Dutch debt collection system requires major reform, experts say
The Dutch debt collection needs a complete overhaul, according to a new report by researchers Nadja Jungmann and André Moerman, NOS reported on Thursday. They argued that the current system plagues households with excessive Costs.
Over 600,000 Dutch households have insurmountable debts, according to the most recent figures from Statistics Netherlands. Despite various initiatives and policy changes, this number remains unchanged, and five out of six of these households are not receiving debt assistance.
Researchers Nadja Jungmann and André Moerman highlighted the extremes of the current debt collection system. They notably gave the example of a household with three debts of 750 euros each. Despite being able to pay off 100 euros monthly, they accumulate an additional 5,593.07 euros in costs. For the initial 46 months, the payments only cover the added costs, without reducing the original debt.
The two researchers pointed out that when a household has multiple debts, creditors compete to secure the maximum repayment amount, leading to escalating costs. This process, from claims to wage garnishment, accumulates expenses at each step. For three debts, the costs can be tripled, turning an original 2,250 euros in debts into 5,593.07 euros in additional costs.
"The various creditors have no objective view of what a debtor can repay," Jungmann said to NOS. "And they don't know what other creditors there are. In fact, they are steering in the wrong." According to the researchers, this all too often leads to creditors choosing to use all available legal means to collect the debt, resulting in dramatic cost increases.
In their report, Jungmann and Moerman advocate for a new collection system. They propose a repayment plan ensuring all creditors receive a proportional payment, keeping the debtor above the subsistence level. While repayment arrangements exist, notably via municipal debt assistance, less than 5 percent of households with registered problematic debts use debt settlements with cancellation.
The bailiffs' professional association KBvG funded the research. This is remarkable because this proposal would significantly reduce bailiffs' revenue as they would conduct fewer official acts like serving judgments and seizures. "It's important that when collecting debts, the focus shifts from individual claims to the collective interest of both the debtor and creditor. It provides both parties with peace of mind and clarity,” said KBvG chairman Chris Bakhuis.
Outgoing Minister of Legal Protection Franc Weerwind received the advice, also on behalf of Minister for Poverty Policy Carola Schouten. It will be incorporated into the 'Interdepartmental Policy Research' on problematic debts announced with the Budget. In this study, representatives from various ministries explore solutions to address the debt issues in the Netherlands. The research is expected to be completed by May.
