German federal government proposes "Legal Tech Act"

Feb 10, 2021 Benn-Ibler Rechtsanwälte

The government draft for an "act to promote consumer-friendly offers in the legal services market" of the German Federal Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz, BMJV) provides for relaxations in the professional law of lawyers as well as clarifications for (legal tech) service providers active in the debt collection sector.

In Germany, the services of debt collection service providers are increasingly in demand by consumers, especially for low-value receivables. In contrast to lawyers, these service providers are allowed to agree on success-based fees. In addition, their services are often linked to litigation funding. In order to achieve more coherent regulation, lawyers in Germany will in future be allowed to agree on success-based fees for orders for monetary claims of no more than 2,000 Euros and for debt collection services. In these cases, litigation financing by the lawyer is also permissible.

Under the Legal Services Act (Rechtsdienstleistungsgesetz, RDG), registered companies or persons who are not licensed as lawyers may provide certain legal services after prior registration. An amendment to the RDG is intended to clarify, on the one hand, that registered debt collection service providers may, in addition to the collection of third-party claims, also offer legal examination and advice related thereto. Secondly, the involvement of a litigation financier by the debt collection service provider does not jeopardize the proper performance of the debt collection service and is therefore permissible.

New rules are also planned for the registration procedure of debt collection service providers. In the future, they will have to include a description of the content of their intended activities when registering, in particular in which areas of law they are to be active and which ancillary services are to be provided.

In addition, debt collection service providers acting for consumers should provide them with a range of information before the contract is concluded, such as the conditions under which a success-based fee is due or whether a litigation financier is involved.

BMJV, government draft (07.01.2021)