The work to clarify the four original root causes of errors in our debt collection systems has now been completed. The conclusion is that 7,800 debt collection customers are eligible to receive total repayments of about DKK 28 million as a result of overcollection and compensation of about DKK 23 million for the time that the money could have been at their disposal. In addition, a large number of debt collection customers will have their debt reduced once the remaining issues have been resolved.
As previously communicated, during the analysis of the four original root causes, the bank has identified a number of additional issues. The number of debt collection customers expected to receive compensation is unchanged, and the total amount of overcollection for the additional issues may, on the basis of a very early estimate, exceed DKK 100 million. In order to minimise the risk of overcollection, the bank is suspending debt collection for the approximately 6,500 debt collection customers who have continued to repay debt. Interest accrual is still suspended for all our debt collection customers.
“We have now completed the original task, but our work on the additional issues continues, so that we can correct all errors, provide our customers with correct information and compensate them correctly. The issues arising from data errors in our debt collection systems have proved to be larger and more complex than we originally assumed. We expect to complete the analyses of these remaining issues and their consequences as well as the payment of compensation to the affected debt collection customers in 2022. As we have to make the necessary adjustments in our systems to correctly calculate the outstanding debt, we cannot rule out the possibility that we will not be able to resume debt collection for debt collection customers until 2023. We very much regret that our debt collection customers will have to wait for final clarification,” says Peter Rostrup-Nielsen, head of the central unit established in October 2020 to ensure timely, consistent and proactive management of debt collection problems.
At the end of October, the Danish FSA and Danske Bank received a partial report from the impartial reviewer assessing the bank’s efforts to correct the errors.
“We are pleased that the impartial reviewer recognises the considerable resources allocated and the amount of work we are doing in order to correct the problems. And that we have chosen calculation models and compensation solutions that will be to the customers’ advantage and, to a large extent, go beyond our legal obligations. However, in such a complex process in which new information about the issues is constantly being identified, there will of course be decisions and processes that could have been handled better. The impartial reviewer’s perspective and input have proved valuable to us in this respect. Therefore, we also take the impartial reviewer’s assessment very seriously, and we will, of course, review our work and processes and have a dialogue with the authorities in respect of the areas where there may be a need to improve our methods and routines,” says Peter Rostrup-Nielsen.
We take the following initiatives on the basis of the impartial reviewer’s partial report:
- In September 2020, we automatically suspended debt collection for cases in respect of which debt collection customers had repaid more than 60% of their debt, and all debt collection customers were also given the opportunity to suspend their repayments if they so wanted. This was introduced to protect debt collection customers against the risk of being subject to overcollection. Because of the complexity of the additional issues, we have decided automatically to suspend all debt collection for debt collection customers to further reduce the risk of overcollection. Debt collection will be suspended until the consequences for each customer are clear. This currently applies to about 6,500 customers. At the same time, the principle that no interest is added to the debt is maintained. It will still be possible for debt collection customers to repay debt if they so wish. Customers will of course be compensated if at a later stage, it is established that overcollection has taken place.
- We also introduce further measures to reduce the risk of overcollection for debt collection customers who choose to continue repayment.
- Until we have clarity of their outstanding debt again, we have chosen to withdraw our reports of debt collection customers to the RKI credit reference register, where the amount of the outstanding debt is uncertain. The affected debt collection customers will be informed directly and as soon as possible.
In addition, the bank has made progress in correcting the errors in the debt collection systems:
- As we communicated in June 2021, a total of about 5,000 debt collection cases were subject to an additional quality assurance review because of a higher complexity of the cases. This work was completed at the end of October, when all cases had been reviewed, and we have concluded that 900 of these debt collection customers are eligible for compensation. The average amount of compensation for overcollection per customer for this group is about DKK 5,900 (excluding time compensation), and the highest amount of compensation remains about DKK 140,000 (excluding time compensation).
- In addition to this, approximately 600 debt collection customers was compensated DKK 1.5 million for overcollection and time compensation in July, however, they were not included in our previous update.
- This means that, in total, 7,800 debt collection customers have been subject to overcollection as a result of the original root causes of our debt collection problems. The total amount of compensation is DKK 51 million with the average amount of compensation for overcollection being about DKK 3,500 and the amount of time compensation about DKK 2,900.
- The work to map the 28 additional issues identified so far continues, but their interdependencies make the task more consuming in terms of resources and time than initially assumed. A total of 15-20,000 debt collection customers are still expected to be eligible for compensation for overcollection due to the additional issues by the errors. A very early estimate subject to great uncertainty shows that the total amount of overcollection as a result of these errors may now exceed DKK 100 million. This figure is expected to become more accurate as the investigations progress. No additional provisions are considered necessary.
- In order to ensure that our customers in the other markets are not affected by the additional issues in relation to debt collection in Denmark, we are – following a principle of prudence – conducting a review to check whether any of the additional issues affect our other markets. The results of this review are expected to be ready in the first quarter of 2022.
- As communicated in September 2021, in a number of cases, we had not reserved the right to withdraw or correct cases involving the estates of deceased persons processed by the court, and we have informed the Danish FSA about the status of this work. During our investigations of this problem, we have identified a similar issue in a few cases in relation to other types of court cases, including enforcement proceedings. This may have affected 80 of such cases, but they have now been withdrawn and will be investigated further. In addition, the bank has continuously become more familiar with the scope and complexity of the 28 additional issues, and the bank decided in June 2021 to start the process of withdrawing cases that were otherwise corrected as a result of the original root causes of errors from the courts. So far, this has resulted in about 240 claims being withdrawn from the courts.