Who pays debt recovery costs in Europe

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Who pays debt recovery costs in Europe In Germany the debt recovery costs charged to private or professional debtors are fixed by law. The list of debt recovery costs is detailed by the legislator, which goes as far as quantifying the amounts that can be claimed for a simple reminder letter. This is a major difference between France and Germany, France going so far as to prohibit the recovery of individuals. The German Federal Ministry of Justice and Consumer Protection wants to reduce debt recovery costs by 50% with a new draft “law to improve consumer protection in collection costs”. German professionals are “upwind” against this reform, their arguments being presented below. This reduction in debt collection costs would affect not only debt collection agencies and lawyers, but also creditors facing higher costs. According to the recovery professionals, this would be a reversal of the polluter-pays principle. Typically, two to six months elapse between receiving and closing a file. And in cases where a trial becomes inevitable, the handling of the case will take three to six yearsThe objective remains to recover the claim amicably. In this regard, even before the first reminder letter, many test steps, data comparisons and solvency checks are performed. On this basis, an individualized debt recovery strategy in relation to the debtor’s situation is determined. In this way, recovery professionals can decide, through which communication, how often and for what purpose, to manage this file. The German project stipulates that consumers will only be required to pay the debt recovery costs of a collection service provider or a lawyer if they have been informed in time. The project would impose the information of the debtor by an undeniable and proven action of the financial risks it incurs if it does not pay its bills. The decrease in the recovery costs payable would result in a profound change in the profitability of the German debt collection services. For the German recovery professional’s two possibilities open up to them: either the collection service providers reduce the scope of their activities by adapting them to their revenue prospects. Or the creditors bear part of the costs of the collection service. For the Germans it is a reversal of the polluter-pays principle. Because it is not the creditor who misbehaved, but the debtor, and this one, should pay for his bad behaviour. The Germans also want to differentiate between private and commercial debtors. Late payments in companies must be as low as possible. In order to achieve this objective, the German legal system is expected to inflict serious legal consequences on debtor companies that do not respect their commitments. In general, the German collection professionals ask that we move away from the flat-rate collection costs and replace it with a gradation of these costs related to the difficulty of collection. The problem of recovering unpaid bills is a hot topic in all developed countries. Very often individuals are protected and for companies the commercial relationship that we are trying to maintain is a real obstacle to rigorous practices in terms of debt recovery costs. Prevention is one of the first levels to be used to first make every effort to ensure that payment delays are reduced to the minimum. The development of digital and new means of payment will certainly change the situation by significantly reducing outstanding payments. However, it is indisputable that we must penalize the bad coaters and the professional latecomers who use and abuse supplier credit. Finally, it is up to the legislator to put in place simple and inexpensive judicial systems and procedures to sanction bad faith behaviour. It is absolutely abnormal that in very many cases no proceedings are initiated because the costs to be incurred are disproportionate to the unpaid claim. The professionals of bad faith are perfectly informed. Georges Vonfelt GEVO

Secret information from a debt collection company.

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The secret information of a debt collection company is a first-rate tool for assessing and analysing the solvency of a company. The proof of this is the example of a large company with over € 20,000,000 turnover whose accounts are supervised and validated by an auditor, and which enjoys a good credit rating with the rating agencies. This company filed for bankruptcy overnight. How could the credit rating agencies validating the solvency of the company be so wrong? Why has the auditor not been alerted?

In reality, this company used a large number of foreign subcontractors and did not pay their invoices changing supplier on multiple occasions, as unpaid foreign suppliers were reluctant to act because of the relative modesty of their claims.

The unpaid invoice files against this company have accumulated with a debt collection company specializing in international debts. The latter immediately suspected serious difficulties when it became impossible to reach anyone in the accounting department. Small instalments were paid irregularly. A payment order for a small fee was contested by the company’s lawyer without any indication of any reason. You did not have to be a top-flight financial analyst to understand that this company was in fact terminating payments. Judicial action for a few thousand euros caused the filing for Bankruptcy.

Another example of a well-hidden secret is the following. The subsidiary of a large group contacts a debt collection company. She wishes to entrust him with the recovery of all his 6-digit client account. As this is a company specializing in B to B services, the customer post is the main or only asset of this company. It turns out during the processes initiated by the debt collection company that most of these claims were disputed, that the disputes were serious and the position of the creditor company legally fragile. In fact, the sole purpose of the creditor was to defend the client item vis-à-vis its auditor by acting with a debt collection company to avoid a massive depreciation of this asset.

The debt collection companies so decried and vilified would have a role to play in the prevention of the difficulties of the companies by having for example a right of information strictly confidential of the organs of control to prevent before it is too late to cure.

Commercial Debt Collection and Business Bankruptcy

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Commercial Debt Collection and business bankruptcy are sometimes linked. When a file arrives in a debt collection office, when the amount of the debt recovery is high and the debtor’s situation is fragile the debt collection actions sometimes lead to the bankruptcy of the debtor company. One can therefore ask the question of the relevance of the action of the debt collection company. In reality it is not the recovery actions that led to the bankruptcy of the company it was certainly already in a state of cessation of payment. The recovery procedures are only the drops of water that broke the camel’s back. The bankruptcy procedures are mostly long and dead-end, the creditor said unsecured (the one who has no security) having very little chance of recovering what is due to him. Should we in these cases renounce recovery actions? the answer is clearly no because only the one who acts keeps a chance to get his bills paid. One of the most common prevention tips was to tell suppliers to learn about the creditworthiness of their customers and keep their credit limit under supervision. This common-sense rule now faces new difficulties. Indeed, the secret of business in a world in full transparency becomes more and more opaque. In France, for example, it is now possible for small and medium-sized businesses to make their balance sheets confidential, whereas a few years ago this was considered a crime that could be prosecuted by the public prosecutor’s office. It is no longer uncommon to see companies that are well-rated by intelligence companies suddenly go bankrupt. One of the remedies to business bankruptcy losses is to adjust the credit limit to the size of the client. It is common to see the debt collection of important files that concern very small businesses. When a company is in trouble it will rush into the arms of a supplier ready to give it credit. The salesperson will be enthusiastic about developing his turnover and everyone will fall into the trap of supplier credit. It is the exporting companies that are setting up in a new country that are most likely to fall into this kind of trap. The losses and debt collection difficulties are in fact linked to the short-term profit policy which penalizes the exporters who have not planned a moderate development and supported by a substantial budget.

90 % of the French B to B debtors with unpaid bills are solvent!

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90 % of the French B to B debtors with unpaid bills are solvent but the success rate of the debt collection agencies and organizations in charge of the receivable collection are largely lower.
What are the reasons?
First of all it’s the way the debt collection industry is organized. The no cure, no pay policy largely practiced brings a focusing from the collector on the larger files. To collect 100 € or to collect 1.000 € it’s the same job, the same time investment but not the same earning. The market (the companies’ client of the debt collection agencies) would never accept to pay a 10 time higher fee to collect a small invoice. The bigger the file the more the debt collection specialist invest time and costs on it.
Other reasons in France are the difficulties to get legal decisions with acceptable fees for the benefit of the creditor. The French government is actually thinking about new dispositions in favour of the reduction of the payment terms. To apply the existing laws would be very helpful and sufficient. For some mysterious reasons some courts are very sensitive for the matter of the recovery costs. We don’t need new laws we need first the application of the old ones.
How to reduce the gap between the 90 % solvent debtors and the percentage of collected files is the goal of the debt collection industry in the near future. It’s difficult to accept that billions of overdue disappear every year because we are missing adapted tools and services.
Georges Vonfelt
www.gevo.fr

Debt collection for unpaid invoices at the digital era

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The debt collection for the unpaid invoices will evolve with the accession of the digital era.
Either we call it numerical or digital, the actual world is confronted with a brand new Industrial Revolution. The payment’s management won’t escape the considerable changes occurring during the commercial exchanges.
The dematerialized sending of the invoices, the advent of new payments means, the end of the old system (checks, bank drafts, promissory notes) the arrival of the biometric credit card are innovations with which the firms will have to get used to.
The internal and external services of the collection of unpaid invoices will have to resolve new challenges.
The repressive and threatening era is over.
The financial and solvency information are more difficult to obtain, some anticipate their complete disappearance and the information’s opacity becomes the rule.
The debt collection of invoices at the digital era will go through more prevention: studies about the behaviours of the invoice’s payment and the litigation anticipation.
New communication tools towards debtors (clients) will be applied: social networks, smartphones, mails, text messages, this is the future for the debt collection for unpaid invoices at the digital era by GEVO.

Georges Vonfelt
www.gevo.fr

Uber’s influence on the payment behaviour

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In France we are talking about an „ uberisation“ of the society due to the important and fast  evolution of the consumer habits.

The evolution is very quick in big urbanisation areas like Paris.

Due of those facts all the leading superstores or hypermarkets announced officially that they will reduce the size of their markets and exclude all the products which are big sellers on Internet.

In the meantime thousands of small companies which are in competition with the Internet start a bankruptcy procedure.

In 2016 in Paris and his suburbs the number of bankruptcies for Fashion retailers, Shoe retailers, small Hotels, small Transport and Taxi Companies raised about 20 % in comparison to 2015.

The suppliers of those companies have to adapt their credit management to this evolution.

In France all the laws and fines issued in the last years couldn’t stop the negative payment delays evolution. One of the major reason is the difficult relationship between the small companies and their Banks.

New ideas are raising coming from the involved professionals ( lawyer, judges, bankruptcy receivers and so on ) one of them is that if a small company goes bankrupt due of the late payment of one of his customers this one will have to pay all the debts of the bankrupt company.

EXECUTION PROCEDURE IN CROATIA FOR DEBT COLLECTION

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As a first step, official warning letter is send to the debtor. If there are no response from the debtor, in the first stage of the debt collection procedure in Croatia, the creditor commences the appropriate execution procedure by forwarding to the debtor the so-called Motion on the Execution Based on the Reliable Documents (reliable documents = invoices or excerpt from the creditor’s business books) through the notary public. In case of the debtor’s objection (debtor can file the objection to the notary public within 8 days as of receipt the creditor’s motion is revoked and is dealt with as an ordinary complaint (lawsuit)

in a lack of debtor’s objection, the Decision on execution will become final and binding, Financial Agency issues the order to all banks in Croatia to seize all of the debtor’s bank accounts. In case there is not enough assets on the bank accounts to settle the claim, debtor’s savings accounts and deposits are also seized. Additionally, it seems that this seizure also refers to all bank accounts the debtor might possibly open in the future.

MAIN SPECIFICS OF THE EXECUTION PROCEUDURE IN CROATIA

  • In order to initiate the execution procedure before the Public Notary; the creditor should have its PIN (Personal Identification Number) obtained before local Tax Department (this is the legal requirement envisaged under the Croatian Execution Law). Obtaining the PIN is a simple corporate action.
  • During the execution procedure, two original copies of invoice/s issued to the debtor, executed with corporate seal of the creditor and signed by its responsible person for billing matters must be submitted to the Public Notary. Alternatively, we can use the official excerpt from the creditor’s business books executed with creditor’s corporate seal and signed by its responsible person for billing matters. Furthermore, the foreign invoices/excerpts from the creditor’s business books must be translated in Croatia (to a Croatian language by the officially appointed court expert).