Who pays debt recovery costs in Europe

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