Future Reform of the Amicable Collection of Consumer Debts: What Are the Key Points?

After just over 20 years, a reform of the regulations governing the amicable collection of consumer debts is in the works. On February 7, 2023, the bill to insert Book XIX, “Consumer Debts,” into the Code of Economic Law was submitted to the House of Representatives. The bill is based on the premise that the consumer is an economically weaker and legally less experienced contracting party compared to a professional or a business. Nevertheless, the legislature acknowledges that late payment causes damage to the creditor company and that the company must be compensated. Currently, however, businesses have too much leeway in determining compensation for nonpayment, so they often demand late-payment interest, lump-sum compensation fees, and/or other collection costs, thereby excessively increasing the initial debt. The bill aims to better define the parameters of amicable debt collection and prohibit abuse, thereby offering better protection to consumers when they find themselves in a situation of payment arrears. What measures will your company need to take into account in the future? - First, the draft bill establishes a strict framework regarding damages and interest. For example, the amount of damages claimed in the event of default must be determined in advance and will henceforth be capped. For a debt of, say, 150 euros, the company will still be able to claim a maximum lump-sum damages payment of 20 euros. The default interest claimed is also capped. Specifically, it may not exceed the interest rate set forth in the Law of August 2, 2002, on combating late payments in commercial transactions. To give you an idea, the expiration of statutory or contractual payment terms in commercial transactions triggers late payment interest at a rate of 10.5% (at least for the first half of 2023). - Second, companies will now be required to send a free initial reminder regarding the unpaid debt. At that point, a period of fourteen calendar days begins during which the company may not claim late-payment interest and/or damages. Only after this fourteen-calendar-day period has expired may your company impose any penalties for late payment. This means that you can only claim interest and/or damages from a consumer after sending a reminder and in compliance with the aforementioned fourteen-day period. If your invoice is payable only after 30 days, keep in mind that you can claim interest and/or compensation no earlier than 45 days after the invoice date (if you send the first reminder immediately). An exception: If you are an SME, you may decide to have default interest accrue starting from the calendar day following the day on which the free reminder is sent. The draft bill also aims to tighten the existing obligations of bailiffs, collection agencies, and attorneys—in other words, individuals or companies tasked with collecting outstanding invoices. For example, they will be required to verify the legality of the claimed damages before initiating any action or procedure for amicable debt collection. For example, a consumer cannot be declared in default if a bailiff determines that the payments claimed do not comply with legal provisions. For example, a consumer cannot be required to pay 40 euros in damages if the outstanding debt is less than 150 euros. In addition, a number of new disclosures must be included in the mandatory prior notice of default sent to a consumer prior to any action or measure related to amicable debt collection. For instance, the creditor is required to actively inform the consumer of their right to obtain all documents substantiating the debt, to request payment arrangements, and to be informed of the procedure to follow in the event the consumer disputes the debt. The new rules will apply to all claims by a business against a consumer, regardless of whether they have a contractual or other legal basis. Parking fees and/or hospital costs would also fall within the scope of application in such cases. Notably, the draft bill also applies to agreements that existed prior to its entry into force and are still in effect. This legislative initiative will, of course, have a significant impact on the agreements you enter into (or have already entered into) with consumers—provided, of course, that all proposed changes actually become law. We are, of course, monitoring this closely and will keep you informed of further developments. Want to know more? Please contact one of our specialists.