Book XIX: a new framework for amicable collection of consumer debts

15 March was World Consumer Rights Day. To mark the occasion, Gandaius Academy organised a lecture by Prof. Dr Reinhard Steennot on the bill to insert a new Book XIX “Consumer debts” into the Code of Economic Law.

This new bill aims to protect consumers more thoroughly by, on the one hand, framing the consequences of payment delays by consumers and, on the other, updating the amicable recovery of these debts by creditors and third parties.

Key lines of the new bill

What are the key lines of this bill? A mandatory first free reminder, a cap on the damages the consumer must pay in case of late payment, the obligation for the debt collector to check that the amounts claimed do not exceed what is allowed, and the possibility for the consumer to temporarily suspend the recovery procedure.

A. Mandatory first free reminder

• A first free reminder must always be sent to the debtor on a durable medium. A durable medium includes a letter, e-mail or SMS.

• It is for the creditor to prove that the reminder was sent. Proof that the debtor also received it is not required. Because of that burden of proof, it is useful to send the reminder in a traceable way by e-mail.

• The bill distinguishes the waiting period after sending that free reminder by letter or by e-mail. By letter: 14 calendar days + 3 working days (to allow for postal delays). By e-mail: 14 calendar days.

• The bill aims to discourage creditors from circumventing the mandatory first free reminder. If the creditor hands the debt to a third party (e.g. a collection agency) without sending this first free reminder, that reminder must still be sent and the corresponding period must elapse before further amicable recovery activities may take place.

• What does this mean for the debt collector? In a B2C context, an amicable collector is required to send its own notice of default and wait 14 calendar days (instead of the current 15 days) for the debtor’s reaction. This means that, if the creditor did not send a first free reminder, the period runs up to 28 calendar days (+ the possible 3 working days) before further amicable activities may be carried out.

• Costs and interest (set in a penalty clause) only start to run after the period following the first free reminder has expired.

• There is an exception for SMEs: they may charge default interest from the start of the 14 calendar days (+3) period if the debtor did not pay within that period.

• Another exception concerns suppliers who systematically deal with late payers (e.g. regular supply of goods or services, a long-term contract). They are not required to send a free reminder every month: “only the reminders for non-payment of three due dates during a year are free of charge”. For additional reminders, the charge may not exceed EUR 7.50.

• This first free reminder is subject to several formal requirements: the balance due and the amount of the penalty clause claimed in case of non-payment; the name and company number of the creditor; a description of the product, the date and the due date; the period within which the debt must be paid before costs and interest will be claimed. Please note! The later notice of default sent by the debt collector must meet many more requirements, including a precise description of the unpaid product and a precise, detailed breakdown of the amounts claimed from the debtor. Creditors will therefore have to provide more information to the debt collector.

B. Mandatory check of amounts to be recovered

• The debt collector has a new duty to check that the amounts to be recovered do not exceed what is allowed.

• Late-payment interest is capped. The maximum contractual late-payment interest rate is the rate set in the B2B legislation of August 2002. At present this rate is 10.5%.

• The (lump-sum) damages, if expressly provided for, are likewise limited. The following scale applies: up to EUR 150: EUR 20; between EUR 150.01 and EUR 500: EUR 30 + (10% of the invoice amount); above EUR 500.01: EUR 65 + (5% of the invoice amount). The maximum lump-sum damages that may be claimed is EUR 2,000. Note: the question was raised whether these damages can be claimed per invoice. Professor Steennot confirmed that hypothesis, but warned that a court might treat it as an abuse of rights. That verification is not, however, the responsibility of the amicable collector.

• What is the (civil) sanction if an unfair term is applied? For example where the cap on costs and interest is exceeded, or where reciprocity and proportionality are not respected? The unfair term is then deemed unwritten. Can one then fall back on supplementary (general or default) law, e.g. the maximum interest allowed under the B2B legislation? The court will assess whether applying supplementary law would create a significant imbalance; that would also considerably weaken the sanction.

C. Suspension of the recovery procedure

• The new bill requires the amicable collector to inform the debtor of the options in case of financial difficulties, and of the right to contest the debt or reject the collector.

• The notice of default must state the procedure in case of dispute, and that the debtor may request payment facilities such as an instalment plan. During home visits, the visitor must inform a debtor who points to payment difficulties about the payment facilities that can be requested, or that they can turn to debt mediation.

• When an instalment plan or help from a debt mediator is requested, or when the debt is disputed, the amicable recovery procedure is suspended. What is the suspension period? Instalment plan: 30 days. If the creditor takes longer than that to reply, the late-payment interest that could have been claimed thereafter lapses. Request for debt mediation: 45 days. The debtor must inform the debt collector of the request and of the mediator’s contact details.

Conclusion

What should you as a creditor watch out for to make recovery of a debt possible?

• Creditors will be required to send a traceable, free reminder to consumers. Only after the 14 (+3) day period may interest and costs be charged to the debtor. This reminder may be sent by post and/or by e-mail. Bear in mind that you must be able to prove that the reminder was sent (an e-mail or registered letter can be useful). If you do not do so, the debt collector will also have to send that first free reminder before amicable recovery actions can start. The obligation to send a notice of default that meets the more extensive formal requirements also remains, before further amicable recovery actions can start. The waiting period can therefore run up to 28 (+3) days.

• For the mandatory notice of default sent by the debt collector (e.g. TCM Belgium), various legal requirements apply. When a file is opened, additional information must be provided, such as a precise description of the unpaid product and a precise, detailed description of the amounts claimed from the debtor. This means extra work, but it is a legal requirement in order to recover debts from debtors. If the requirements are not met, interest and damages cannot be claimed and, in the worst case, the claim can be declared void by the court. The advantage is that the debt collector will be better informed about the debt and will therefore also be able to inform the debtor better. That increases the chance of recovering the debt.

• Interest and damages can only be claimed if they comply with the legal provisions and therefore do not exceed the capped amounts. Interest and damages must also be expressly included in your general terms and conditions in order to claim them. If not, only the statutory interest for consumers can be claimed (currently 5.25%).

Important: EVERY debt collector (lawyer, bailiff, collection agency) must comply with the new requirements.

For more information about our help in collecting unpaid invoices or about how we work, do not hesitate to contact us via s.dereze@tcm.be or 0498 29 29 14.

17/03/2023