Debtors and recovery costs in B2B: What you can claim ?

Flat-Rate Recovery Compensation: Legal Framework in France

Flat-rate recovery compensation is a measure provided by French law to protect creditors against late payments.

It allows creditors to offset the additional costs incurred by recovery procedures when a professional debtor delays payment of an invoice. In France, this compensation was established by Article L441-10 of the Commercial Code.

Characteristics of Flat-Rate Recovery Compensation

• Fixed Amount of €40: The amount of this compensation is set at €40 per overdue invoice. This sum applies from the first day of late payment, regardless of the invoice amount or the duration of the delay. This amount was defined as part of the transposition of European Directive 2011/7/EU.
• Applicable Between Professionals Only: The flat-rate recovery compensation applies exclusively to business-to-business (B2B) transactions, i.e., between professional creditors and debtors. It does not apply to private individuals or consumer transactions.
• Automatic and Non-Negotiable: The creditor does not need the debtor’s consent to apply this compensation. It can be directly added to the overdue invoice amount.
• Cumulative with Other Late Payment Penalties: The flat-rate recovery compensation is in addition to late payment interest, which can also be claimed by the creditor. Late payment interest is calculated based on a rate often specified in the general terms and conditions of sale (GTC) and increases proportionally with the delay.

Application Modalities of the Compensation

• Invoicing: The compensation can be directly included in overdue invoices but is often mentioned upfront in the general terms and conditions of sale (GTC).
• Legal Conditions: For the compensation to be enforceable, the creditor must have complied with their contractual obligations, particularly regarding invoicing terms, deadlines, and payment conditions.
• Debtors: Professionals only.

Note: In B2C transactions, debt recovery activities on behalf of others are regulated by Articles R.124-1 to R.124-7 of the Code of Civil Enforcement Procedures.

In amicable recovery for third-party debts, Article L.111-8 of the Code of Civil Enforcement Procedures applies. It stipulates that the costs of amicable debt recovery are exclusively borne by the creditor. Paragraph 2 of Article L.111-8 states: “Recovery costs incurred without an enforceable title remain the responsibility of the creditor, unless they involve an act required by law. Any contrary provision is deemed unwritten unless provided otherwise by legislation.”

As a result, a debt recovery agency cannot charge recovery costs in addition to the principal and late payment interest specified in paragraphs one and two of Article 1231-6 of the Civil Code.

Importance and Implications of Flat-Rate Recovery Compensation

The flat-rate recovery compensation aims to reduce late payments in B2B transactions, which can harm the cash flow of businesses, especially SMEs. It also encourages companies to respect payment deadlines, thereby contributing to better financial fluidity within the economic network.

Flat-rate recovery compensation is a simple yet effective measure to offset costs incurred by creditors in the event of late payment. It is a strictly regulated mechanism designed to provide a quick and standardized solution to additional recovery costs while raising awareness among businesses about the financial consequences of payment delays.

Other Interests and Compensation for Creditors

1. Late Payment Interest

   • Automatically applies if payment is not made by the due date.
   • Calculated based on an annual rate, often specified in the GTC.
   • In the absence of contractual provisions, the base rate equals the European Central Bank (ECB) refinancing rate plus 10 percentage points.
   • Example: If the ECB rate is 2%, the applicable rate is 12% (2% + 10%). For an unpaid €10,000 invoice overdue by 30 days, the interest would be: €10,000 × 12/100 × 30/365 = €98.63

2. Additional Recovery Compensation

   • Beyond the €40 flat-rate compensation, creditors may claim additional compensation if their recovery costs exceed this amount.
   • Creditors must justify these costs with supporting documents (e.g., bailiff invoices, debt collection agency fees).
   • Judicial validation may be required in case of disputes.

3. Specific Contractual Penalties

   • Some commercial contracts include specific penalties for late payments.
   • These penalties can be fixed amounts or percentages applied to the overdue invoice.
   • Must be explicitly stated in contracts or GTC.

4. Formal Notice Costs

   • Sending a formal notice (e.g., registered letter, administrative fees) may incur costs.
   • The enforceability of these costs depends on their inclusion in the GTC or contract.

5. Penalty Clause

   • A contractual clause specifying a fixed amount payable by the debtor in case of non-compliance with payment obligations.
   • Predefined in the contract and not linked to the invoice amount.
   • Can be reduced by a judge if deemed excessive.
   • Must be written and mutually agreed upon.

Creditors have multiple tools to compensate for costs and damages resulting from late payments in B2B transactions, including late payment interest, flat-rate recovery compensation, additional compensation, specific penalties, and penalty clauses. When clearly stated in GTC or contracts, these mechanisms provide creditors with leverage to encourage timely payments.

These measures collectively improve financial relations between businesses and reduce insolvency risks.

At KREANCIA, we will apply your GTC in compliance with legislation and automatically calculate the applicable interest.

The repayment base therefore includes the principal collected and all additional fees collected.

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