Debt collection best practices: how to choose your service provider?

Entrust the debt to a collection service provider

An agreement must be drawn up between the creditor and the service provider, defining the scope and parameters of the collaboration.

• the basis and amount of the sums due, with separate indications of the various components of the claim(s) to be recovered from the debtor,
• the conditions for determining the remuneration payable by the creditor,
• the conditions for repayment of funds collected on behalf of the creditor
• the terms and conditions of the guarantee given to the creditor against the pecuniary consequences of civil liability incurred as a result of the debt collection activity.

Collection agencies are bound byarticle R. 124-2 of the French Code of Civil Enforcement Procedures:

• be covered by professional liability insurance,
• prove that they hold an account in an approved credit institution, exclusively dedicated to the receipt of funds collected on behalf of creditors.

 

Regulations concerning collection costs

It’s a good idea to check the practices of the collection company you use, for example, to make sure it doesn’t charge debtors out-of-court (civil claims). Article L 121-21 of the French Code des procédures civiles d’exécution expressly forbids charging collection fees to private individuals: “It is forbidden for a professional to solicit or collect collection fees from a consumer under conditions contrary to the second paragraph of article L. 111-8 of the Code des procédures civiles d’exécution. ”
DGCCRF extract “It is forbidden for a creditor to charge collection fees to a debtor, except in four cases:

• the costs relate to an act which the creditor is required by law to perform (for example, a summons to pay rent or an insurance premium);
• the costs were incurred as a result of bad faith on the part of the debtor (however, the creditor must refer the matter to the enforcement judge and prove that the debtor acted in bad faith (for example, by proving that the debtor never intended to pay);
• the costs were incurred to recover sums that could not be collected due to an NSF check;
• the creditor and debtor are professionals: in this case, the creditor can claim a fixed indemnity of €40″.

Some companies still charge this type of fee.
Nota : You should be aware that charging collection fees to a debtor is punishable by two years’ imprisonment and a €300,000 fine.

Regulations on collection methods

In the method used, the service provider must act with all the necessary diplomacy, identify himself, ascertain the debtor’s identity and engage in constructive dialogue with the debtor.

The creditor must entrust claims that are well-founded, certain, liquid and due.

• The claim must be“certain”, i.e. it must be indisputable.
  Check that the debt is well-founded.
  Have you signed a contract?
  Are the obligatory clauses clearly written?
  Are the sums claimed due?
• The claim must be“liquid”, i.e. its amount must be precisely determined and valued.
• The debt must be“due and payable”, i.e. it must have fallen due.
  The creditor may not proceed with the collection of a debt whose performance is subject to a suspensive condition.

 

Prescribed or extinguished claims

The creditor must also ensure that the claim is not time-barred, i.e. that the time limit for taking legal action has passed, or extinguished , i.e. too old to be claimed.
For example: a consumer credit debt, or a water or electricity bill debt, is time-barred two years after the first unpaid, unpaid instalment(article R. 312-35 of the French Consumer Code), i.e. it is no longer possible to take legal action after this date.
If the creditor has not obtained a writ of execution during this period, he can no longer take legal action.
If, on the other hand, the creditor has obtained an enforceable title (prior to the foreclosure period), the debt will not be time-barred until ten years later , regardless of the origin of the claim enshrined in the title. If a debt collection company threatens the debtor with legal action even though the claim is time-barred, it will be liable to penalties for misleading commercial practices.

Responding to deceptive and abusive collection practices

Some debt collection companies and bailiffs sometimes exert pressure, threaten or even harass debtors by telephoning family, neighbors, friends or employers, or by visiting debtors’ homes or workplaces.
Article 9 of the French Civil Code states that “everyone has the right to respect for his private life“.
Judges can put a stop to any invasion of privacy.
To remedy the excesses of certain collection companies, you can lodge a complaint with the public prosecutor at the judicial court to put a stop to such practices and clean up the industry.
You can also contact the DGCCRF (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes) if the company has not complied with regulations.
You can also file a report on the SignalConso platform created by the DGCCRF.