BANNING NO-CURE-NO-PAY FOR AMICABLE DEBT COLLECTION: USEFUL?

A Member of Parliament wants to ban the no-cure-no-pay method for amicable debt collection. Is this a useful proposition? Who will benefit, who will suffer?

The benefits of the no-cure-no-pay principle

Virtually all professions work according to this principle. This ranges from, for example, the sale and rental of buildings – which is clearly based on a success fee – to any business where you buy a specific product or obtain a service. One does not pay for a BMW if a Dacia is given; similarly, one does not pay for an apple when buying a pear.

Whenever confusion may arise between the means used and the results delivered, the no-cure-no-pay method prevents misunderstandings. In debt collection – as in other services – the customer is not really interested in the number of letters we send; he actually simply wants to know whether he will get back the money owed to him.

The no-cure-no-pay principle makes the service provider responsible and offers welcome security in the relationship between service provider and customer.

Critics of the no-cure-no-pay principle

Of course, one can imagine that this encourages unhealthy practices. This is also the stance of the author of the bill DOC 552101/001 (July 2, 2021):

<< In reality, however, this practice increases the risk of higher costs for both creditor and debtor. After all, the collector will try to drive up the costs in every possible way to compensate for the losses. >>

In fact, the Member of Parliament seems to ignore the law of 2002. This stipulates:

<< Art. 5. It is forbidden to ask the consumer for any compensation, other than the agreed amounts in the underlying contract, in the event of non-compliance with the contractual obligations. >>

How then could the debt collection agency “drive up the costs”? It would then have no other option than to break the law and be severely punished (the same law also provides for severe penalties and is extremely well monitored by the FPS Economy).

The author should have consulted previous proposals that from 2014 (DOC 54 0702/001) again in 2019 (DOC 55 0267/001:

<< We cannot ignore the fact that a small minority of bailiffs – low in number but accounting for a substantial amount of amicable recoveries by bailiffs – interpret the law in their own way. Some of them do not hesitate to break the rules of the law or even to pretend that they do not exist, while others are more subtle and twist the spirit of the law through unrightful contractual provisions.

By way of compensation, collection costs and advances are liberally accumulated, not to mention the forbidden practices that are incompatible with professional ethics, such as the no cure no pay principle, which amounts to a kind of fee on a commission basis, which de facto leads to a conflict of interest and an accumulation of completely useless actions to fill up one’s own pockets. >>

Further on in the text, we read that the National Chamber of Bailiffs of Belgium acknowledges the problem.

The no-cure-no-pay method is indeed prohibited for judicial recovery, which is a good thing, because otherwise there is an imbalance between the resources of the debtor and those of the creditor:

• On the one hand, the debtor would have to pay considerable costs resulting from the court proceedings (including paying his lawyer, even if he is wrongly prosecuted)
• whereas the creditor would not pay any of these costs, even if he recklessly calls for law enforcement.

The difference between amicable and judicial recovery lies in the use of court and law enforcement. And, in this context, it should be called “no cure no pay for creditor.  Because the debtor has to pay. It is there and only there that some are “driving up costs in every possible way”. This has been going on for more than 10 years, and it is being publicly denounced:

• De Tijd, Jun 2019: « De moneymakers van de schuldenindustrie »
• Le Vif, Mar 2019: « les huissiers gonflent souvent la facture de façon abusive»
• RTBF Dec 2018: « Les huissiers de justice ont-ils tous les droits ?»
• Knack, Oct 2018: « De verborgen misbruiken van deurwaarders »

This has however not prompted our politicians to introduce thorough checks and sanctions for over 10 years. Nevertheless, this costs the victims 100 million euros a year, in addition to being VAT fraud.

Debt collection fantasies

The author of the legislative proposal also writes that:

<< The debt collectors who apply the no-cure-no-pay principle are also more likely to take legal action, as they can charge further fees that can be used to compensate for the losses. >>

Despite the fact that we have been in the business for a long time, we simply do not see how this proposed business model could be profitable. Our clients are big corporations (and even include some well-established law firms) and it would be very difficult to make profit on lawyer’s and bailiff’s fees.

The amicable recovery of debts, which is carried out by debt collection agencies, is a service aimed at avoiding going to court. At TCM, less than one per cent of the debt claims go to court!

The author goes on to claim that:

<< The practice […] leads de facto to a conflict of interest and an accumulation of completely useless actions, […]. >>

How can a “no-cure-no-pay” practice – in an out of courts context – lead to a conflict of interests and the accumulation of useless actions? This is an absolute fallacy.

Conclusion

To us, this proposition of law does not seem to be in touch with or adapted to the everyday reality of debtors and their creditors.

The amicable “no-cure-no-pay” collection is indeed useful, well supervised and seldom causes problems. On the other hand, the confusion between amicable and judicial levels is a real problem for the activity of bailiffs.

It would be useful if the State finally took up its role in this matter and enforced public order tariffs for courts actions (through a police investigation). By turning a deaf ear, successive Justice Ministers have condemned hundreds of thousands of consumers and small-scale traders to the considerable enrichment of a few dozen bailiffs.

Banning no-cure-no-pay in amicable debt collection will benefit the bailiffs since that is where their profits lie. It will also channel more work to the tribunals (which are already overflowed). It is primarily the debtor who will pay more, but also the creditor and even the taxpayer (to finance the Justice department), to the benefit of these few bailiffs.

Also read debt collector, lawyer, bailiff: similarities and differences (21 Sept 2021)

BANNING NO-CURE-NO-PAY FOR AMICABLE DEBT COLLECTION: USEFUL?

A Member of Parliament wants to ban the no-cure-no-pay method for amicable debt collection. Is this a useful proposition? Who will benefit, who will suffer?

The benefits of the no-cure-no-pay principle

Virtually all professions work according to this principle. This ranges from, for example, the sale and rental of buildings – which is clearly based on a success fee – to any business where you buy a specific product or obtain a service. One does not pay for a BMW if a Dacia is given; similarly, one does not pay for an apple when buying a pear.

Whenever confusion may arise between the means used and the results delivered, the no-cure-no-pay method prevents misunderstandings. In debt collection – as in other services – the customer is not really interested in the number of letters we send; he actually simply wants to know whether he will get back the money owed to him.

The no-cure-no-pay principle makes the service provider responsible and offers welcome security in the relationship between service provider and customer.

Critics of the no-cure-no-pay principle

Of course, one can imagine that this encourages unhealthy practices. This is also the stance of the author of the bill DOC 552101/001 (July 2, 2021):

<< In reality, however, this practice increases the risk of higher costs for both creditor and debtor. After all, the collector will try to drive up the costs in every possible way to compensate for the losses. >>

In fact, the Member of Parliament seems to ignore the law of 2002. This stipulates:

<< Art. 5. It is forbidden to ask the consumer for any compensation, other than the agreed amounts in the underlying contract, in the event of non-compliance with the contractual obligations. >>

How then could the debt collection agency “drive up the costs”? It would then have no other option than to break the law and be severely punished (the same law also provides for severe penalties and is extremely well monitored by the FPS Economy).

The author should have consulted previous proposals that from 2014 (DOC 54 0702/001) again in 2019 (DOC 55 0267/001:

<< We cannot ignore the fact that a small minority of bailiffs – low in number but accounting for a substantial amount of amicable recoveries by bailiffs – interpret the law in their own way. Some of them do not hesitate to break the rules of the law or even to pretend that they do not exist, while others are more subtle and twist the spirit of the law through unrightful contractual provisions.

By way of compensation, collection costs and advances are liberally accumulated, not to mention the forbidden practices that are incompatible with professional ethics, such as the no cure no pay principle, which amounts to a kind of fee on a commission basis, which de facto leads to a conflict of interest and an accumulation of completely useless actions to fill up one’s own pockets. >>

Further on in the text, we read that the National Chamber of Bailiffs of Belgium acknowledges the problem.

The no-cure-no-pay method is indeed prohibited for judicial recovery, which is a good thing, because otherwise there is an imbalance between the resources of the debtor and those of the creditor:

• On the one hand, the debtor would have to pay considerable costs resulting from the court proceedings (including paying his lawyer, even if he is wrongly prosecuted)
• whereas the creditor would not pay any of these costs, even if he recklessly calls for law enforcement.

The difference between amicable and judicial recovery lies in the use of court and law enforcement. And, in this context, it should be called “no cure no pay for creditor.  Because the debtor has to pay. It is there and only there that some are “driving up costs in every possible way”. This has been going on for more than 10 years, and it is being publicly denounced:

• De Tijd, Jun 2019: « De moneymakers van de schuldenindustrie »
• Le Vif, Mar 2019: « les huissiers gonflent souvent la facture de façon abusive»
• RTBF Dec 2018: « Les huissiers de justice ont-ils tous les droits ?»
• Knack, Oct 2018: « De verborgen misbruiken van deurwaarders »

This has however not prompted our politicians to introduce thorough checks and sanctions for over 10 years. Nevertheless, this costs the victims 100 million euros a year, in addition to being VAT fraud.

Debt collection fantasies

The author of the legislative proposal also writes that:

<< The debt collectors who apply the no-cure-no-pay principle are also more likely to take legal action, as they can charge further fees that can be used to compensate for the losses. >>

Despite the fact that we have been in the business for a long time, we simply do not see how this proposed business model could be profitable. Our clients are big corporations (and even include some well-established law firms) and it would be very difficult to make profit on lawyer’s and bailiff’s fees.

The amicable recovery of debts, which is carried out by debt collection agencies, is a service aimed at avoiding going to court. At TCM, less than one per cent of the debt claims go to court!

The author goes on to claim that:

<< The practice […] leads de facto to a conflict of interest and an accumulation of completely useless actions, […]. >>

How can a “no-cure-no-pay” practice – in an out of courts context – lead to a conflict of interests and the accumulation of useless actions? This is an absolute fallacy.

Conclusion

To us, this proposition of law does not seem to be in touch with or adapted to the everyday reality of debtors and their creditors.

The amicable “no-cure-no-pay” collection is indeed useful, well supervised and seldom causes problems. On the other hand, the confusion between amicable and judicial levels is a real problem for the activity of bailiffs.

It would be useful if the State finally took up its role in this matter and enforced public order tariffs for courts actions (through a police investigation). By turning a deaf ear, successive Justice Ministers have condemned hundreds of thousands of consumers and small-scale traders to the considerable enrichment of a few dozen bailiffs.

Banning no-cure-no-pay in amicable debt collection will benefit the bailiffs since that is where their profits lie. It will also channel more work to the tribunals (which are already overflowed). It is primarily the debtor who will pay more, but also the creditor and even the taxpayer (to finance the Justice department), to the benefit of these few bailiffs.

Also read debt collector, lawyer, bailiff: similarities and differences (21 Sept 2021)