TCM Group: A spotlight on TCM USA

TCM offices open during Easter holidays

De afschaffing van de quasi-immuniteit, een goede zaak?

Aanpassing Boek XIX: Matiging i.p.v. nietigverklaring AV

More news

HOW ETHICALLY RESPONSIBLE DOES THE STATE COLLECT ITS DEBTS?

Everyone likes to be paid on time. When you lend money to your best friend, you expect to see that money returned to your account shortly. Likewise, a creditor also expects its goods or services to be paid as was agreed upon. The State is no exception to this rule.

Ethics debt collection by state But what if the State, which imposes very strict debt collection rules on ordinary creditors, does not itself act in the corresponding ethical manner?

In this article, we will shed a light on various government initiatives which promote and impose ethical debt collection. Furthermore, we will conclude with an analysis of the collection strategy of the Federal Public Service (FPS) Finance.

FPS Economy: amicable collection control

The FPS Economy is the state’s supervisory body for the collection sector. Any actor in the collection sector (a collection agency, and since 2009 also a lawyer or a bailiff) who acts as an amicable intermediary on behalf of the creditor must respect the legal provisions of the law of December 20, 2002 on amicable recovery. These legal provisions guard, among other things, the ethical correctness of collection.

If a collection agency violates this legislation, one can file a complaint with the FPS Economy (lawyers and bailiffs are supervised by their own supervisory bodies).

Some of the main elements of this law revolve around the protection of the privacy and dignity of the consumer, and thus the way in which these consumers are addressed.

For the protection of the consumer’s privacy and dignity, it is forbidden to take further steps with or in the presence of third parties (neighbours/ family / employer). The law article translates as follows:

“Art. 3. § 1. In amicable debt collection matters, any behaviour or practice which violates the consumer’s privacy or is liable to mislead him, as well as any behaviour or practice which attacks his dignity, is prohibited “

“§ 2. The following is particularly prohibited:

any writing or behaviour which tends to create confusion as to the quality of the person from whom it originates, such as in particular writing which would falsely give the impression that it is a document coming from a judicial authority, a ministerial officer or a lawyer.

any communication containing inaccurate legal threats, or erroneous information on the consequences of non-payment.

any mention on an envelope showing that the correspondence concerns the recovery of a debt.

the collection of amounts not provided for or not legally authorized.

the approach of neighbours, family, or the employer of the debtor. By approach we mean, among other things, any disclosure of information or request for information in connection with debt collection or with the debtor’s solvency, without prejudice to actions taken within the framework of legal recovery procedures.

recovery or attempted recovery from a person who is not the debtor.

any recovery attempt in the presence of a third party, except with the agreement of the debtor.

any action aimed either at having the debtor sign a bill of exchange or at requiring an assignment of debt or an acknowledgment of debt.

harassment of the debtor who has made it known explicitly and in a well-reasoned manner that he is disputing the debt.

telephone calls and home visits between 10 p.m. and 8 a.m.

“The King may add to, change or adapt this list, on the recommendation of the Minister to whom the Economic Affairs belong.”

The way in which the consumer can be contacted is also subject to several rules. First, a written demand letter must be sent. It must provide the creditor’s phone number. Then, no actions can be taken in the 15 days which follow this first writing. The law article translates as follows:

“Art. 6. § 1. Any amicable debt collection must begin with a formal written notice to the consumer.

This formal notice must fully and unequivocally contain all the data relating to the claim. It must include at least the data listed in § 2 and other recovery techniques can only be carried out after the expiration of the period provided for in § 3.

§ 2. This formal notice includes at least the following data:

1 ° the identity, address, telephone number and capacity of the original creditor;

(NOTE: in 1 °, the words “where applicable the business number,” are inserted between the words “the identity “and the words” the address, “<Royal Decree 2003-04-04 / 39, art. 6, 002; Effective: 01-01-2005>)

2 ° the name or denomination, address, registration number in the trade register, VAT number, and registration number with the Ministry of Economic Affairs of the person carrying out the amicable debt collection;

(NOTE: 2 ° is replaced by the following provision:

“2 ° the name or denomination, address and, if applicable, the business number of the person carrying out the amicable debt collection as well as the contact details of the supervisory administration with the Federal Public Service for the Economy, SME, Middle class & Energy; “<AR 2003-04-04 / 39, art. 6, 002; Effective: 01-01-2005>

3 ° a clear description of the obligation which gave rise to the debt;

4 ° a clear description and justification of the amounts claimed from the debtor, including damages and default interest claimed;

5 ° the mention that, in the absence of reaction within the time limit provided for in § 3, the creditor may proceed to other recovery measures.

[1 6 ° if the recovery is carried out by a lawyer, a ministerial officer or a legal representative, the following text will appear in a separate paragraph, in bold type and in another type:

This letter concerns an amicable recovery and not a judicial recovery (summons to court or seizure).] 1

§3. In the formal notice, the time limit within which the debt can be reimbursed before additional measures are taken is mentioned. This period is at least fifteen days and starts on the date of the sending of the written notice.”

Law proposition amending the law of 20 December 2002 pertaining to the amicable collection of consumer debts, for the purpose of combating abuse

A proposition of law was introduced in 2019 to protect consumers even better. We have already discussed this bill in detail in an article. It proposes:

That consumers should receive an invoice within 7 days of purchase.
That consumers would be granted a standard payment period of 20 days.
That in case of no payment within these 20 days, the consumer would receive a free reminder letter with an additional period of 10 days to pay.
That after this period, collection costs would be capped.
That the FPS Economy can also control lawyers and bailiffs who collect amicably.

Our conclusion was that there is clearly very little knowledge about debt problems and how to deal with them. Merely giving debtors more time to pay their debts, but also to incur debts, does not solve the problem.

In addition to this, the cost of this policy is fully charged to creditors. They will need to wait longer for bill payments, suffer additional administration, hence getting themselves in trouble. This would particularly affect SMEs. As Unizo puts it nicely: “In the meantime, the creditor must of course continue to pay its own suppliers (and the tax authorities)”.

Having lawyers and bailiffs, who carry out the same collection activities as debt collection agencies, monitored by the supervisory body for debt collection seems only logical to us.

In 2020, that bill was, incidentally, once again amended to a standard payment period of 30 days. However, both proposals have still not been implemented to date.

FPS Finance’s collection strategy

The foregoing points briefly shed a light on what the government has already worked out, and is still working out, in terms of legislation on the (ethical) collection of unpaid invoices from consumers. But how does the government confirm its own rules concerning this collection?

We have examined the Federal Ombudsman’s report (FR – NL) on the collection strategy of the General Administration for Collection (Federal Public Service Finance).

The reason for this report and investigation is the number of complaints (200 on average each year) about how this administration collects tax. The complaints focused on the terms of repayment plans, the resources used to recover receivables and the associated communication.

Payment plans:

Payment plans cannot exceed a period of 12 months.

(Translated) “The new payment plan strategy limits the possibility of granting a payment plan for a maximum period of twelve months from the onset of debt. Beyond this period, the administration considers that the payment difficulties are structural, and the applicant is offered alternatives. “

The taxpayer that is unable to pay the debt within 12 months should be referred to the private market or to insolvency proceedings.

However, this lack of flexibility has put two groups of taxpayers in unnecessary financial jeopardy. People with temporary payment difficulties or people facing exceptional debt often simply need an extension of the payment period.

The administration’s policy offers them no structural solution. However, an accumulation of debt is not to be feared for this type of payment difficulties (which are not repetitive in nature).

Referral to a private lender is also unusual, given the fact that the law does not allow to lend money to a person who may not be able to repay.

The actual duration (max. 12 months) is determined according to the estimated repayment capacity:

(Translated) “This payment capacity is established by subtracting the ” fixed costs” from the applicant’s income, which are determined on a flat-rate basis based on the following scales: € 1,300 for a single person and € 1,600 for a couple, increased by € 150 per dependent child. These scales are inspired by the law on the protection of workers’ remuneration. “

As a consequence, the real financial capacity of the taxpayer is not considered. However, the government has various tools (web applications such as REMI / CEBUD) to measure this actual capacity: the minimum budget is calculated through the reference budgets to assure a dignified existence.

(Translated) “A payment plan may be granted for a longer period than that determined based on the payment capacity established on a lump sum basis, in ‘special circumstances (e.g. medical costs)’. The processing agent is then required to justify his decision, which may be subject to subsequent internal control.”

Therefore, this opens the door towards arbitrariness and does not comply with the principle of proportionality. There is a risk that taxpayers in financial difficulty will not be treated equally, namely by taking into account their actual capacity to pay.

Prosecution

The Administration (FPS) has data mining models to predict which recovery procedure is the most appropriate, and the Administration’s employees are evaluated according to KPIs (Key Performance Indicators):

(Translated) “Tax Receivers can now assess the solvency of taxpayers using data mining models, in order to achieve a more efficient and targeted collection. Each taxpayer is assigned a “Delphi score”, which determines their solvency profile over a period of twelve months.

Since 2015, the administration also uses a datamining model, Pegasus, which aims to “predict which recovery measure (bailiff, garnishment, etc.) offers the best chances of success” and “avoid unnecessary costs being incurred.“

(Translated) “Thus, for example, a recovery action must systematically be initiated for any debt not covered by a payment plan – with a minimum threshold and subject to the results of the data mining analysis – within four months from its onset date. If the recipient does not comply with the recommended action, the case may be submitted to a subsequent evaluation by the hierarchical authority.“

However, the result is not always favourable. For example, many lawsuits appear to be useless (given the fact that the debt is almost paid off or soon to be paid off), unproportionate and even harmful (simultaneous execution at the bank and at the employer’s). Furthermore, sometimes such amounts are even claimed which leave people with less than the living wage, and an instalment plan can be irrevocably stopped without a possible second chance.

It seems unethical to us that an employer should be unnecessarily involved in the financial difficulties of his employee. Likewise with the fact that people are reduced to living on less than the legal minimum.

The Administration also sends bailiffs:

(Translated) “Sending the file to the bailiff is only preceded by a payment reminder sent by the administration to the taxpayer one month after the payment deadline. Since March 2017112, this payment reminder has only been sent by regular mail and no longer by registered mail. “

This reminder however is not free (it costs 20EUR), in which it differs from the rule imposed on ordinary creditors! In addition, according to the law applicable to ordinary creditors, they must wait 10 days after the (free) reminder letter before taking further collection action.

Another problem with bailiff actions is that they are not monitored independently (e.g. by the FPS Economy), and that they are not encouraged to limit prosecutions.

Communication:

The Administration is quite difficult to reach by telephone.

(Translated) “In the specific situations where the request for a payment plan is rejected or adapted, but also in the event of difficulties encountered during the execution of the plan, the citizen may need additional contact with an Infocenter employee.

However, no telephone number is enclosed with this (partial) rejection letter or e-mail, which only contains the general contact details of the Infocenter. A telephone conversation with the employee who took the decision or with any other Infocenter employee is therefore impossible.“

The Federal Ombudsman also sheds a light on the fact that the name of the case manager is generally not mentioned in correspondence. However, the Open Government Act requires that all correspondence from a federal administrative authority must mention the name, capacity, address and telephone number of the person who can provide more information on the case.

As already mentioned in article 6 of the law on amicable debt collection, ordinary creditors must always indicate their telephone number.

Conclusion

Ethical collection is more than collection done strictly by the book or according to the law. Ethical collection mainly requires empathy and realism, which does not lie within the scope of computer systems, nor is it encouraged when KPIs are imposed.

If the debtor’s real situation is not taken into account, the chances of an amicable debt collection become slim. Knowledge of legislation is necessary as a thorough basis, but human communication skills are still the key to success.

Moreover, it is striking that the government itself does not or only partially apply the rules that it imposes or wishes to impose on ordinary creditors. “Do what I say, not what I do!”

TCM Belgium can proudly state that it has been maintaining a good balance between the ethical and economic aspects of our work for many years.

Do you have questions about your (inter)national unpaid receivables? Do you want an ethically responsible collection of these debts? Do not hesitate to contact us.