Recovering debts from a consumer? Watch out for the new rules!

Which debts do the new rules apply to?

Any type of debt a consumer owes to a business falls under the new rules, but only insofar as there is no enforceable title yet. If you already have a judgment ordering your debtor to pay, the Act does not apply. So this is about debt recovery in the prior “amicable” phase.

Mandatory free first reminder.

When the consumer has not paid the debt by the due date, there is a payment default. If you want to obtain payment, you must send a “first reminder” for which you may not charge any costs. The first notice of default must be free of charge.

Why this free first reminder? The legislator assumes there may be various reasons for a late payment. An immediate, almost automatic sanction would then be unfair. This view is not beyond criticism. We will share our assessment later.

If it concerns unpaid invoices in the context of “regular supply of goods or services”, i.e., successive deliveries such as utilities, the consumer is entitled to a maximum of three free first reminders per year. So if the consumer is a “repeat late payer”, you are not required to send a free first reminder for every single due date. You must send a maximum of three per year free of charge.

Each second and subsequent reminder may cost a maximum of EUR 7.50, on top of postage costs. The legal text does not explicitly clarify whether this EUR 7.50 amount is VAT-inclusive or VAT-exclusive, nor whether it can be indexed. In practice, it is advisable to approach this conservatively and transparently (and to have your templates checked against the most recent guidance/practice).

The Act requires that reminders be sent on a “durable medium”, for example a paper letter, an email, or an SMS.

Mandatory information.

The first reminder must contain at least the following mandatory details:

1. The outstanding balance and the amount of the contractual penalty/compensation you will claim if payment is not made within fourteen calendar days.
2. The name or business name and the company number of the creditor business.
3. A description of the product or service that gave rise to the debt, as well as the date on which that debt became payable.
4. The period (of at least 14 days) within which the consumer must repay the debt before you may claim any costs, interest, or compensation.

In addition (and importantly in practice), you should also clearly state:

• How and through which channel the consumer can dispute the debt.
• That the consumer may obtain, upon request, the supporting documents substantiating the debt (and how to request them).
• That the consumer has the possibility to request payment facilities (an instalment plan) and how to do so.

Where amicable recovery is carried out by a lawyer, a bailiff, or a debt collection agency (or another judicial representative), the first reminder must moreover unambiguously state that it concerns an amicable recovery and (in short) that there is no enforceable title and that, without an enforceable title, forced enforcement is not possible.

Mandatory waiting period of 14 calendar days.

To give the consumer the opportunity to verify the correctness of the amount claimed, to pay the debt, or to dispute it, the legislator considers that the business may not claim late-payment interest or compensation for at least 14 calendar days after sending the first reminder.

One critical remark is that the legislator overlooks that the consumer has already had the opportunity to dispute or pay during the payment term stated on the invoice.

In addition, the 14-day period only starts running on the third working day after sending by post. The legislator apparently takes into account deteriorated postal services, which no longer deliver letters daily. It concerns working days because postal delivery only takes place on working days.

For electronic reminders, the 14-calendar-day period starts on the calendar day following the day the reminder is sent electronically.

Any late-payment interest may only start running after the 14-day period has expired, without retroactive effect, unless you are an SME. If you are an SME, the Act provides that if payment is not made after the first reminder, you may calculate interest from the calendar day following the date of sending the first free reminder, i.e., 14 days earlier.

An SME is any business that, at the time this provision is applied, meets the criteria referred to in Article 1:24, § 1 of the Belgian Code of Companies and Associations.

Mandatory provision of supporting documents at the consumer’s request.

Another new element is that the Act obliges businesses to provide the consumer with all supporting documents for the debt and all necessary information on how a dispute of the debt must be made. This must be done “without delay” and at the consumer’s request.

Practical tip: make sure you can quickly retrieve (and provide) internally: offer/order, delivery or performance dates, invoice, general terms and conditions, communications regarding complaints, and any payment arrangements.

Capping of contractual interest.

Late-payment interest is the compensation for the delay in payment.

In addition to limiting the start date of interest, a business may only claim interest if this is contractually provided for, and the interest is capped.

If you are an SME, you can claim interest from the day following the sending of the first reminder. All other businesses may only claim interest after the minimum 14-day period has expired.

Late-payment interest may not exceed the interest rate at the reference rate plus eight percentage points referred to in Article 5, second paragraph, of the Act of 2 August 2002 on combating late payment in commercial transactions.

Statutory fixed compensation amounts.

Compensation amounts are compensations for the costs the business must incur to collect the debt.

With regard to compensation, the Act also provides maximum amounts depending on the outstanding balance, provided that the compensation is expressly stipulated in the contract with the consumer.

These compensations are at most:

• EUR 20 if the outstanding balance is less than or equal to EUR 150
• EUR 30 plus 10% of the outstanding amount on the tranche between EUR 150.01 and EUR 500 if the outstanding balance is between EUR 150.01 and EUR 500
• EUR 65 plus 5% of the outstanding amount on the tranche above EUR 500, with a maximum of EUR 2000, if the outstanding balance is more than EUR 500.

New rules governing the activity of amicable recovery.

The new Act also regulates the activity of amicable recovery of consumer debts. We will discuss this part in a later Wanted Facts.

Broadly speaking, it concerns an integration of the former Act of 20 December 2002 “on the amicable recovery of consumer debts” into the Code of Economic Law.

What if you, as a business, do not comply with the Act?

If you still charge costs for the first reminder, fail to include mandatory details, or do not comply with the minimum 14-day term, you expose yourself to a range of civil sanctions.

Payments the business has received in breach of the Act must be reimbursed to the consumer by the person who received the payment. You cannot restart recovery because the consumer’s incorrect payment is deemed to be discharging.

An additional sanction is that the consumer is released by operation of law from payment of the contractual penalty, meaning both interest and compensation.

Clauses contrary to the Act are null and void or deemed not written.

Excessive penalty clauses are also unfair within the meaning of Article VI.83, 24° of the Code of Economic Law. If the clauses are not reciprocal, they are also null under Article VI.83, 17° of the Code of Economic Law.

In addition, administrative sanctions and even criminal sanctions are possible.

From when do the new rules apply?

As from 1 September 2023, being the first day of the fourth month following the month of publication in the Belgian Official Gazette, the new Act enters into force. This means that from then on all new contracts are subject to the new rules.

As from 1 December 2023, the new Act will also apply to agreements concluded before 1 September 2023, provided that the payment default arose after the entry into force of the new Act.