To deal with the negative consequences of non-payment, most companies routinely include a damage clause in their general terms and conditions or agreements, providing for default interest and/or liquidated damages in case of non-payment or late payment. Since 1 September 2023, the new Book XIX has been applicable, which means that stricter rules apply in this area. From now on, consumers must be clearly informed about the default interests and the costs that can be charged if they do not pay their invoice (on time). Moreover, companies are not simply free to determine the amount of interest and flat-rate compensation.
After more than 20 years, the legislation concerning the recovery of consumer debts has changed. Indeed, the Act of 20 December 2002 on the amicable recovery of consumer debts is being replaced by the new Act of 4 May 2023. This Act of 4 May 2023 inserts a new Book XIX “Consumer debts” into the Economic Code.
First, it is important to note that these new rules only apply in B2C relationships. Consequently, the regulations must only be complied with (i) by a company when it claims payment of its debt against a consumer, and (ii) by a third party in charge of recovering the consumer debt (such as a collection agency).
The new rules of Book XIX apply to all invoices issued since 1 September 2023. Since 1 December 2023, Book XIX also applies to invoices arising from existing contracts where the delay in payment arose after the entry into force of Book XIX (1 September 2023).
The main novelties are the following:
(1) Advance free payment reminder.
A company may claim default interest and/or liquidated damages from the consumer only if it has first sent the consumer a free payment reminder (via reminder, formal notice, etc.) after the expiry of the given payment period. This payment reminder must contain certain disclosures. Moreover, the company must respect a waiting period of 14 days. During this waiting period, the consumer can dispute or pay the invoice. Only after the end of this waiting period can the company enforce the lump-sum compensation and default interest as stipulated in the general terms and conditions or agreements accepted by the consumer.
(2) Costs for subsequent payment reminders are limited
The cost of a subsequent, additional payment reminder shall not exceed 7.50 euros, plus the postage costs applicable at the time of dispatch.
(3) Capping of interest rate and liquidated damages
After the company has sent a free payment reminder and the consumer has still not paid, the company may charge the consumer default interest and/or liquidated damages. These default interests and damages are capped by the new legislation:
The default interests cannot exceed those determined by the Law of 2 August 2002 on combating late payment in commercial transactions. Today, this interest rate is 12% and is regularly adjusted.
For flat-rate compensation, a maximum amount is provided for, depending on the balance due:
- 20 euros if the balance due is less than or equal to 150 euros;
- 30 euros plus 10 % of the amount due on the tranche between 150.01 and 500 euros if the balance due is between 150.01 and 500 euros;
- 65 euros plus 5 % of the amount due on the tranche above 500 euros with a maximum of 2000 euros if the balance due is above 500 euros.
(4) Penalties
It is very important for businesses to comply with these new regulations. After all, the consequences are not insignificant. Indeed, any damages clause that exceeds the above-mentioned ceilings will be deemed unwritten. Thus, the judge can no longer decide to moderate agreed interests and lump-sum damages in B2C relationships in case of exceeding the ceilings. The court can also order that any payment obtained in violation of Book XIX must be repaid to the consumer by the person who received the payment. Finally, criminal fines can also be imposed on the company. For example, incorrect calculation of the amount of liquidated damages can be punished with a Level 2 sanction (fine of €26 to €10,000, or up to 4% of the total annual turnover if it is a higher amount).
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