Compensation for recovery costs: Creditor Support Tools

In recent years, an increasing number of businesses have been considering effective ways of recovering debt collection costs. The Polish legislator has addressed this issue in the Act on Combating Excessive Delays in Commercial Transactions (the “Act on Payment Delays”) to combat unfair practices of counterparties.

The Act on Payment Delays, which applies to business-to-business relations, brings a number of solutions aimed at shortening payment deadlines, introduces new types of interest and a fixed sum for the cost of recovering a late commercial payment.

Creditor Support Tools

One of the key elements of the Act on Payment Delays is the shortened payment periods, which is intended to strongly encourage debtors to pay their financial obligations on time. The new type of interest represents a further step towards payment regularisation, providing creditors with an effective tool to motivate debtors to pay their debts on time.

Fixed-sum Reimbursement Amount

The Act on Payment Delays also provides for creditors to be granted a fixed sum to cover the costs of debt recovery. This arrangement is intended to compensate the actual expenses incurred by creditors in the process of debt recovery, which in turn stimulates fairness in commercial relations.

It is worth remembering, however, that the Act on Payment Delays does not apply to commercial transactions in which one of the parties is an individual not engaged in business activity. This means that it mainly covers relations between businesses, eliminating the need to apply them in the context of transactions with individual consumers.

Creditors can claim a fixed sum under the Act on Payment Delays, which brings fairness in debt recovery

In light of the Act on Payment Delays, creditors may take advantage of a fixed sum to recover reasonable debt collection costs. This entitlement is based on the value of the benefit and makes compensation more just.

Under the Act on Payment Delays, a creditor is entitled to claim a fixed sum depending on the value of the monetary claim. Here are the key points:

1. When the value of a monetary claim does not exceed PLN 5,000, the creditor is entitled to EUR 40.
2. When the value of a monetary claim is more than PLN 5,000, but less than PLN 50,000, the creditor is entitled to EUR 70.
3. When the value of a monetary claim is PLN 50,000 or more, the creditor is entitled to EUR 100.

The introduction of these fixed amounts is intended to compensate for the creditor’s own recovery costs. However, in order to benefit from this entitlement, the creditor must meet two key conditions:

1. the creditor has fulfilled its non-monetary obligation; and
2. the debtor has failed to make payment within the period specified in the contract.

Importantly, this entitlement does not require any additional formalities. A creditor does not have to demonstrate the costs incurred in recovering the debt, nor does it have to prove that it has taken any particular action to recover the debt. This approach introduces an element of simplicity and fairness in the process of compensating creditors, while at the same time encouraging debtors to settle their debts on time.

The Act on Payment Delays enables creditors to claim the recovery of costs: financial protection for creditors

With the introduction of the Act on Payment Delays, creditors have gained an additional tool in the form of being able to seek the reimbursement of costs that exceed the fixed sums. The legislation is designed to provide fuller financial protection for creditors who are anxious to recover their debts efficiently.

Unlike the fixed sum, the amount of which is determined according to clear criteria, any costs exceeding this amount must meet additional conditions. They must be appropriate, justified and reasonable. Importantly, they must also be documented. The range of reimbursable expenses incurred is wide, including debt collection costs, legal aid fees and expenses related to the use of collection agencies.

An important criterion for costs above the fixed sum is their reasonableness. It is useful to base the amount of these costs on the prevailing market rates for such services. This approach allows for fairness and transparency in the cost recovery process.

The Act on Payment Delays is now a key tool to protect the interests of creditors. It gives them the opportunity to be compensated for expenses incurred in the recovery of their debts, which is an important step towards a sustainable business relationship.

The Act on Payment Delays is designed not only to protect the rights of creditors, but also to promote fairness in commercial transactions. Tools such as shortened payment periods, new interest rates, a lump sum reimbursement amount and the reimbursement of other reasonable costs are a step towards building a solid foundation for a healthy business environment. Businesses should read the legal provisions carefully and, if in doubt, seek the assistance of an attorney specialising in commercial transactions.