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Legal bases of debt collection The theory of the assignment« An assignment is an act by which one person gives another person the power to do something... on his behalf » (art 1984 of the French Civil Code). Asking a collections agency to obtain an outstanding payment constitutes an assignment. In the case in point, the creditor, the entity to whom the sum is due, assigns the collections agency (Cabinet d'Ormane) the task of taking action with the debtor and depositing the funds on its behalf. The law of 1991 "covering the reform of civil execution procedures"This law of 1991 reformed the civil execution procedures, i.e. essentially the manner in which bailiffs/process servers apply court orders. Article 32 of this law is important and has direct applications to Collections Agencies and their customers. Loi 91-650 du 9 juillet 1991 Art 32 : Alinéa 1 : Les frais de l'exécution forcée sont à la charge du débiteur, sauf s'il est manifeste qu'ils n'étaient pas nécessaires au moment où ils ont été exposés. Alinéa 2 : Les contestations sont tranchées par le juge de l'exécution. Alinéa 3 : Sauf s'ils concernent un acte dont l'accomplissement est prescrit par la loi, les frais de recouvrement entrepris sans titre exécutoire restent à la charge du créancier. Toute stipulation contraire est réputée non écrite. Alinéa 4 : Cependant, le créancier qui justifie du caractère nécessaire des démarches entreprises pour recouvrer sa créance peut demander au juge de l'exécution de laisser tout ou partie des frais ainsi exposés à la charge du débiteur de mauvaise foi. Alinéa 5 : L'activité des personnes physiques ou morales non soumises à un statut professionnel qui, d'une manière habituelle ou occasionnelle, même à titre accessoire, procèdent au recouvrement amiable des créances pour le compte d'autrui, fait l'objet d'une réglementation fixée par décret en Conseil d'Etat. In paragraph 3, Art 32 establishes the principle that, in the case of collections without an enforceable order (court order), it is the Creditor who pays the costs of the collection and not the debtor. The direct consequence of this article is that Collections Agencies must request payment of their fees from the Creditor (its customer) and not from the debtor. Decree 96-1112 of December 18, 1996 which governs "the activity of persons involved in out-of-court collection of debts on behalf of third parties"This decree, [see complete text here], governs "out-of-court collections" activities for persons other than lawyers, bailiffs/process servers, etc. The most important points of this decree are: the obligation to take out a "legal liability" insurance policy, to have a separate bank account for customers' funds, to sign a written agreement with customers, and to include certain wording on the follow-up notices sent to debtors. Conclusion : we see that the collection of debts for third parties is a well-defined activity legally based on several complementary texts. This activity is a commercial activity and not a legal activity. This framework is flexible enough to allow for competition to play a role between the various companies on the market, of which Cabinet d'Ormane is one of the most efficient and reliable. |
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