Can I recover debt collection expenses from a debtor?
Thread poster: MariusV

MariusV  Identity Verified
Lithuania
Local time: 17:24
English to Lithuanian
+ ...
Sep 21, 2011

I had quite a weird situation: a stubborn debtor (notorious non-payer) for the amount of almost 6000 EUR. The only thing that helped against them was hiring a professional debt collection agency in the UK (payment, after huge efforts and very hard work of the debt collectors finally received). The debt collector now issued their invoice for 15% from the amount that makes almost 900 EUR.

I’d like to ask you if it would be possible to sue the debtor (e.g. via Small Claims Court) for recovery of my expenses for debt collection? Any advice or personal experiences?


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Kevin Fulton  Identity Verified
United States
Local time: 10:24
German to English
Probably not collectable Sep 21, 2011

If the deadbeat wasn't willing to pay the fee for translation, you're not going to get any satisfaction from suing him for the debt collector's fee. Depending on the law in your area, this may not be the basis for a valid claim. Check with a lawyer in this regard.

In many countries, debt collection fees are considered "professional fees" and are tax-deductible. Check with an accountant.


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Sheila Wilson  Identity Verified
Spain
Local time: 15:24
Member (2007)
English
+ ...
I'm no lawyer, but I doubt it Sep 21, 2011

Your original debtor doesn't owe you this (or any) money. He has acquitted himself of the debt by paying the collector. This fee is your contracted debt to the collector and it's your responsibility to pay it. I'm surprised the collector didn't hand over to you the net amount - I thought they always did that.

I know it's hard, but at least you didn't lose the entire six grand.

Sheila


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Alex Lago  Identity Verified
Spain
Local time: 16:24
Member (2009)
English to Spanish
+ ...
For the future include a penalty clause Sep 22, 2011

Hi

As Sheila says the debtor has paid their debt, unless you had a penalty clause in the contract for late payments you can't claim anything else from them but at least the collector's fees can be considered a business expense.

For the future I would suggest you include a penalty clause in your contracts, stating that if the client does not pay on time they will be subject to a penalty, for example in my contract its says they will be subject to a 20% surcharge for every month they are late, I haven't had to use it yet but the idea is that this will help me cover any collection charges. I also state the same thing on the actual invoice.


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TranslateThis  Identity Verified
United States
Local time: 09:24
Spanish to English
+ ...
very unlikely Sep 22, 2011

I'm not a lawyer either, but it seems very unlikely.

I am glad to hear you were finally paid, Marius! BTW, 15% doesn't seem very high. As far as I know, debt collection fees in the US are much higher, around 30%.

Alex-
This sounds like a very good idea. Do you have a separate contract with each translation agency, in which you specify your terms? Have any agencies refused to sign it? Or do you add this clause to their contracts? I will definitely include it on my invoice.


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Alex Lago  Identity Verified
Spain
Local time: 16:24
Member (2009)
English to Spanish
+ ...
Standard Sep 22, 2011

TranslateThis wrote:

Alex-
This sounds like a very good idea. Do you have a separate contract with each translation agency, in which you specify your terms? Have any agencies refused to sign it? Or do you add this clause to their contracts? I will definitely include it on my invoice.


Yes, in the end each agency has a different contract as it ends up being a mix of their conditions and mine, I did have one agency refuse to sign it so I decided not to work with them, if they are going to be honest and pay on time the clause will never affect them so there is no reason for them not to sign.


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Neil Coffey  Identity Verified
United Kingdom
Local time: 15:24
French to English
+ ...
Maybe under EU legislation... Sep 22, 2011

MariusV wrote:
I’d like to ask you if it would be possible to sue the debtor (e.g. via Small Claims Court) for recovery of my expenses for debt collection? Any advice or personal experiences?


Sorry, I can't remember off hand, but I do recall reading something at one point that under EU legislation you can recover debt collection fees up to a certain amount. See if you can find something here:

https://payontime.co.uk/late-payment-legislation-in-eu-member-states

However, I also seem to recall that in the UK, this amount was something like £75, so nowhere near the 900 Euros it's cost you here.

Incidentally, you can theoretically charge statutory interest even where nothing to the contrary was stated in the contract. However, with current interest rates that probably equates to the price of a bag of crisps (but you might want to check-- if the debt was outstanding for a while it might add up to another hundred Euros or two I suppose).


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Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 16:24
Member (2005)
English to Spanish
+ ...
Count your blessings Sep 23, 2011

And post a very clear note in the BlueBoard about this company.

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Sheila Wilson  Identity Verified
Spain
Local time: 15:24
Member (2007)
English
+ ...
My experience Sep 23, 2011

Neil Coffey wrote:
I do recall reading something at one point that under EU legislation you can recover debt collection fees up to a certain amount.

...

Incidentally, you can theoretically charge statutory interest even where nothing to the contrary was stated in the contract.


I do know that the EU Small Claims Court adds court fees and bailiff's fees to the debtor's bill, automatically. You also have the option to ask for interest from the date the payment was due - this is normally quite a long time if the debtor doesn't pay when first contacted by the bailiff - and this is strongly recommended on the form. BTW, the rate of interest received is nothing like the rate of inflation, or the rate you get on your savings at the bank. It's about 8 times more!

I don't remember what the figures were. I had already paid a small amount to the court and a couple of larger amounts to the bailiffs, and I lost track, but I must have recovered about 90% of everything. There were costs of telephone calls, stamps, registered letters - and, of course, time - that were not reimbursed, but the "poor" ex-client paid the rest. The next step for him was procedings for contempt of court, something I think most company owners would want to avoid.

I would recommend this route for any debt that qualifies.

Sheila


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kmtext
United Kingdom
Local time: 15:24
English
+ ...
Under UK law... Sep 23, 2011

Details here: http://www.dti.gov.uk/files/file37581.pdf

You can charge your client a fee plus interest on the outstanding amount, however it's a paltry sum, and probably won't cover your recovery costs.


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MariusV  Identity Verified
Lithuania
Local time: 17:24
English to Lithuanian
+ ...
TOPIC STARTER
thanks so much! Sep 28, 2011

kmtext wrote:

Details here: http://www.dti.gov.uk/files/file37581.pdf

You can charge your client a fee plus interest on the outstanding amount, however it's a paltry sum, and probably won't cover your recovery costs.


Bingo! This is exactly what I need!! Thanks a lot!!!


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