Czech lower house adopts changes to law on collections, but not all proposals succeeded

On 16 April 2021 the Chamber of Deputies in the Czech Republic approved an amendment to the law on collections proceedings. If the amendment is passed by the Senate, then apparently collections proceedings that yield not results will not be allowed to continue indefinitely.

The confiscation of movable property during collections proceedings has also been partially restricted by the adopted amendment. However, the attempt to require collections agents to operate just within their own region was once again rejected by the lower house.

The Czech Senate will now be assessing the model for collections proceedings that the amendment would create if it becomes law. Some clubs in the lower house, both of governing coalition parties and opposition ones, were not satisfied with the end result of the changes adopted. 

The dissatisfied parties say they believe the changes that have been passed are too minor. Representatives of the different factions hope the upper chamber will intervene to strengthen the law.

Czech Justice Minister Marie Benešová (for ANO) also said she is not enthusiastic about the outcome. “The senators will have a hard job,” she said.

The finally-adopted version of the bill would introduce a six-year deadline after which collections agents would have to halt any proceedings that had yielded no results. The creditor could reverse that step by making a down payment for the costs of the proceeding to continue.

Proceedings yielding no results could only last 12 years at the most, however. The Czech Government had originally proposed a basic three-year deadline, with a maximum length of 12 years for collections proceedings. 

The Chamber of Deputies has also approved limiting collections of movable property if the debtor is a pensioner, physically disabled, or incurred the debt as a minor. The debtor could also reverse the sale of movable property by voluntarily paying at least CZK 1 500 [EUR 60] above and beyond the amount of their income being attached by law.  

Three joint proposals by the Christian Democrats (KDU-ČSL) and Pirates to introduce local jurisdictions for collections agents where the cases would be distributed by what is called rotation, as well as requiring the concentration of all collections proceedings targeting one and the same debtor with a single collections agent, once again met resistance in the Chamber of Deputies. One of the proposed adjustments assumed collections agents would work within the full territory of a particular region, while the other two adustments proposed different kinds of partially local jurisdictions, just for certain kinds of debts. 

Currently, creditors are able to freely choose any collections agent anywhere to officiate a proceedings. Ivan Bartoš, chair of the Pirates, posted the following summary to Facebook:  “Our journey of several years seeking to cut through the tentacles of the collections octopus, and our attempt to push through our original amendment to the collections proceedings regulations, ended with a loss in the lower house today. The political will to pass these changes could not be found among the other parites. The post-COVID era could push many people into the collections trap who have gone into debt in order to survive and who have been unable, through no fault of their own, to fulfill their obligations and simply pay their bills.”

The “Reconstruction of the State” (Rekonstrukce státu) initiative has also protested against the failure to adopt the changes on social media:  “MPs from ANO and ODS have rejected collections agents’ territoriality. Corrupt agents and those who traffic in debt can celebrate – this cutthroat business will continue…”.

The introduction of what is termed territoriality has actually long been supported by the Chamber of Collections Agents. The principle of local jurisdictions could, in their view, significantly aid the stability of the law enforcement system.

Some collections agents, however, disagree with the introduction of territoriality. As for debts that are old, two of the proposals adopted by the lower house do address them. 

If the debtor owes the money to the state itself or to any other public institution, it would be enough for them to pay off the principal plus CZK 750 [EUR 30] for the costs of the proceeding, should the law ultimately be adopted by the Senate. Any collections proceedings where the principal is CZK 1 500 [EUR 60] or less and for which recovery has yielded no results would also be halted.  

In such cases, the creditors would have part of their receivables covered by the state in the form of tax relief, and the state would also cover part of the collections agents’ expenditures associated with their attempts to recover the money owed. The Chamber of Deputies did not, however, pass a pivotal part of the Government’s bill.

The rejected section had to do with concentrating all of the collections proceedings for a single debtor with the collections agent who first brought a proceedings against that debtor. The Government had hoped the change would lower the costs of such proceedings.

Other adjustments that have now been adopted by the lower house include the requirement that the money collected be used first to pay off the debt principle and then the interest. The financial penalties for debts incurred by a failure to pay in to the health care and social security systems would also be reduced if the bill eventually becomes law. 

The Chamber of Deputies has adopted other minor changes as well. These concern, for example, the collections agent’s duty to record telephone calls about collections proceedings and a ban on the confiscation of any state allowances or benefits intended to ameliorate the effects of some of the wrongdoing caused by the communist regime or to reward those who participated in the national resistance.