Reimbursement, upon presentation of supporting documentation, of all collection costs—even those exceeding €40 per invoice—is a matter of public policy, just like late payment penalties! You may therefore demand them from your debtors or obtain them through the courts.
In practice, we know that these legal provisions are not automatically granted, even by some major commercial courts, which are still sometimes slow to strictly apply the law and which, out of habit, prefer to lump everything together and rely on Article 700 of the Code of Civil Procedure!
In a ruling dated December 20, 2017, the Commercial Chamber of the Court of Cassation reiterated that late-payment penalties owed under Article L 441-6 of the Commercial Code are automatically due, without the need for a reminder, even if they are not explicitly provided for in the contract. Please note, however, that late payment penalties must be specified on the invoice and in the general terms and conditions of sale.
In its June 9, 2016, ruling, the Paris Court of Appeals confirmed that the additional compensation —in addition to the lump-sum compensation for collection costs—is indeed also a matter of public policy and is automatically due. You may therefore obtain a court order for reimbursement of the costs you incurred to collect your debt (fees and expenses of the collection agency and attorneys) provided that you can substantiate them.
In its Information Note 2013/26, the DGCCRF outlines how Articles L 441-3 and L 441-6 of the Commercial Code are to be applied:
- Required information in the Terms and Conditions and on invoices, including, in particular,
- Late Payment Penalty Rates
- A flat-rate collection fee of 40 euros per overdue invoice
- Supplementary Allowance Upon Submission of Supporting Documentation
- Penalty rate: It must not be less than three times the statutory interest rate—for 2018, the statutory interest rate is 0.89%—and, unless otherwise provided, this rate corresponds to the ECB’s REFI rate plus 10 basis points—for 2018, the REFI rate is 0%.
- The judge may award additional compensation if the expenses incurred exceed 40 euros per invoice. These expenses include the collection agency’s fees and costs, whether flat-rate or contingent on the outcome.
- Late payment penalties and lump-sum compensation are not subject to VAT. Generally speaking, any amounts intended to compensate for a loss incurred are not subject to VAT. Furthermore, there is no need to issue an invoice for these penalties or for the lump-sum compensation.
- Penalties and the lump-sum compensation of 40 euros must be allocated to the fiscal year in which they are received. However, additional compensation based on supporting documentation must be allocated to the fiscal year in which the court decision granting it became final.
- Failure to include the required information in the Terms and Conditions of Sale is punishable by a fine of 15,000 euros. Failure to include this information on the invoice is punishable by a fine of 75,000 euros.
In practice, we encourage you to use your written reminders (or confirmations of phone follow-ups) to specify the amounts owed for late payment penalties and the lump-sum compensation as of the date of the reminder. Once the amounts owed have been collected, you can then confirm the amounts collected with a summary statement.