On 1 September 2023, the Law of 4 May 2023 inserting Book XIX “Consumer debts” into the Belgian Code of Economic Law (Wet van 4 mei 2023 houdende invoeging van boek XIX “Schulden van de consument” in het Wetboek van economisch recht / Loi du 4 mai 2023 portant insertion du livre XIX “Dettes du consommateur” dans le Code de droit économique – the Law) will enter into force for consumer contracts which are concluded on or after that date. As of 1 December 2023, the Law will also apply to the recovery of consumer debts from contracts concluded before 1 September 2023 if the delay in payment or the amicable recovery occurs after 1 September 2023.
The primary objective of the Law is to modernise the rules governing the amicable recovery of consumer debts, whether by the creditor or through third-party intermediaries. In addition, the Belgian legislator aims to strike a balance between the adverse effects encountered by companies resulting from delayed payments by consumers and the financial impact of debt collection activities on consumers.
Free First Reminder and 14-day Grace Period
If consumers fail to pay their debts by the original due date and a penalty clause applies, the application of this clause will be subject to (i) the issuance of a formal notice (taking the form of a first reminder); and (ii) the expiry of a grace period of at least 14 calendar days starting from the third working day after sending the reminder. If the reminder is sent electronically, the 14-day grace period starts on the calendar day following the day of sending of the first reminder.
The costs of the first reminder cannot be charged to the consumer. As regards contracts for the regular supply of goods or services, reminders pertaining to three expired due dates within a given calendar year should be free of charge for the consumer. The costs of additional reminders may not exceed EUR 7.50, to be increased with the postal charges applicable at the time of sending.
Capped Interest and Penalty Clauses
If consumers fail to pay the (full) outstanding debt within the aforementioned 14-day period, companies may claim interests and late payment damages under a contractual penalty clause. However, as these amounts could be unreasonable compared to the actual damage incurred, the Law puts a ceiling on both the interest rates and the amount of damages that can be claimed:
- The interests must be based on the outstanding amount and are capped at the rate provided for in Article 5 of the Law of 2 August 2002 on combating late payment in commercial transactions (Wet van 2 augustus 2002 betreffende de bestrijding van de betalingsachterstand bij handelstransacties / Loi du 2 août 2002 concernant la lutte contre le retard de paiement dans les transactions commerciales). This interest rate is updated every six months.
- The damages must be proportionate to the amount of the outstanding debt. Debts equal to or lower than EUR 150 entitle the creditor to a maximum compensation of EUR 20. If the outstanding amount ranges between EUR 150.01 and EUR 500, the maximum compensation is set at EUR 30, to be increased with 10% of the outstanding amount between EUR 150.01 and EUR 500. If the outstanding amount exceeds EUR 500, the compensation is capped at EUR 65, to be increased with 5% of the outstanding amount exceeding EUR 500, subject to an overall cap of EUR 2,000.
The Law is available here (in Dutch) and here (in French).
Companies are well advised to amend and update their general terms and conditions now so as to ensure compliance with the Law. Any terms and conditions that diverge from the Law will be null and void.
Van Bael & Bellis’ team of experts is available to advise you in more detail on the implications of this Law, and to review and update your current general terms and conditions. Do not hesitate to contact us if we can be of any assistance.