In the past few days, our office has received a large number of clients with the same situation concerning attempts to collect expired claims that the original creditor subsequently sold to a third party. For this reason, we consider it useful to explain when a claim becomes time-barred and how the attempts of ‘predatory’ debt buyers to collect uncollectible debts look like. We will present the most common questions and answers on this topic.
Statute of Limitations on Claims and Predatory Debt Buyers
When does a claim become time-barred?
The Law on Obligations prescribes the statutes of limitations in Articles 371-380. According to the law, the general statute of limitations is 10 years and applies to all claims for which a specific, usually shorter, period is not prescribed. The Law on Obligations recognizes the following specific periods:
The following claims become time-barred after three years:
claims for periodic payments due annually or in shorter intervals (Article 372);
mutual claims of legal entities arising from contracts for the sale of goods and services, as well as claims for reimbursement of expenses made in connection with such contracts (Article 374);
claims for rent, whether determined to be paid periodically or in a lump sum (Article 375);
claims for damages caused from the moment the injured party became aware of the damage and the person responsible for it (Article 376);
claims arising from insurance contracts, except life insurance contracts (Article 380).
The following claims become time-barred after five years:
the right from which periodic claims arise, calculated from the due date of the oldest unfulfilled claim after which the debtor ceased making payments (Article 373);
claims for damages from the moment the damage occurred (Article 376);
claims of the insurance policyholder or third party under a life insurance contract (Article 380).
The following claims become time-barred after one year:
claims for the supply of electricity, heating energy, gas, water, chimney services, and maintenance of cleanliness, provided that the delivery or service was performed for household needs (Article 378);
claims by radio and television stations for the use of radio and TV receivers (Article 378);
claims by post, telegraph, and telephone companies for the use of telephones and mailboxes, as well as other claims they charge in quarterly or shorter periods (Article 378);
claims for subscriptions to periodic publications, calculated from the end of the period for which the publication was ordered (Article 378).
Which claims are most often purchased?
Particular attention should be paid to claims related to commercial contracts, as predatory debt buyers primarily purchase claims arising from such contracts in the hope of successfully collecting them.
Commercial contracts, as defined by the Law on Obligations, are contracts concluded between companies and other legal entities engaged in commercial activities, as well as sole proprietors and individuals who conduct registered commercial activities, in the course of their business operations or in connection with such operations.
It is essential to emphasize that for commercial contracts, it is not important whether the debtor is a legal entity or a sole proprietor, as both conduct commercial activities. As long as the claim arose from a commercial activity (e.g., the purchase of physical raw materials by an oil company), it is considered a commercial contract subject to a 3-year statute of limitations.
How does predatory debt purchasing work?
Predatory debt purchasing operates in such a way that various commercial companies in the Republic of Serbia (which will not be named here) massively buy a large number of claims from other legal entities based on cession agreements, paying a disproportionately small amount relative to the total assigned claims. For example: Company A buys claims in the total amount of 1,000,000 euros from 20 different companies, paying a fee of several tens of thousands of euros and then attempts to collect such claims.
How do attempts to collect claims look, and what to do in such a situation?
A typical attempt to collect claims begins with a phone call, often involving a series of calls in which it is repeatedly insisted that the debt exists, that it is due for payment, and that the debtor is obligated to pay it.
Keep in mind that these calls are almost without exception recorded, and the purpose of such conversations is twofold:
To persuade the debtor to pay the alleged debt to avoid enforcement or legal proceedings, thereby misleading them into believing that the predatory debt buyers can succeed in such proceedings, even though, based on the law and facts, it is often clear that they would not succeed due to the statute of limitations.
To manipulate the debtor into acknowledging the claim, thereby circumventing the statute of limitations.
Acknowledging the claim in a phone conversation, which is, as we mentioned, usually recorded, can be done in various ways. The recipient of the call may find themselves in a situation where something that was time-barred suddenly becomes collectible due to an unskilled choice of words during communication.
For this reason, it is essential that, in the case of such a call, you do not respond to any questions but instead state that you do not wish to make any statements without consulting an attorney. Immediately after that, contact a lawyer who can advise you on further steps. Similarly, if you receive a pre-lawsuit notice, lawsuit, or enforcement proposal from predatory debt buyers, it is necessary to contact a lawyer without delay to obtain legal advice.
If you have any questions or need assistance in dealing with predatory debt buyers, feel free to contact us via email at office@aktodorovic.rs or by calling 021/505-205.