The new rules on the regulation of the lump sum for collection expenses

Act V of 2013 on the Civil Code added the lump sum for collection expenses as a new legal instrument to the Hungarian regulations in accordance with the relevant directive of the European Union which provides a forint amount equal to 40 euros for the recovery costs of the creditor in case of contracts between business parties for the late payment of the debtor. Act IX on the lump sum for collection expenses (Act) was published on 23 March 2016 and entered already into force on the next day. It set aside the rules of the Civil Code on the lump sum for collection expenses and introduced some new rules on it which are in several aspects significantly different from the earlier regulation. The basic rules: the amount of 40 euros of the lump sum for collection expenses and the declaration that any contract term which excludes payment of this lump sum or sets the amount thereof in less than 40 euros shall be null and void, have not changed.

New definitions

A significant change, that the Act declares that the obligation of paying the collection lump sum only arises from financial obligations based on business transactions concluded between business parties or business parties and contracting authorities. The Act details the definitions in connection with the lump sum for collection expenses, such as the definitions of the business transactions, contracting authority and business party. Business transaction – in the use of the Act – is a transaction between business parties or between business parties and contracting authorities thesubject of which is the sale and purchase of goods or providing service for a payment. Contracting authority – in accordance with the rules of the Civil Code – is the contracting entity as defined in the Act on Public Procurement, even in that case as well when it is not obliged to perform a public procurement. The definition of the business party is slightly different from the definition in the Civil Code; according to the Act, business party is a party not regarded as a contracting authority, performing independent economic or professional activities (including those business parties as well where the activity is performed by a person – e.g. sole entrepreneur). 2

Not an unconditional payment obligation, just a possibility to claim

The Act contains an important rule different from the earlier regulation: the payment of the lump sum for collection expenses is not regarded as an unconditionally prevailing obligation of the debtor without any further conditions, it is only a potential claim of the creditor. This means that the payment of the lump sum for collection expenses is not obligatory, the debtor only has to pay it if is requested by the creditor.

Term of preclusion

The creditor has only one year long preclusive deadline from the occurrence of the default to claim the lump sum for collection expenses. According to the Act, date of the expiration of the claim (the starting date of the preclusive deadline) is – in case of voluntary performance – the date of the performance or – in case of lacking the voluntarily performance – the date of the first demand for performance. The debtor does not have to pay the lump sum for collection expenses if the debtor excuses its default in the proceedings for collection of the lump sum for collection expenses. However, paying the lump sum for collection expenses does not exempt from the other legal consequences of the default, but it comprises in the damages.

Transitional regulations

The rules of the Act are applicable for the financial obligations based on business transactions concluded before the Act became effective. The preclusive one-year deadline for a default existing when the Act became effective starts from the effective date of the Act, from 24 March 2016. The Act – at the same time – amended the Accounting Act. It added an extra paragraph (56) to Article 176 which declares that when the Act enters into force the obligation arising from the lump sum for collection expenses presented in the accounting records of the business party may be deleted against the other incomes, in case it was not claimed by the creditor.