Italian-Debt-recovery-and-late-payment-interests

Debt Recovery In Italy And Late Payment Interests

Laws

In Italy, the debtor shall pay an invoice within 30 days; which is shorter than other EU countries where the debtor has “normally” up to 60 days to pay back the debt. However, in the public sector, the companies tend to not follow this rule while postponing the payment up to a year. Subsequently, debt recovery or credit collection in Italy is generally more bothersome than for example U.S or UK. For this very reason, companies and businesses shall maintain an effective system dedicated to the collection of overdue accounts.

Under previous circumstances, it should be highlighted that a debt recovery matters always need a case-by-case analysis that may look at credit details such as the type of credit, the time of the debt, and the reason for the debts. Furthermore, after 6 months, the probabilities to recover the credit are already reduced by the 30%.

Within this context and in order to not losing your credit, VGS usually suggests to its client to first proceed with an assessment of debtors’ financial and economic situation. This assessment will highlight the reasons why the debt has not been paid back yet. After that, standard procedures suggest that payment notices might be effective in order to solve the issue outside the court. On the contrary, VGS suggests proceeding with a standard injunction order through which the creditor can prove his/her credit and the judge may release an enforceable order of payment.

Aside of the details in relation to the debt recovery proceeding and its possible costs, VGS aims to highlight the importance of legal interests in the context of debt recovery or credit collection. Generally speaking, in presence of a pecuniary credit, interests of late payment are due since the first day of delay. In addition, the late payment interests are due even in the case the creditor did not suffer any damage. (Art. 1224, 1 sec) In the context of legal interests linked with a debt recovery, VGS always prompts the parties to establish a tailored interest rate that will replace the statutory interest rate. However, parties’ decisions shall never be translated into a usurious rate (Art. 1815 Civil Code) and the conventional decision shall take place through a written agreement.

In relation to late payment interests, they are not due if the debtor can prove that the delayed fulfillment of the obligation was not the debtor’s responsibility. After that, there is a specific framework for debt recovery in the context of commercial transactions. Specifically, the framework applies to debts and credit between companies and companies and public administrations concerning the delivery of goods or the provisions of services for remuneration. Subsequently, the late payment interest is higher than the legal interest rate when these are referred to as commercial debts and credits. In these cases, these interests are named Commercial Interests.

In absence of a precise indication of the time limit for the payment, art 4 of the Italian Legislative Decree 231/2002 set automatic interest terms. In details,

  • 30 days from the date of receipt of the invoice;
  • 30 days from the date of receipt of the goods or from the date of the provision of the commercial service when the date of the invoice receipt is unknown;
  • 30 days from the date of receipt of the goods or from the date of the provision of the commercial service, when the date in which the debtor receives the invoice precedes the receiving of goods or the provision of the service;
  • 30 days from the date where the statutory or contractual verification obligation towards the conformity of goods and services.

VGS professionals confirm that matters regarding debt recovery and credit collections may also include issues regarding legal or late payment interests. Legal interest may represent a further issue for both debtors and creditors so that the careful analysis of the most appropriate interest clauses looks like fundamental.

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