Enforcement proceedings up to 5 times higher than the debt
One in four families in the country have had a problem with payment of debts, further due to increased costs in enforcement agents’ black notepads. Last year they collected 127 million Euros on behalf of debts. It is a bad trend showing the growth of poverty in the country, economists analyze
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co-author: Iskra Opetcheska
Forty-year-old Irena.P from Struga would have nearly fainted on the floor in her office when she received a letter from an enforcement agent that for a debt of 2,000 denars would have to pay almost 55,000 denars.
“The debt reached about 350 Euros for a service of a construction company. But instead the owner personally to inform me, he immediately sought help of an enforcement agent. Then I had to pay 6,000 denars for nine months. So in the end, for a debt of 350 Euros I paid nearly a thousand Euros”, says Irena.
The bank retained 6,000 denars nine months without taking into account that the debtor must not be taken more than one third of the salary.
Nikola Petrovski from Bitola had a similar problem as the bank had blocked his account. Last year he went to the nearest bank and was shocked.
“The clerk told me that my account had been blocked by the enforcement agent and that I could not pay the kindergarten for my grandson. She told me that first I had to pay the whole debt to unblock the account. Then she asked 50 denars to tell me which enforcement agent had blocked my account. Notaries, enforcement agents, banks, courts, the state. They will all “skin” us. There was not such wilderness even in Turkish times, when tax collectors collected blood tax in the villages“, says Petrovskiangrily.
Last year around 140,000 mostly poor citizens shared Petrovski’s destiny, which means that every fourth family in the country had a problem with payment and were in enforcement agents’ “black” notepads.
Too expensive for the citizens
From the Chamber of Enforcement Agents they agree that the procedure is expensive, but emphasize that not all the money goes with them. They charge 10 to 15% of the total amount, other money goes to notaries, lawyers, banks and courts. If the costs in banks and the cadastre are reduced, value added tax for the enforcement services abolished, the enforcement costs will be reduced for at least 50%, highlights enforcement agent Gordan Stankovic.
“For a debt of 3.000 denars, collected after three years, the interest is 50 percent. Costs of proceedings are also included in the collection and they amount to 2,000 denars. Major creditors such as Telecom, EVN, mobile operators, Toplifikacija, often transfer these proceedings to lawyers who for such case would charge 3,000 to 4,000 denars. Before they reach the enforcement agent, lawyers have 5,000 denars costs to represent the case at a notary, and finally the enforcement agent will pay 2,500 denars. So while the procedure reaches the enforcement agent, the debt of 3.000 becomes 15.000 denars. Here are banks which charge 500 to 1,500 denars to block and unblock the account”, says Stankovic.
And the Notary Chamber president Zorica Pulejkova agrees that the procedure is expensive, but says that notaries charge smallest reward for the service.
“Ninety percent of proposals for enforcement are for a debt of 10.000 denars where the prize for the notary is 500 denars, which is less compared to how much courts charge for enforcement proceedings. So that part of the cost accounts for the notary public is not so big”, says Pulejkova for Inbox 7.
According to the Rules of Notary Tariff, for a debt between 10,000 and 100,000 denars the notary fee is 600 to 2,100 denars. Besides this fee notaries charge two percent for each debt exceeding 100,000 denars, but must not charge a fee higher than 18,000 denars. All these costs are increased if the procedure is conducted through a lawyer and moreover 18 percent VAT. From the tax enforcement proceedings every year the state collects about five million Euros.
Citizens, despite the costs, react to the contempt for procedure by the enforcement agents. Aleksandar Nikolic from Skopje, a resident of Vlae, shared his bad experience with Inbox 7. He has been sent to an enforcement agent by the company Ekodom for a debt of 1,500 denars.
“My account was blocked without being notified by the notary that I have a debt to someone, and for a debt of 25, I had to pay 100 Euros”, says Nikolic.
Enforcement agents admit that this procedure is contrary to law and should not be handled this way.
“For a debt to come to collection, previously it has to go through other instances such as courts, notaries public or state administrative body depending on the case”, says enforcement agent Stankovic.
In this case Nikolic’s right was broken in the process of enforcement, but tired of the proceedings, courts, banks and enforcement agents he gave up the case and paid 6,500 denars to the enforcement agent.
After growing number of complaints, this year for the first time in the latest report, the Ombudsman sent a serious criticism pertaining to irregularities in the work of enforcement agents and the implementation of the law.
“The analysis shows that citizens often sought protection against obsolete claims, inadequate delivery of orders for compulsory enforcement, complete blocking of transaction accounts maintained at commercial banks and the implementation of mandatory enforcement without regard to the limitation or exclusion of enforcement”, it is written in the report.
In 2013 citizens mostly complained against enforcement agents keeping money received in respect of social assistance, legal support or on temporary unemployment. Also, citizens complained that although they had submitted certificates from the CSW that they were beneficiaries, enforcement agents continued with the collection.
“This way of conducting enforcement proceedings is a blatant violation of the citizens’ rights – debtors in enforcement proceedings given that it is acting outside the legal provisions. Especially because it is a category of people who are on the edge of existence and thus are not informed how they can protect their rights in the process”, says Ombudsman Idzet Memeti.
Inappropriate delivery increases costs
Another reason why the collection of debts is too expensive for citizens is the way orders are delivered. In 2013 the Ombudsman concluded that citizens were informed that in certain circumstances the delivery could be made by public announcement.
“From the contacts with citizens it results that not always the delivery by post is applied, and that applicants learn of the obligation determined by final order after their bank accounts have been blocked. In case where irregularities were found, citizens were instructed to continue the procedure by filing a complaint to the president of the court in whose jurisdiction the enforcement was carried out”, it is written in the report of the Ombudsman.
Notary public Pulejkova assures that during the delivery there is no abuse, but they only implement legal solutions.
“Delivery of orders has always been problematic in terms of the court and the creditors. With the recent amendments to the Law on Civil Procedure (POB) delivery to citizens and businesses is maximally simplified. And here perhaps lies the possible problem that restricts debtors’ right to file complaints, and it is not due to abuse but because such is the legal solution. A step plus might be considered that will enable a secure delivery at least to citizens”, says Pulejkova.
Revenue growth of enforcement agents shows poverty growth
Last year enforcement agents collected 127 million Euros as the total amount. This amount represents an increase of 22% compared to the 104 million Euros collected in 2012. For economists this amount is a bad trend that shows growth of poverty among citizens.
“These are direct indicators that poverty is knocking at our door more and more. Most of the cases at the enforcement agents are of unpaid loans and bills, and any increase, whether the number of cases or the amount collected reflects the poverty in the country”, says economist Stojce Samardziski.
Enforcement agents agree with this statement.
“Many debtors come to us and seek to pay the debt in installments of 2,000 or 3,000 denars. After some time they come to the office and require to pay that debt in monthly installments of 1,000 denars”, says Stankovic.
Uninformed citizens often feel angry towards enforcement agents, notaries and lawyers, and thus to the prevailing opinion that they protect only the big companies that make millions in profits.
“The large number of issued payment orders and their implementation highlight issues with the quick recovery of debts. But again it is in the interest of the citizens although not all can understand it. Sometimes citizens are right if delivery is not proper. However there is a way it can be solved. But we have to realize that it is cheaper if the debt is paid on time”, says Pulejkova.
Most of the citizens’ debts to public enterprises are unpaid bills. Citizens’ debts to banks are most often because of overdue consumer loans and unpaid credit cards.
Costs of average proceedings for a debt of 3.000 denars, collected after 3 years, Inbox 7 calculation
Debt 3.000 denars Interests 1.500 denars Cost of civil proceedings 2.000 denars Attorney fees for civil proceedings 3.000 denars Attorney fees for representing the case at notary 5.000 denars Enforcement agent fee 2.500 denars Blocking the bank account 1.500 denars TOTAL 15.500 denars
Editor: Stojanka Mitreska