Understanding Debt Collections In Austria

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Due to the nature of the relationship between Germany and Austria, many of the collections procedures adhere to the German code of collection regulations and laws, though exceptions are made when Austria has a specific statute that differs from German code, known as Rechtsanwaltsvergütungsgesetz, or RVG.

Interest

It's common to always attach interest to a past due debt that needs to be collected. Due to regulations set by the European Union in European Directive 2000/35/CEE, this practice is somewhat governed universally across member states, of which Austria is one.

For this reason, the interest rate attached to a debt will be the rate set by the Austrian National Bank plus an added charge of 8 percent. This interest rate is charged to the debt's outstanding balance on a daily basis.This interest rate can be overridden by a higher or lower rate if a different rate is stipulated in the contract that exists between the debtor and the creditor.

Debt collection costs:

Austria's procedure for recovering the costs associated with debt collection come in the form of damages awarded to companies based on the delay in receiving payment from the debtor. Known as "Delay for Pay" or "Inkassokosten," these laws only go into effect when a debt is significantly past due.

It is common policy to use the German code of collections, known as Rechtsanwaltsvergütungsgesetz, as a guide when determining the costs charged to debtors. That code is based on the statutory lawyers' fees in Germany, and is an excellent way for clients to recoup a significant majority of the costs associated with the collection of the debt.

When passing on collected costs to a client, International Collection Agencies will process the received money in one of two ways.

In most cases, the money will be directly passed on to our client, who will use them to reduce the overall claim. In some cases, however, it is policy to add them to a success fee that will be billed to the client at the conclusion of the collection process.

The decision between either procedure is made in the contract that is executed, and is agreed upon at the time the contract is signed.

Legal Procedures

In Austria, it is possible to begin legal proceedings against a debtor without any prior notification that those legal proceedings are about to begin.

It should be noted, however, that a final notice and warning of legal action is often sent by many creditors as a courtesy to debtors, and as a way to reduce the time and money that must be invested in legal proceedings.The court system in Austria is heavily weighted in favor of reaching a settlement between the creditor and the debtor.

It should be standard policy for a International Collection Agency to advise their clients on a case-by-case basis when presented with the option to settle the case or move forward with prolonged and defended legal actions.

Required documents:

The legal procedure in Austria is not a generally prolonged one, as it can be in many of the country's neighboring court systems. The judicial system does require a great deal of paperwork to begin legal proceedings, however, most International Collection Agencies will not file any motions with the court until they are in possession of the following documents:

- Copies of the contract between the creditor and debtor - Any outstanding invoices - Copies of account statements that show an outstanding balance, payments, or credits, if relevant

If the legal action proceeds to a lawsuit instead of an amicable settlement between the creditor and the debtor, most International Collection Agencies will need an even larger number of documents to ensure the client's best chance at success in the court system.

These documents include the following:

- Copies of all contractual documentation and correspondence - Delivery confirmations, orders, and order confirmations - Further backdated invoices - Documents proving the business relationship between both parties - Documentation of debt-related correspondence or agreements - Evidence of oral agreements between both parties, including witnesses

After all of the relevant documentation has been received -- a fully defended lawsuit -- can proceed against the debtor quickly and effectively.

Legal dunning procedure

The legal dunning procedure regulated by Austrian law contains only a single step for those claims involving a debt up to 75,000.00 EUR.

In this case, the legal dunning procedure directly results in the issuance of a Payment Order, or "Zahlungsbefehl," issued to the debtor. This payment order is delivered by the local court nearest the debtor's home address or main business offices.

For debts that are far larger than 75,000.00 EUR in size, the case is handled by the district court nearest the debtor's main business address. In these larger cases, a Limited Payment Order, or "bedingter Zahlungsbefehl," is issued to the debtor via service.

In both cases, the debtor has a full four weeks from the date of delivery or service, during which they can object to the debt, dispute it in court, or even choose not to respond to the order for payment at all.

If the debtor does choose to make a payment to eliminate the debt, they will need to pay the entire outstanding balance due, as well as all applicable interest charges, within 14 days of the order having been delivered or served. If the debtor does not pay within 14 days, and does not file an objection within the allotted period of four weeks, the payment order immediately becomes final. The court can then choose to begin execution of the debt against the debtor.

If an objection is filed during the four-week time frame, legal action will begin to determine the validity of the debt and the terms of payment between the creditor and the debtor.

Lawsuit

Lawsuits between creditors and debtors in Austria are started due to one of two incidents. The first is a dispute filed by the debtor, against the creditor, during the course of the amicable phase of collection.

The second time a lawsuit is initiated occurs if a debtor files an objection to a payment order issued by the court during the legal dunning procedure. In both cases, a written pre-procedure is followed.

During this time, the creditor and debtor exchange evidence, opinions, and proofs, with the judge who is overseeing the lawsuit itself. There is no requirement to present in the courtroom until the judge has determined whether or not enough evidence exists to lodge a dispute and pursue a formal lawsuit between the parties.

Once the judge does have the information needed to accept the lawsuit, a hearing will be called. This hearing takes place in the court itself, and both parties are required to attend. During this time, the judge will set a date for the publication of the final judgment in the case.

Both parties in the lawsuit will be informed about this final judgment via writing by the court on the date issued by the judge.

Notification will often take place via postal mail, rather than service.

Costs:

The costs associated with a legal procedure against the debtor are largely based on the amount of the debt that is still outstanding.

These costs are calculated in a way that takes both parties' financial situations into consideration, making it difficult to calculate or estimate the exact costs that will be incurred during a lawsuit against the debtor.

Other costs and fees may arise during the trial that were not planned for at its outset, including costs associated with hiring experts or providing witness testimony about oral agreements or other matters.

For these reasons, a International Collection Agency should have a policy that allows it to give cost estimations only on a case-by-case basis when legal action is pursued.

Expected time frame:

The judicial system in Austria is rather expedient when compared to several other European countries. The average length of time needed to complete the legal dunning procedure is between just eight and twelve weeks. A fully defended lawsuit in the country's courts can take up to 12 months in some cases, with more complex matters requiring an even longer duration.

Even so, this is among the shortest amounts of time for a lawsuit to conclude in any European country.

Interests and costs:

Most International Collection Agencies will seek to add the interest and debt collection costs to the debt's outstanding balance in court.

This is permitted by Austrian law, and is frequently granted at the conclusion of the suit in the final judgment issued by the court.

Any court costs incurred by the creditor, as well as lawyers' fees paid by the creditor, can additionally be attached to the outstanding balance of the debt when the court issues the final judgment.

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