One’s fault is another’s earning model

Many a poor slob knows them: the letters ‘in the name of the King’, in which a bailiff in legal jargon (‘with notice’, ‘therefore’) increases the original bill by a mountain of costs. For example, debts are sometimes up to ten times over and people get further into trouble – until they may, years later, end up in debt restructuring. From that moment on they have lost control of their finances and have to live on five to seven bucks a week.

Nadja Jungmann, lecturer in debt and collection at the Hogeschool Utrecht, sees this often happen. “How can it be that small debts turn into large debts?” she says. “I think that’s an important question, especially now that we are in a crisis and more people are in danger of falling into payment arrears.”

Debts often add up quickly, Jungmann notes. “It all starts with collection costs. If I have not paid a subscription of 15 euros, I soon receive a payment reminder that adds another 40 euros. That’s quite a lot, especially when it comes to an automatically generated letter. Then the debt is already 55 euros. If you don’t pay that, with a bit of bad luck, hundreds of euros in writs, writs and court fees will be added.”

Jungmann wonders: is it desirable for debts to be linked to a business model? “In any case, it should not be exorbitantly earned. In Sweden, a legal maximum of 60 kronor, 5.60 euros, applies to a payment reminder.”

Emeritus professor Nick Huls argued eight years ago in his farewell speech entitled ‘Forgive us our debts more often’, in favor of a different model in which debt collection and debt counseling go hand in hand. “I am in favor of an integrated approach to debt,” says Huls. And he is also inspired by Sweden: “There is only one large debt collection agency there, in the hands of the government.” But Huls has noticed that something like this meets a lot of resistance in the Netherlands. “It would result in too great a concentration of power, it is said, and trust in the government has not exactly increased in recent years. Look at the Allowances affair.”

Also read: ‘Something has to happen. I was in debt everywhere

Civil servant and entrepreneur

Such a Swedish system may meet with resistance, but there is also criticism of the current model. “A Dutch bailiff is a civil servant and an entrepreneur at the same time,” says Connie Maathuis, director of the Dutch Association of Certified Collection Companies. “He has official powers, such as the enforcement of sentences, but at the same time operates with a profit motive. In addition, all bailiff companies also conduct debt collection and can decide for themselves when they cancel the amicable debt collection process and go to court. This is followed by litigation and attachment costs, which are added to the outstanding debt. Going to court therefore brings the debtor further into trouble, while the bailiff actually earns from it. I think this is a perverse incentive in the current system.”

This is one of the reasons why Jungmann and Huls argue in favor of enshrining the right to a payment arrangement in the law. “That is not the case now,” says Huls. Creditors, collection agencies and bailiffs can decide for themselves whether or not they make an arrangement with the debtor.

Chairman Chris Bakhuis of the Royal Professional Association of Bailiffs (KBvG) acknowledges that bailiffs earn little or nothing from the amicable process – or, as she calls it, ‘preventive’ measures. “By that I mean the efforts that bailiffs make to prevent the costs from rising further. We are legally obliged to do so, and external auditors oversee it. But we are not being paid for such preventive work now. It would be good if it did. That would be a healthy incentive.”

Bakhuis does not think it right that bailiffs are seen as people who earn money from other people’s money worries. “It is not the case that bailiffs ruthlessly seize seizures to earn money themselves. In any case, it cannot be done without a judge’s decision. We are obliged to consult a digital register to prevent senseless seizure. And if a bailiff does not comply with the rules, you can go to the disciplinary court.”

Maathuis sees it differently. “You can trust the good intentions of the bailiffs, emphasize that they are bound by rules and that there is supervision, but it is better to remove the perverse incentives from the system. Because only when it is no longer possible, you know for sure that it will not happen again: proceeding too quickly to judicial measures that are lucrative for the bailiff and disastrous for the consumer.”

Direction is missing

A lack of coordination in debt collection is another problem, says Maathuis. “There is no central system where you can check whether someone has other payment arrears. The different creditors operate independently of each other and all try to get as big a piece of the pie as possible, no matter how small the debtor’s pie is.”

For example, according to Jungmann, it often happens that creditors cause problems for each other. “In that case, an amount that is too high has been agreed with a debtor, as a result of which he cannot pay his other creditors. And although we have an attachment-free foot in the Netherlands, a social minimum to live on, as a debtor you can voluntarily sit under this. A creditor or collection party can persuade someone to do so, while that person can in turn lead to arrears with other parties. The debt continues to rise.”

A few years ago, ‘social collection’ emerged. The tone is friendlier, more understanding. ‘If you can’t pay, please contact us.’ However, according to Jungmann, it has now become apparent that the competition between collection companies is hindering this trend. “There is still a large group that says: we want to collect socially, but also a group that puts more pressure on. If you collect more socially, they see, you mainly give more room to other creditors who take a tougher stance.”

The average debt rises to around 37,000 euros with thirteen to fourteen creditors

However, Bakhuis reports, the bailiffs conduct “round table discussions” with Minister Weerwind (Legal Protection) “to give substance to social collection, for example with a social rate for preventive actions.”

But critics of the current model fear that such a rate will not help unless there is a collective, coordinated approach to one’s debts. “It would be good to get a complete picture of a debtor’s situation more quickly, says ‘debt expert’ André Moerman, the man behind the website www.dep.nl. “Usually there is no direction whatsoever, so that people with money problems muddle through for years. They mistakenly think: I’ll figure it out. And when they eventually end up in restructuring, the average debt has risen to around 37,000 euros with thirteen to fourteen creditors. Only during the debt restructuring is everything put together and carefully considered what someone can pay. That coordination should be there much earlier. Also because households with debts contribute to society cost 11 billion euros annually.”

Belgian bailiffs

Arie Lodder, bailiff in Rotterdam, agrees. “Earlier intervention and coordination is better for everyone. This prevents the debts for the debtor from increasing further and the creditor receives his money sooner.”

That is why Lodder wants to experiment in the Netherlands with MyTrustO, an approach developed by Belgian bailiffs. Under the motto ‘Take care of your debts yourself and avoid extra costs’, they invite consumers to sound the alarm at an early stage about money worries. The consumer then has a ‘picture taken’ of income, assets and payment arrears and then makes arrangements with all creditors, based on his repayment capacity. “Sometimes it’s only, say, 200 euros a month,” Lodder says. “Now all collection agencies and bailiffs are trying to take that 200 euros. The idea of ​​MyTrustO is a collective debt settlement: we are going to divide the 200 euros between the creditors. This way you can remove a lot of stress from the debtor, so that he does not get sick of his money worries, but can focus on his work and is able to improve his repayment capacity.”

Bakhuis likes the idea, but wants to look at the implementation. “I don’t know the Belgian model, but it’s good to get an overview as early as possible. The bailiff is the designated party for a coordinating role. He’s the one who knocks on people’s doors. So where it can be solved, the bailiff can play a nice coordinating role. But if there is no money, then it is something for the debt relief.”

The Belgian model is actually a combination of debt collection and debt assistance, says Lodder. “It can also help municipalities to assist people with money problems early. And it works. MyTrustO has been around for seven years now, many people have heard of it, and they are now reporting earlier and with a lower average amount of late payment.”

An early approach, more coordination, repayment based on what someone can really pay? That seems like a good idea, especially now that large groups of Dutch people are in danger of getting into trouble. Because according to those involved, the debt sector is currently a maze of conflicts of interest: between bailiffs and debt counselors, between bailiffs and collection agencies, between bailiffs themselves, between private and public parties.

“The list is even longer,” says emeritus professor Huls. “Because, just to name a few: critics argue that debt collection is an earning model even for the judiciary in the Netherlands. But among all those interests, a few get overlooked: those of the debtor, the original creditor and society as a whole.” That is why he also advocates a collective approach. “The debt industry itself is due for restructuring.”

Huls is not the only one who sees it that way. “Everyone is in each other’s way,” says Maathuis. “We have to move to a different model. The current system is unsustainable.”