Ministry targeting repo agencies

Justice Minister Jiří Pospíšil (Civic Democrats, ODS) is cracking down on an underregulated system of repossession that has itself become big business, with more than 2,000 repossessions daily nationwide, including some cases where people are unaware they even owe money.

"We want to prevent an overly harsh interpretation of the law," he told journalists Jan. 17.

In 2002, Libuše Urválková received such an order after she forgot to pay the final bill for her telephone line in Pardubice while relocating to Germany. When repo agents found she had left the country nearly a decade later, they garnished her mother's pension account to collect payment, Urválková said. By then, the bill had climbed from some 300 Kč to nearly 15,000 Kč.

"If they had told me then that I owed something, I would have paid it. But after 10 years?" Urválková said. "This is how they work. They wait for the late fees to accumulate, and then they go after you."

After presenting to Parliament a draft bill aimed at reducing court bureaucracy in petty debt cases in fall 2011, Pospíšil now seeks to limit speculation with petty claims.

Bolstered by a recent decision by the Constitutional Court that called attention to the issue, the Justice Ministry has proposed to further amend existing legislation, lowering the maximum amount of fees debt collection agencies may charge for a single nonpayment from 6,500 to 3,500 Kč.

In addition, Pospíšil plans to implement measures requiring debt collectors to alert debtors of their nonpayment and give them a reasonable time to reply before they begin charging fees.

"If someone has a petty debt and doesn't know about it or forgets about it, he should have the right to be notified and given the chance to pay off the original sum," Pospíšil said.

Currently, debt collection agencies are not required to notify a nonpayer of his delinquency within a particular time frame. Private companies and their lawyers, who are currently entitled to a servicing fee of up to 6,500 Kč for the repayment of a delinquent petty fine like a parking ticket, have thus transformed debt collection into a wildly profitable business, buying up petty claims and inundating the courts with requests for the issuance of repossession orders.

"We are dealing with big business with unpaid debts, where one law firm is capable of churning out thousands of requests for court orders," Pospíšil said.

According to official figures from the Czech Repossession Chamber (ČEK), local courts ordered 701,000 asset seizures in 2010, as compared with 4,302 in 2001 - a more than 162-fold increase. Based on these numbers, an estimated 2,000 property seizures take place in the Czech Republic every day.

The Constitutional Court upheld a decision Jan. 3 by a lower court in Ústí nad Labem to deny legal fee compensation to Bazcom, a private debt collection firm that had previously inundated the Ústí nad Labem court with some 16,000 lawsuits against nonpayers of petty fines.

"Mostly, these were orders against free riders on public transportation who had received fines for failing to buy a ticket," said Constitutional Court spokeswoman Jana Pelcová. "[Bazcom] had previously bought up these claims from the municipal Transport Company."

Constitutional Court judges reasoned Bazcom had the right to request the amount of the original fine from debtors, but refused Bazcom's request to demand an additional legal fee of 6,600 Kč per request - a total of more than 105 million Kč.

Constitutional Court judges reasoned the requested legal fee compensations were exorbitant in Bazcom's case, as the court order requests were generated by an automated system and thus did not require the hiring of outside legal expertise.

The court also voiced concern about the growing bureaucratic burden placed on courts by the current system, an issue Pospíšil's draft bill seeks to address by lowering the courts' involvement in petty claims cases.

The judiciary's exasperation with the status quo was evident in the language of the Jan. 3 decision.

"I hope this decision ... does not lead the plaintiff to inundate the court with another several thousand complaints, when they are unlikely to be judged differently," Constitutional Court General Secretary Tomáš Langášek concluded in the report.

Reacting to the recent crackdowns, repossession officers say they are being unfairly targeted.

When daily Lidové noviny recently asked ČEK Chairwoman Jana Tvrdíková how it was possible to charge five-figure fees for the nonpayment of a few crowns, she replied: "Those few crowns require the attention of university-educated people, and their labor costs something."

Markéta Hulpachová can be reached at
mhulpachova@praguepost.com