How to calculate 40 Euro late payment compensation

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Debt collection is associated with costs incurred by the creditor. However, there is a way to cover these expenses. Well, a flat-rate compensation has been introduced to compensate the creditors' costs. The flat-rate fee for recovery costs is EUR 40 in compensation and is charged in the event of late payment. However, how is this fee charged and what does it even mean? These questions are answered in the article below.

In accordance with applicable law, a creditor who has not received payment on time may demand a refund of EUR 40 from the contractor as compensation for the debt collection costs incurred. Moreover, in a situation where several invoices are in arrears, the debtor may be charged a multiple of this amount.

Converting EUR 40 of the compensation into the Polish currency

According to the act on payment deadlines in commercial transactions, which has been in force since April 28, 2013, the value of EUR 40 in compensation is converted into the Polish currency at the average EUR exchange rate announced by the National Bank of Poland on the last working day of the month preceding the month in which the cash payment became due.

Who is entitled to EUR 40 in compensation?

Compensation in the amount of EUR 40 is due to a creditor who has performed his services but has not received payment for them within the prescribed period. This deadline should be specified in the contract or request for payment. It is assumed that EUR 40 of compensation may be charged for each invoice not paid on time. It is this document that is the basis for applying for the repayment of receivables, and in such a case, the creditor automatically acquires the right to lump-sum compensation, which is to cover the costs of recovering the debt.

When can you apply for EUR 40 in compensation?

The aforementioned Act does not make the calculation of EUR 40 in compensation conditional on referring the case to court. As a result, it can be applied for from the date of acquiring the right to interest, i.e. at the stage of pre-court proceedings.

Collection costs higher than 40 euros

What if the creditor's costs are higher than the aforementioned 40 euros? In this situation, the creditor is entitled to reimbursement of these costs, including the costs of court proceedings, less this amount.

When is 40 Euro compensation not favorable?

If the debtor fails to pay the debt on time, claiming EUR 40 in compensation for recovery costs is not profitable in the event of legal proceedings.

This is due to the fact that the amount of the calculated compensation should be added to the value of the receivable. This will increase the amount of court fees. In addition, if the creditor wins the court case and the debtor has to reimburse the amount due, the amount of compensation will be deducted from the costs of the court proceedings. In a situation where the calculated compensation is lower than the sum of court fees and costs of legal representation, then it is not profitable to pursue it. Because it will be zero and the creditor will not receive any redress.

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When is this solution beneficial?

If the debtor pays the debt together with the out-of-court compensation, then it is a profitable solution for the creditor.

It is also beneficial for the creditor when many invoices are unpaid, in which case the sum of EUR 40 of compensation will be charged from them. It is very likely to exceed the costs of litigation, which will result in the compensation being reimbursed.

It is important here that the provision of the act applies only to commercial transactions the subject of which is the paid delivery of goods or the paid service. This regulation does not apply to contracts concluded between the entrepreneur and the consumer.

EUR 40 in compensation for recovery costs has many advantages and gives creditors a chance to get their money back. However, before the entrepreneur decides on this form of compensation, he should first calculate whether it will be profitable for him.