Unfortunately, we don’t often think before taking out a loan what the possible consequences of a default are. Of course, we are aware that the case may be dealt with by a debt collector, court or bailiff, but these are rather vague and very distant images. Meanwhile, the first debt collection steps the lender will take will take place fairly quickly. We can receive a prompt just a few days after the loan repayment period has expired. What is this and what will its consequences be?
What is the prompt?
The reminder is an official reminder to pay the creditor. Otherwise it is also called a reminder or a request for payment, although the latter form is not entirely correct (but more on that later). The prompt can take various forms: by SMS, e-mail, letter or even telephone. So there is no single pattern or tone. Initially, the loan company may suspect that the borrower simply late or has forgotten the repayment, but in the long run is going to repay the loan.
What is the function of prompts?
Prompts are the first and most commonly used way to recover borrowed funds. This is not strange – after all, it is one of the cheapest and simplest debt collection measures, it is not too time-consuming (it can be sent in series) and – which is very important – often has the desired psychological effect.
The basic functions that perform prompts are: an incentive function, prompting the borrower to repay the liability faster, and an evidentiary function, which will serve in court proceedings as a confirmation of undertaking amicable actions.
When and how will I receive prompts?
The form in which prompts may appear has already been specified. However, their frequency can be very different and depends primarily on what practice is used by the particular lender. Some are more lenient, others will remind you of the arrears on the first day after the deadline. Usually, however, 7 days is taken as the cut-off date, because most often then the situation begins to get serious. It is also common practice for weekly reminders to be sent. The overall time at which prompts will be sent is also varied. Most often it is at least a month of periodically sending notifications of non-repayment, but it can also take a little longer.
Is there a workflow and order of using prompts? Probably yes, because usually forms of prompts are sorted according to the degree of psychological impact and probability with which they may prompt the debtor to pay. In turn, they will be:
- SMS and email prompts – they show the relatively lowest degree of impact, because they usually occur in an impersonal form, they are not of a highly formal nature, and borrowers show a lot of carelessness in relation to this form; it also has no consequences;
- telephone prompts – direct contact with an employee of a loan company may cause the borrower to feel ashamed and embarrassed, which is a great motivating factor, but lasting only during the conversation and causing at most the fear of answering the next call;
- letter prompts – this is the most official form, and thus the most indicative of the seriousness of the situation; in addition, the borrower may be under stress that the family will learn about the debt.
Are payment orders prompted?
On the one hand, yes, because they are quite a specific form of reminder and notice of non-repayment. On the other hand, they cannot be classified as they take on a much sharper tone and are almost the last step before going to court.
They are no longer just a request to settle the obligation, but also for the first time clearly indicate the consequences of non-repayment: the calculation of additional costs, the possibility of bringing a civil action and possible bailiff proceedings. Most often it also indicates the repayment method proposed by the creditor.
The final form of this type of recovery measure is the pre-trial payment order, which is already the introduction to filing a lawsuit with the court. On the one hand, it is a formal requirement to prove to the judge that all amicable means have been exhausted and the lender has shown good will to settle the dispute in a conciliatory manner.
An important point is that a pre-court demand for payment sent twice by registered mail and not picked up by the debtor is considered to have been served. On the other hand, the pre-trial payment order brings the borrower to mind and the bailiff’s specter, and it is likely to motivate him to pay back at least part of the debt.
How much will I pay for the prompts?
The Anti-usury Act has introduced a top limit of costs that can be charged for prompts. The basic assumption was that the debtor should pay only as much as the costs of preparing and sending the reminder. The Act also imposed a top cost limit that lenders cannot exceed. Some loan companies (e.g. Aasa) and even banks abolished such fees, while others reduced them significantly.