To be able to recover your collection costs from a
commercial debtor in Canada, you must have a valid signed agreement whereby the
debtor has agreed specifically that the costs of collection are recoverable.
A version of this clause may look something
like this:
“The customer shall pay all solicitor's
fees and expenses, and all legal costs as between solicitor and his own client
on a full indemnity basis, as well as an allowance for the time, work and
expenses of the Credit Grantor, or of any agent, solicitor or employee of the
Credit Grantor, for any purpose herein provided for and whether such sums are
advanced or incurred with the knowledge, consent, concurrence or acquiescence of
the Customer or otherwise, together with interest thereon at the rate provided
for herein, shall be repayable to the Credit Grantor on demand, or if not
demanded then with the next ensuing installment payable to the Credit Grantor.”
Where these costs are recoverable, often the courts decline
to add the total amount of the collection costs and/or contingent fees in the
event you decide to sue your customer.
Funds paid for court filing fees, service of documents,
etc. are legally recoverable in all
provinces in Canada and are added to the final judgment amount.
The Reality of
Recovering Collection Costs
Notwithstanding the legalities, what are the chances of
recovering collection costs from your slow-paying customer?
As with any business transaction, if you have a signed
agreement where the customer has agreed to your terms and conditions, the
chances are more favourable than if you do not.
Sometimes it may take court action to facilitate the recovery of
collection fees. It is only possible to
enforce a legal contract through the courts.
Priority Credit’s approach is to recover all principal and
interest charges on an amicable basis.
If the creditors agreement with its customer contains the required
clauses to hold the debtor company liable for collection fees, then we will
work to obtain those expenses as well.
Should your customer balk at paying these fees, they may be
used as a negotiating tool to encourage prompt remittance of the principal
amount of the debt.
When pressed, some debtors will agree to pay the interest
expense, especially if they want to work with the creditor again in the future;
however if there is no signed agreement to pay interest or collection expenses,
the debtor will not pay them.
