17. Can debt collection agencies charge debtors debt collection fees (losses due to default)?

Cases in which debt collection fees have been contractually agreed

In principle, binding provision can be made in a contract for debt collection fees to be paid and their amount can also be fixed. If fees are stipulated in a company’s general terms and conditions of business, Article 8 of the Unfair Competition Act and the “rule on unusual provisions” must be observed (see FAQ 7). If fees are excessively high, the court may order them to be reduced in accordance with Article 163 paragraph 3 of the Swiss Code of Obligations (CO).

Cases in which debt collection fees have not been contractually agreed

There is no clear case law as yet on the issue of whether and under what circumstances a creditor or debt collection agency as its representative can demand that a debtor pay the agency’s costs (fees, expenses etc.), although this appears to have a basis in Article 106 CO. According to legal experts and the available case law, the following principles apply:

- In the case of financial debts, losses due to default need only be reimbursed to the extent that the costs exceed the statutory or contractual default interest. If the reimbursement of losses due to default is stipulated, it is not simply added to the default interest.

- The creditor must provide documentary proof to substantiate a claim for losses due to default.

- The cost of an initial reminder cannot be claimed back, unless this is stipulated in a contract or in a law, such as Article 20 paragraph 1 of the Insurance Contracts Act and Article 34a paragraph 2 of the Ordinance on Old Age and Survivors‘ Insurance. The costs incurred by the debtor in their own efforts to collect the debt cannot normally be reclaimed. However, losses due to default may include the cost of instructing a debt collection agency. It must however be necessary in the case concerned that an agency is involved.

- Article 27 paragraph 3 of the Federal Act on Debt Enforcement and Bankruptcy does not exclude the possibility of making contractual provision for passing on the costs of a debt collection agency to the debtor, provided they relate to the process of issuing reminders and ultimatums. The guiding principle underlying the legislation – that it should be normally possible to collect debts without having to involve a professional agency – can however be applied to the process of issuing reminders and ultimatums and taken into account in deciding whether it was reasonable to involve a debt collection agency.