The right to debt collection is an arising right between the debtor and the creditor in civil relations, in which the creditor has the right to demand payment from the debtor, and conversely, the debtor must repay the debt to the creditor. However, in some cases, the creditor can transfer their debt recovery rights to a third party to carry out debt collection tasks on their behalf, which may result in changes in the legal subjects within the civil relationship as well as legal consequences. In this article, TNTP’s lawyers will analyze the cases in which debt collection rights can be transferred and the legal consequences when parties transfer these rights.
1. Debt Collection Rights as Regulated by Law
Under the provisions of the 2015 Civil Code, all civil relations consist of two groups of subjects: the entitled party and the obligated party. The entitled party is the party entitled to a value or material benefit from the obligated party, or they may require the obligated party to perform a certain task for them as agreed upon by the parties within the scope allowed by the law. The obligated party is the party that must deliver, provide a value or material benefit to the entitled party, or perform a specific task for the entitled party according to the agreement of the parties within the scope allowed by the law.
Therefore, in the field of debt collection, the Creditor is the entitled party who has the right to demand the Debtor to pay the debt according to the agreement of the parties, or the right to recover the debt, and the Debtor is the obligated party who must pay this debt to the Creditor. Thus, the right to recover a debt is a right to demand attached to the status of the Creditor in civil relations and is regulated by the Civil Code.
2. Transfer of Debt Collection Rights
• Article 365 of the 2015 Civil Code regulates the transfer of the right to claim as follows:
Article 365. Transfer of the right to claim
1. The entitled party who is entitled to perform an obligation may transfer that right to a successor by agreement, except in the following cases: a) The right to claim for maintenance, the right to claim compensation for damage due to infringement of life, health, honor, dignity, or reputation; b) The entitled party and the obligated party have agreed or the law has provisions on the prohibition of transferring the right to claim.
1. When the entitled party transfers the right to claim to a successor, the successor becomes the entitled party. The transfer of the right to claim does not require the consent of the obligated party. The entitled party transferring the right to claim must notify the obligated party in writing of the transfer, except in other agreements. If the transferor does not notify the obligated party of the transfer and this incurs costs for the obligated party, the transferor must bear these costs.
According to the above regulations, it can be seen that when the entitled party, in this case, the Creditor, transfers their right to claim to a third party (referred to as the successor), the successor will become the entitled party. Therefore, the legal subject of the entitled party is transferred along with corresponding rights and obligations.
However, the transfer of the right to claim cannot be carried out in two cases: (i) The right to claim for maintenance, the right to claim compensation for damage due to infringement of life, health, honor, dignity, or reputation; and (ii) The entitled party and the obligated party have agreed or the law has provisions prohibiting the transfer of the right to claim. In cases not falling into these two exceptions, the transfer of debt collection rights is recognized by law.
Furthermore, according to the regulations, the transfer of the right to claim does not require the consent of the obligated party (Debtor), but the transferor must notify the obligated party in writing of the transfer unless there is another agreement.
Therefore, if the Creditor transfers their debt recovery rights to a Successor, the transfer can be recognized under the law, provided that the transfer complies with the legal requirements. After completing the transfer of debt recovery rights, the Successor will have the right to take necessary measures to demand that the Debtor fulfill their obligation to repay the debt.
This article, “Can the right to debt collection be assigned or not?” is presented by TNTP. We hope this information is valuable for businesses.