Fiduciary transfer of receivables – what is it?
A fiduciary transfer of receivables is a combination of a simple assignment and collection. As it is not regulated by law, it is referred to as an unnamed contract. There is no sale of the claim here, but an assignment. In practice, a fiduciary transfer is nothing more than an order to collect a debt with a transfer of the creditor’s rights to the debt collector.
What is the effectiveness of this solution and what does it mean for the original creditor?
The psychological aspect is important, but let’s clarify: under a trust assignment agreement, the trust ee (the assignee, which in this case is the debt collection company) acts on behalf of himself, but in the interests of the principal (the assignor, the seller of the debt). Toward the debtor as well as third parties, the trustee acts as a new creditor. With an assignment of receivables, he no longer needs to show any additional power of attorney and authorization. This greatly speeds up the entire process and facilitates the work of both the mediators and the lawyers involved in the judicial recovery of the debt.
The contract of trust assignment of receivables entered into for the purpose of debt collection, specifies in detail the scope of cooperation between the parties, but its contents are not disclosed to debtors or third parties.
Benefits of a trust assignment agreement
Going back to psychology: the emergence of claims usually has a specific context. Often the creditor and debtor are long-time cooperators, sometimes even acquaintances.
The trust assignment agreement has the advantage that the trustee, revealing himself to the debtor as his new creditor, can act as a mediator and hold discussions with the debtor in isolation from the conflict and emotions that sometimes accompany the creation of a debt.
What’s more, the trustee, or collection company, also does not have to refer in any way to the past between the creditor and debtor. This can be of great importance in the special case where the debtor has counterclaims against the creditor.
Contrary to the fears of some creditors, equipping the trustee with the powers of an assignment of claims does not carry any danger. In the case described, the transfer of the claim occurs in the formal sense, but it does not necessarily mean that the assignor has ceased to be a creditor in the economic sense.
The conclusion of a trust assignment agreement also does not affect the creditor’s entitlement to enter the claim as a deductible expense, which it will be able to exercise if circumstances provided for by the tax law arise, such as the execution against the debtor being discontinued as ineffective.
