—
—
On the bridge you gain, on the arch you lose. This well-known folk saying aptly describes the current, yet another, amendment to the Enforcement Act, for which public consultation was completed in July.
Namely, with these legal amendments, employers and the Croatian Pension Insurance Institute should be relieved in such a way that they will no longer have to enforce salaries or pensions, as has been the case so far, but all enforcement actions on monetary assets will be conducted by Fina. In addition to relieving the HZMO and employers, this will establish a unified system of enforcement on monetary assets and resolve issues regarding the priority order of debt collection.
The fact that employers enforced salaries while Fina enforced monetary assets, and that enforcement actions were often not conducted according to the priority order, opened the possibility for manipulation and avoidance of enforcement, which some Croatians took full advantage of.
To avoid an enforcement action threatening him, a debtor would sign a contract with a trusted person, for example, a sister or brother, at a notary public stating that he owed a large amount, for example, two million kuna, and immediately allowed them to collect that debt through salary enforcement. The employer was obliged to carry out such enforcement on the salary, and thanks to the fact that the sister or brother would collect their fictitious debt, the real debtor would never come up for collection on monetary assets through Fina.
Moreover, collection on salaries and pensions brought additional administrative work for employers and the HZMO. For example, the HZMO conducted 20,317 enforcement actions in June (the number of users and the number of enforcement actions are not necessarily identical as one user may have two enforcement actions in some cases).
In order to avoid such situations and relieve employers, it was decided that all debt collection on monetary assets would go through Fina. However, digital banks could now pose a headache for Fina, as Fina cannot conduct collections in other countries.
– Fina, in accordance with the law and general principles of the scope of national legislation, can only enforce actions on accounts opened in banks in the Republic of Croatia that are part of the enforcement system on monetary assets and cannot enforce actions on the territory of another state. Creditors can enforce actions on the debtor’s property according to the rules of the state where that property is located (in the EU, enforcement based on documents from other member states is regulated, for example, by Regulation (EC) No. 805/2004 of the European Parliament and Council of April 21, 2004, on the introduction of a European order for payment for uncontested claims, regulations on mutual assistance in the collection of claims based on taxes and other public levies, and other regulations depending on the type of claim and the document the creditor has) – replied Irena Svalina, Director of the Communication and Marketing Department at FINA.
Cross-border collection
Or simply put, if a debtor decides to receive their salary via Revolut (which has recently become possible), Fina will not be able to enforce the action. In that case, enforcement will be possible, but with a somewhat more complicated procedure than that through Fina.
– Creditors can initiate cross-border collection procedures in EU member states – the Ministry of Justice briefly responded to our question about how enforcement will be conducted in the case of salary payments via Revolut.
They received a similar response from the Croatian National Bank, noting that they are not authorized to supervise the implementation of the Enforcement Act nor to provide interpretations of the new amendments to the Enforcement Act.
– Regardless of the above, we note that the interpretations presented do not exclude the possibility of enforcement according to the enforcement law of the state where Revolut Bank UAB is located or according to the rules of European law, for example, based on Regulation (EC) No. 805/2004 of the European Parliament and Council of April 21, 2004, on the introduction of a European order for payment for uncontested claims – stated the HNB.
Such cross-border collection, to which we were referred by the Ministry of Justice and the HNB, will be significantly more expensive and complicated for creditors.
– European Union regulations govern how enforcement can be carried out on an account in another member state. Therefore, enforcement will be possible in cases where the debtor receives their salary through Revolut or another digital bank, but it will certainly be more complicated and expensive. The enforcement process differs in each country, and the creditor will need to seek legal assistance from a lawyer in the country where the debtor’s account is located in order to carry out the enforcement – explained Edi Suljić, a lawyer at the law firm Bradvica Marić Wahl Cesarec (BMWC).
