Improved protection from unjustified debt enforcement
The Debt Enforcement and Bankruptcy Act (DEBA) regulates the procedure by which a person in Switzerland is able to recover money from his/her debtors by means of governmental enforcement. In Switzerland, it is relatively easy to initiate a debt enforcement procedure compared to other legal systems. When a debt enforcement procedure is initiated against a person, an automatic entry is made against him/her in the debt enforcement register, which is also visible to third persons for up to five years after completion of the procedure. This can have negative consequences for him/her. The planned amendments to the DEBA are intended to provide a remedy.
Amendments to the Debt Enforcement and Bankruptcy Act – What is at issue? If a debt enforcement petition is filed with the competent debt enforcement office, it issues a summons to pay to the purported debtor. The petitioning party does not have to provide the debt enforcement office with any evidence of the alleged debt. The debt enforcement office only checks whether the formal requirements on the petition are met. It does not carry out a material verification.
A debt enforcement procedure automatically leads to an entry in the debt enforcement register, which is also visible to third parties for five years (Article 8a (4) of the DEBA). Any third person can view any other person's entries in the debt enforcement register if he/she can provide proof of interest. A common example of this is a written contract. In addition, relatively frequently a contracting party, business partner, or bank will require an extract from the debt enforcement register before entering into a contractual relationship. Another example is landlords who often exclude tenancy applicants with entries in the debt enforcement register without any further examination.
For this reason, the Swiss legislature has recently dealt with the question of how better to protect people who are unjustifiably petitioned against. By a resolution dated 16 December 2016, the Federal Assembly decided that the DEBA should be amended in various respects and the protection against unjustified debt enforcement petitions should be improved. New is that the person petitioned against will have more rights than before, in order to fight against unjustified debt enforcement procedures.
New: Limitation on the right of third parties to view the debt enforcement register The person petitioned against can defend him/herself against the debt enforcement by contesting the claimed debt at the debt enforcement office within ten days of the delivery of the summons to pay ("the objection period") and by raising a so-called legal objection ("Rechtsvorschlag"). The raising of a legal objection is also noted in the debt enforcement register. However, any entry in the debt enforcement register may be a potential disadvantage for the affected person, even when it is clear that a legal objection has been raised against the petition. New is that the person petitioned against should have the right, after the expiry of three months from the date of service of the summons to pay and the raising of the legal objection, to file an application to make the entry in the debt enforcement register inaccessible to third parties. The debt enforcement office will then set a time limit of twenty days within which the petitioning party must demonstrate that he/she has timely initiated a procedure for the removal of the legal objection (action for having the legal objection set aside or legal action in ordinary civil or administrative proceedings). If this proof cannot be provided, the entry in the debt enforcement register will no longer be displayed to third parties.
The term "timely" should be understood to mean that the procedure for removing the legal objection must be initiated within the previously mentioned three-month period plus twenty days. However, the creditor of a claim pursuant to Article 88 (2) of the DEBA has a period of one year from the date of delivery of the summons to pay to continue the debt enforcement procedure or to initiate the removal of the legal objection. Correspondingly, the new provisions also stipulate that debt enforcement register entries which were not to be shown to third parties will become accessible again if, after the expiry of the three-month period plus twenty days, the enforcing creditor provides the proof retroactively or continues with the debt enforcement procedure. The term "timely" therefore should not be given any independent meaning
New: Right of evidence at any time In addition, the amendments to the legislation introduce the right of the person petitioned against to request at any time of the debt enforcement office that the petitioning party provide evidence of the claim being enforced, including an overview of all claims against the person petitioned against. Under the (still) valid law, the person petitioned against can only request this within the ten-day objection period.
New: The right, at any time, to have the non-existence of the claim being enforced judicially ascertained In principle, any person petitioned against has the right to assert that the debts that are being petitioned for have already been repaid or deferred, or to have it judicially established that the debt did not exist or no longer exists. If the person petitioned against is successful with this, the debt enforcement proceedings are dismissed or discontinued and no longer notified to third parties.
However, this requires the initiation of judicial proceedings. Under current law, until recently such proceedings pursued by the person petitioned against to have the debt ascertained as non-existing or deferred ("declaratory action") were only possible under federal jurisprudence when the person petitioned against has not raised a legal objection, or if the legal objection has already been legally rescinded. The Swiss Federal Supreme Court has relaxed its case law in a more recent decision (BGE 141 III 68), and now also allows a declaratory action even if a legal objection has been raised. This is based on the fact that the person petitioned against has, in principle, an interest worth protecting in the determination of the non-existence of the claim as soon as it becomes part of a debt enforcement procedure (so-called "declaratory interest"). However, according to current case law, such an action is still excluded if the debt enforcement "can be proven to have been made solely to interrupt the limitation period of a claim". The legislature now explicitly states that a judicial declaratory action is possible at any time, irrespective of whether a legal objection was raised and irrespective of the grounds for the debt enforcement.
Overview of the amendments
Outlook and the entry into force of the amendments The planned amendments to the DEBA are generally welcomed. In particular, the possibility of deprivation of third party access to debt enforcement information after the three-month period is likely to be an advantage for those affected by unjustified charges or for those who have had debt enforcement actions initiated against them by creditors merely for the purpose of interrupting the limitation period. On the other hand, there is also the risk that justified instances of debt enforcement are no longer brought to the attention of third parties because the creditor fails to initiate the procedure for the removal of the legal objection shortly after the delivery of the summons to pay.
It should be noted, however, that even under the new law, the person petitioned against has to undertake a judicial procedure with all the associated costs (e.g., advances on costs, attorneys' fees) in order to overcome an unjustified debt enforcement. It remains to be seen whether in the future increased use will be made of the right to see the evidence, as well as the judicial determination of the non-existence of the debt at any time, and whether the innovations will actually lead to a noticeable improvement in the situation for those subjected to unjustified debt enforcement.
The referendum deadline for changes in the law expired unused on 7 April 2017. The date the amendments enter into force still needs to be determined by the Federal Council.