The legal effect of factoring is the transfer to the factor (assignee), by operation of law, not only of the claim itself, but also of the claim for overdue interest against the debtor (factoring counterparty). This circumstance is indisputable, as it follows directly from Article 509 § 2 of the Civil Code, i.e. from the provision on assignment of receivables.
Factor acquires rights to interest to the same extent that it was due to the factor (assignor) from the debtor. Thus, if, for example, company X, which sells bicycles, applied statutory interest for late payment in its relations with its counterparties, this is the interest that the factor will be able to demand from the debtor (the company that purchases the bicycles from the factor). If the parties apply the interest rates referred to in the Act of March 8, 2013 on payment terms in commercial transactions, then in the factor-debtor relationship these interest rates (which are more favorable to the factor and less favorable to the debtor) will apply. However, the opposite situation cannot occur - that in the factor-contractor relationship there was statutory interest for delay, and as a result of factoring (assignment) in the factor-contractor relationship there will be interest for delay in commercial transactions in relation to the same receivable. This is because the factor takes the place of the factor by becoming a creditor with the same rights. In addition, this follows from the principle of the impossibility of worsening the debtor's legal position as a result of the assignment.
The parties to a factoring agreement have the option of Exclusion of interest from the scope of the assignment, relative modification in other respects (e.g., by limiting the amount of interest). However, this will not be in the interest of the factor, hence such provisions and exclusions are rarely used in the factor-factor relationship. Some restrictions on the assignment of interest may be provisions of the notice of assignment used by entities with strong market positions (especially large retail chains) - I wrote about this in the occasion of an article on the notice of assignment (SEE ALSO). An appropriate stipulation in the assignment notice document may result in the exclusion from the scope of the assignment of interest in whole or in part. Such a situation is disadvantageous for factoring companies, which must then enforce interest claims against factoring companies under the terms of the factoring agreement. They thus lose one co-debtor.
A different issue, however, is interest occurring in the factor-factor relationship. They may or may not correspond to interest in the factor-contractor (debtor) relationship. In this regard, the upper limit is the provision of Article 359 §21 Civil Code providing for maximum interest at twice the statutory interest rate (i.e. 10% as of 1.01.2016 according to the announcement of the Minister of Justice of 7.01.2016 on the amount of statutory interest).
This post is an excerpt from a series of articles categorized as "the scope of factoring (assignment)."
