QCOSTARICA — Outstanding debts owed to a regulated entity such as a bank or financial institution expire after four years, counting from the last payment made. This period can be extended if an official notification is made.
Adriana Rojas, a consumer rights specialist, explained that a text message, phone call, or email does not constitute official notification.
According to Rojas, notice can only be made by a notary public or a judicial notifier, who is an official of the Judicial Branch in charge of executing the procedural act.
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“But if the notification is given after four years, the debt was already prescribed,” she clarifies.
She also points out that WhatsApp messages and phone calls are “financial harassment,” which is prohibited by the Ley de la Promoción de la Competencia, so it must be reported to the Consumer Support Directorate of the Ministry of Economy, Industry and Commerce (MEIC), through the institution’s website or by calling 800-consumo (800-266-7866).
However, if you do not pay, your credit will be impacted for at least four years in the Credit Information Center of the Centro de Información Crediticia de la Superintendencia de Entidades Financieras (Sugef) – Superintendency of Financial Entities, starting at the moment when the debt should have been paid and was not, when it is considered uncollectible or, even, when it is settled through judicial collection.
A negative credit record will remain and financial entities can refuse to give you a loan, a credit card, or any installment purchase.
It is possible to consult the credit history and the rating that you have as a debtor on the Sugef website. But, you will need a digital signature.
Mitigating situations
According to the expert, there are a series of mitigating situations, which can prevent a judicial collection.
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“When a person stops paying a loan and goes into default, the first question is: what was the reason why they were paying normally and stopped doing so?” she added.
She also says that there are many causes that are covered.
“If there is insurance involved, the obligation to pay is delegated to a third party, which is the insurance company. Among others, there are unemployment insurance, life insurance (which is applied when the debtor dies). In these cases, the defense is lack of active and passive legitimacy, unenforceability of the obligation due to insurance,” she explains.
Rojas also mentions the possibility of abusive clauses being applied in the loan agreement that make payments more expensive. This is also reportable.
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Costa Rica debtor ratings
In Costa Rica, debtor rating is based on delinquency, payment capacity and historical payment behavior. Debtors are classified into four levels:
- Level 1: Has the ability to pay
- Level 2: Has slight weaknesses in payment capacity
- Level 3: Has serious weaknesses in payment capacity
- Level 4: Has no payment capacity
Separation cases
Rojas commented that the most common cases of judicial collection processes in the country are those related to housing loans granted to couples.
“There are some who tell me: ‘I stopped paying because we got divorced, he doesn’t pay me alimony and I can’t keep paying.’”
In addition, she assures that there is no defense for that in Costa Rica.
A judicial collection process lasts between four and five years, according to Rojas and affirms that in the case of a house that is in dispute, the owner still has rights over it, until the auction has been held.
“If the owner finds a buyer and manages to sell the property, not all invested may be lost and manages to recover a significant part of the investment,” she said.
However, when it comes to other assets, such as a vehicle, at the moment the judicial collection comes in, a confiscate warrant is issued, the car is retained and it is put in the name of a judicial depositary.
“There the defense can be to appeal to the statute of limitations on the debt, but the recovery of the car becomes more difficult,” she says.
Judicial collections in Costa Rica
Data from the Judicial Branch show that by the end of last year there were 132,068 cases of open judicial collection proceedings in the Courts.
The year with the greatest saturation was 2019 when the figure reached 237,736. Currently, these proceedings account for nearly nine out of 10 of the cases handled.
To address this, the magistrates have carried out a series of actions, in order to reduce the time that these proceedings take in the courts, among these are improvements in systems and technological tools, such as the Task Debugger of the Written Classifier, which was improved with artificial intelligence.
Likewise, civil courts provide personnel for judicial collection, the Mandatory Automated Continuous Transfer System was implemented, which was tested by the Superior Council in circular 272-2023, and a QR code is used in resolutions for early conciliations, also approved last year.
Likewise, a series of proposed bills, reforms to regulations, and issuance of circulars have been presented.
Salary garnishment
In a judicial collection process, a portion of the debtor’s salary can be withheld. A court order or official notice instructs an employer to withhold a percentage of an employee’s salary and send it to the creditor. However, it must not exceed one-eighth of the difference between what is earned and the minimum wage.
The only way to withhold a higher percentage of the salary (up to 50%) is for child support, which is in the child’s best interest.
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