Legal Literacy - Recently, there have been rampant cases of forced and arbitrary vehicle confiscation by third-party services used by financing/leasing companies, in this case, debt collectors. So, is it actually permissible for debt collectors to forcibly seize our vehicles? What about the fiduciary agreement? Let's delve into the explanation in the following article.

Fiduciary Agreement

A fiduciary agreement is an agreement containing an agreement between the fiduciary grantor and the fiduciary recipient, that a certain object is surrendered/will be surrendered its ownership rights in trust, from the fiduciary grantor to the fiduciary recipient, to guarantee the payment of the debtor's debt in a certain principal agreement.

Based on Article 1 number 1 of Law Number 42 of 1999 concerning Fiduciary Guarantees (“Law 42/1999”), fiduciary is the transfer of ownership rights of an object based on trust from the Fiduciary Grantor to the Fiduciary Recipient for a specific purpose.

Based on these provisions, a fiduciary agreement has the following elements:

  • There is an element of trust, namely the fiduciary grantor surrenders his ownership rights over a certain object to the fiduciary recipient. The fiduciary grantor retains ownership rights over the object, but these rights are surrendered to the fiduciary recipient for a specific purpose.
  • There is an element of a specific purpose, namely the object surrendered as a fiduciary guarantee must be used for a specific purpose, for example, to pay off debt.
  • There is an element of agreement, namely the fiduciary agreement must be made in writing and agreed upon by both parties.

Fiduciary agreements can be used for various types of transactions, for example:

  • Financing, for example, financing the purchase of motor vehicles, housing financing, or working capital financing.
  • Lending and borrowing, for example, lending and borrowing money or goods.
  • Work contracts, for example, work contracts between companies and their employees.

In financing transactions, a fiduciary agreement can be used to guarantee debt payment by the debtor. If the debtor cannot pay the debt, then the fiduciary recipient can take over the object that is the object of the fiduciary guarantee and sell it to pay off the debt.

The fiduciary agreement must be registered at the Fiduciary Registration Office to provide legal certainty to both parties and third parties.

The Law on Debt Collectors Forcibly Seizing

So, what about the use of debt collectors to collect or forcibly seize our goods or vehicles?

Financing company/leasing and the public must both understand the rules that apply in this country, so that they do not harm each other and no one violates the law by complying with the applicable rules.

Regulation of the Minister of Finance

Regarding forced withdrawals by debt collectors, the Indonesian Ministry of Finance has issued regulations to prohibit financing/leasing companies from forcibly withdrawing vehicles from customers who have vehicle credit arrears. This rule is contained in the Regulation of the Minister of Finance of the Republic of Indonesia No.30/PMK.010/2012 concerning Fiduciary Registration for Companies Financing which was issued on October 7, 2012. This step was taken to protect the rights of customers and create fairer conditions in handling vehicle credit arrears.

Financing companies are required to register every credit transaction before a notary within a maximum of 30 days after signing the credit agreement. If the financing or leasing company does not carry out this registration, they may be subject to sanctions, including warnings or reprimands up to three times, freezing, and revocation of permits.

The process involves cooperation between the customer, the financing company, and a notary to create a fiduciary agreement before the vehicle is handed over to the customer. After that, the fiduciary agreement is registered at the fiduciary registration office. The debtor (customer) and creditor (financing company) receive a registration/fiduciary guarantee certificate as a step of protection against customer assets.

This aims to prevent financing or leasing companies from taking vehicles arbitrarily if there are late payments or bad credit. They cannot use the services of third parties, such as debt collectors, without following the correct legal procedures.

The process that should occur is that the financing or leasing company reports and submits an application to the district court by bringing evidence of the fiduciary agreement and the registration certificate that has been made. After being tried, the court will issue a decision, and if necessary, the vehicle can be taken over or confiscated by the court. Furthermore, the vehicle will be auctioned, and the proceeds will be used to pay off the debt to the financing or leasing company. The remainder will be returned to the customer.

Thus, this procedure provides legal protection for both parties and ensures fairness in resolving problematic credit.

Decision of the Constitutional Court

The Constitutional Court (MK) Decisions Number 18/PUU-XVII/2019 and Number 2/PUU-XIX/2021 explicitly outline the steps for submitting fiduciary objects. This proves that the petitioners' concerns regarding unilateral execution or arbitrary withdrawal by creditors are unwarranted. The Court has considered the procedures for executing fiduciary guarantee certificates in accordance with Law (UU) 42/1999, adjusted to the Constitutional Court Decision Number 18/PUU-XVII/2019.

Read Also: Consumer Legal Protection: The Importance of Protecting Motor Vehicles from Forced Seizure by Debt Collectors

In Decision Number 71/PUU-XIX/2021, the Constitutional Court explained that the "authorized party" to assist in the execution of fiduciary security objects is the District Court, as stipulated in the Elucidation of Article 30 of Law 42/1999. Therefore, the phrase "authorized party" can be interpreted as "district court," which is requested to assist in carrying out the execution. This means that creditors cannot carry out their own executions by force. This decision provides legal certainty and protects parties involved in the fiduciary security process from arbitrary actions.

Law No. 42 of 1999 concerning Fiduciary Security

Article 19 paragraph 2 of Law No. 42 of 1999 concerning Fiduciary Security explains that "Fiduciary" is a way to transfer ownership of an item based on trust, but the item remains under the control of the party making the transfer. Fiduciary is usually used in credit agreements for motor vehicles.

It is important to convey that customers or consumers are not allowed to take actions such as transferring, pawning, or renting vehicles (motorcycles/cars) that are still in the credit process without notifying or obtaining prior approval from the financing company (leasing). This prohibition is in accordance with the provisions stipulated in Article 23 paragraph 2 in conjunction with Article 36 of Law No. 42 of 1999 concerning Fiduciary Security, with the consequence of a 2-year prison sentence.

Criminal Code (KUH Pidana)

In addition, it should be remembered that this action can also be considered a criminal act of embezzlement in accordance with Article 372 of the Criminal Code, which threatens a prison sentence of 4 years. Likewise, the recipient, holder, or controller of a pawned vehicle can be considered a fence based on Article 480 of the Criminal Code, with the threat of a 4-year prison sentence.

Law Number 39 of 1999 concerning Human Rights

Law Number 39 of 1999 concerning Human Rights states that a person cannot be imprisoned or detained by a court simply because they are unable to fulfill their debt payment obligations, as stipulated in an agreement. In other words, even if there is a report of debt arrears, the court is not allowed to impose a prison sentence on someone solely because of economic limitations in paying their debt.

Criminal Threats for Financing Companies

If a financing or leasing company forcibly withdraws a consumer's vehicle through a Debt Collector, then this action can be reported to the police on the basis of Criminal Acts of Extortion and Threats, as well as Criminal Acts of Theft.

According to Article 368 of the Criminal Code, Extortion and Threats are defined as acts of forcing someone with violence or threats of violence to obtain goods or eliminate receivables unlawfully. This violation is subject to a maximum prison sentence of 9 months.

Article 365 of the Criminal Code regulates the crime of theft involving violence or threats of violence against a person. The following is the content of Article 365 of the Criminal Code:

Paragraph 1:
Perpetrators of theft who use violence or threats of violence against a person to facilitate or simplify the act of theft, or if caught in the act to allow escape or other participants, can be sentenced to a maximum of 9 years in prison.

Paragraph 2:
A maximum prison sentence of 12 years can be imposed if the theft is carried out at night inside a house or enclosed yard where there is a house, on a public road, or on a train or tram that is running. A heavier sentence will be applied if the perpetrators number 2 or more and carry out destructive actions, climbing, using false keys, false orders, or false official clothing, and if the act results in serious injury.

Paragraph 3:
If the theft results in death, the perpetrator can be sentenced to a maximum of 15 years in prison.

Paragraph 4:
The death penalty, life imprisonment, or a maximum prison sentence of 20 years can be imposed if the perpetrator of the theft, which involves violence or threats of violence, is carried out by 2 or more people in conspiracy, and results in serious injury or death.

The financing or leasing company may be subject to legal sanctions if there is a violation by the debt collector. This is because the debt collector operates based on a power of attorney given by the financing or leasing company in accordance with Article 55 paragraphs 1 and 2 of the Criminal Code. This article stipulates that a person can be punished if involved in a criminal act, either as a direct perpetrator, giver of orders, or participating in the act. Therefore, it should be remembered that giving authority to a debt collector also requires legal responsibility. Be careful in giving or promising something, and avoid abuse of power or dignity, so as not to violate the law.