Enforcement of Fiduciary Security for Financing Companies Post Constitutional Court Judgment

#enforcement, #fiduciary

In Indonesia, financing companies are known as companies engaged in funding for the needs of the public, in terms of goods and services. Based on Article 1 point 1 of the Regulation of the Financial Services Authority of the Republic of Indonesia Number 35/POJK.05/2018 concerning Financing Companies Business Operation (“POJK 35/2018”), financing companies are defined as follows: 

“Financing Company is a business entity that carries out financing for goods and/or services”. 

One type of financing that is often used by the public is multipurpose financing, especially for motor vehicles. In the practice of distributing financing for motor vehicles, in order to ensure smooth payments by debtors and as a form of risk mitigation by financing companies, a security agreement is made as stipulated in Article 26 paragraph (2) letter c of POJK 35/2018. The type of security that is often used is the fiduciary security because of the nature of the fiduciary security itself, namely the goods being provided as security can still be used by the fiduciary giver. 

In addition to the fact that the object of the fiduciary security can still be used, another advantage of the fiduciary security is the executory power which is equivalent to a court judgment (parate eksekusi). Or in other words, creditors have the authority to enforce the fiduciary security directly without having to go through and without any intervention of the court as regulated in Article 15 paragraphs (2) and (3) of Law no. 42 of 1999 concerning Fiduciary Security (“Fiduciary Security Law”). Article 15 paragraphs (2) and (3) of the Fiduciary Security Law essentially states that a fiduciary certificate has executory power which is equivalent to a final and binding judgment, so if the debtor defaults, the Fiduciary Recipient has the right to sell the object of the fiduciary security on his own authority. 

Based on the explanation above, in the event that the debtor has defaulted (not paying even though the debt is due/default) or better known as "non-performing financing", the financing company as the creditor can unilaterally enforce the fiduciary security in the form of a motor vehicle from the debtor. In practice, to collect and enforce the fiduciary security, financing companies usually cooperate with other parties who perform the debt recovery function (debt collectors). The use of debt collector services is legally permitted as stipulated in Article 48 of POJK 18/2018. However, unfortunately this privilege is often misused by debt collectors who collect debts by means of violence and duress. Moreover, the debtor is not given the opportunity to prove that he is not in default. This action is based on a perception that unilateral enforcement is allowed if the creditor already has a fiduciary certificate which is executory in nature. For this matter, there was a petition for a judicial review of Article 15 paragraphs (2) and (3) of the Fiduciary Security Law because it was considered contrary to the 1945 Constitution, especially Article 1 paragraph (3), Article 27 paragraph (1), Article 28D paragraph (1), Article 28G paragraph (1) and Article 28H paragraph (4) of the 1945 Constitution where the Judgment of the Constitutional Court No. 18/PUU-XVII/2019 dated January 6, 2020 (“Judgment No. 18/2019”) changed the interpretation of Article 15 paragraphs (2) and (3) of the Fiduciary Security Law which was then given a further meaning through Judgment No. 18/PUU-XVII/2019. 2/2021, so the meaning became as follows: 

(i)    The enforcement of the fiduciary certificate through the district court is actually only an alternative that can be sought in the event that there is no agreement between the creditor and the debtor with regard to the default and voluntary handover of the object of security from the debtor to the creditor;

(ii)   For a debtor who has acknowledged the default and voluntarily hands over the object of the fiduciary security, the enforcement of the fiduciary security can be carried out by the creditor or even the debtor himself. 

Therefore, it can be concluded that the guideline for financing companies to enforce the fiduciary security from debtors is as follows:

a. The enforcement of the fiduciary security unilaterally without going through a court can be carried out by the creditor in the event that the debtor has stated that he has defaulted and voluntarily hands over the object of the fiduciary security to the creditor;

b. The enforcement of the fiduciary security cannot be carried out unilaterally by the creditor in the event that there is no agreement regarding the default and the debtor objects to voluntarily handing over the object of the fiduciary security. In such a situation, all legal mechanisms and procedures in the enforcement of the Fiduciary Certificate must be carried out, the same as the enforcement of a final and binding court judgment as regulated in Article 196 of HIR/Article 208 of RBg where in principle a petition for execution must be submitted to the Chief Judge of the local District Court. Then for the stages of execution through the court, finance companies can be guided by the Guidelines for Execution at the District Courts issued by the Directorate General of the Judiciary of the Supreme Court in 2019 jo. Letter of the Directorate General of the General Court No. 846/DJU/HM/02.3/2021, Subject: Execution at the District Court and Compliance with Execution Data Input at SIPP dated August 10, 2021.

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