Sound routines for recovery of debts or claims are crucial for anyone running a business. It is of little use having elevated sales volumes, if you are not getting paid for services or goods rendered. At the same time you should be aware of the debtors’ rights regarding reminders.
Output VAT is NOT supposed to be calculated on the late fee.
The reminder may be issued and forwarded to the customer when the invoice is 14 days overdue. You can forward an unlimited number of reminders; however, there is a limit to the number of late fees you may charge the debtor with. The reminder shall include details of the demand as well as the outstanding amount. The deadline for payment needs to be at least 14 days.
One is allowed to demand a late fee, which can be no higher than 1/10 of the debt collection rate. The rate is fixed for one year at a time and published in “The regulations to the Act on Debt-collection” (in Norwegian: “Forskrift til inkassoloven”).
Maximum late fee (from 01.01.2011): NOK 61,-.
Notice of debt collection
Prior to taking legal actions in order to recover a debt, the collector needs to issue and forward a notice of debt collection to the debtor. One can either forward one reminder followed by a notice of debt collection, or such a notice can be forwarded directly to the customer when the invoice is 14 days overdue. The letter should leave no doubt that it actually is a notice of debt collection, and the deadline for payment needs to be at least 14 days. Details of the demand as well as the amount outstanding must also be included.
Maximum overdue fee (from 01.01.2011): NOK 61,-.
Legal recovery of debts
The seller may proceed to legal recovery of the debts if the customer has still not paid when the notice of debt collection is 14 days overdue. The seller can choose to carry out the debt collection himself, but in most cases it is advised that the proceedings are handled by a professional body. There are a number of debt collection agencies in Norway. One should also be aware that the Act on Debt collection will apply both for in-house debt collection and for agencies offering this kind of service.
However, a number of the provisions in the Act will apply for debt collection agencies only. This kind of activity is defined as someone collecting debts on behalf of others in a professional capacity, and acquisition (purchase) of debts that are overdue followed by a pursuit for recovery of these debts. Each provision will state if it applies to overall debt collection or only to debt collection agencies.
Letter of demand of payment
When the seller has decided to take legal actions to recover the debt, a (formal) letter of demand must be forwarded to the customer, not earlier than 14 days after the notice of debt-collection.
The letter of demand shall include:
The name of the creditor
The nature of the debt
The amount of the debt and specification of the principal amount and additional claims (fees, interests etc)
The penalty interest rate and the terms
Consequence if the debt is not paid
The right to demand legal proceedings
The maximum fee must not exceed 3/10 of the debt collection rate.
The maximum fee for a letter of demand is (from 01.01.2011): NOK 183,-.
In connection to the same debt, one can only charge three separate fees, either for two reminders and one letter of demand or for one reminder, one notice of debt collection and one letter of demand.
One is allowed to charge penalty interest if the payment is late. The Act states that the interest is calculated from the due date as long as it is stated. If the due date is not stated, the interest will start accumulating as of one month after a written notice requiring pay has been given.
The penalty interest rate is given in separate regulations. From 01.01.2011 the rate is 9 % for individuals. The same rate will apply for business to business trade, provided other terms have not been agreed upon.