§ 5-18. The bank's duty to notify co-debtors

This section requires the bank to keep the co-debtors (those who are jointly liable for the loan) informed when something goes wrong. All notices must be in writing. Three types of situations are covered: changes in security and debt insurance, default, and longer payment deferrals.

The first concerns security and insurance. If an expected security falls away, is not provided, or the debt insurance is not taken out, the bank must give notice without undue delay. The reference is to § 6-2, which concerns notice to guarantors (kausjonister) (those who guarantee the loan). There, the bank must also give notice in good time if the cover under a debt insurance policy that has been taken out may fall away or change significantly.

The second is default. The bank must send written notice that the loan is not being paid as agreed, and then keep the co-debtor informed of how the matter develops. If the co-debtor has reason to believe that the matter has been put right, a new duty to notify arises if a later payment is missed.

The third is deferral. If the bank and a borrower agree to defer instalments or interest for more than three months, the others must be notified without undue delay. The same applies when circumstances mentioned in § 6-3 fourth paragraph arise: the credit customer has died, debt negotiations or bankruptcy proceedings have been opened, or the customer has applied for a debt settlement.

The notification matters for how much the co-debtor can ultimately be held liable for. § 5-21, which governs reduction and lapse of the co-debtor's liability for the debt, refers to this section. The provision sits alongside § 5-17 on the allocation of liability, § 5-19 on the right to information and § 5-20 on the release of security, and the scope is defined in § 5-16. Example: The bank and the main borrower agree on a deferral beyond three months. The other co-debtor must then be told in writing without undue delay.