§ 16. The debt collector must keep client money separate from its own money
When the debt collector (inkassator) receives money from the debtor (skyldner), the money must quickly be paid on to the creditor (fordringshaver). The debt collector may keep its own fee (vederlag). The rest of the money must be kept separate from the debt collector's own money.
Machine-translated from Norwegian. The Norwegian text is the one that applies. Read the original in Norwegian.Norsk English العربية Polski Українська
The text of the law (unofficial translation)
The debt collector shall as soon as possible pay collected funds to the creditor. The debt collector may withhold an amount corresponding to its fee.
The debt collector is obliged to keep collected funds and other funds belonging to clients separate from its own funds and funds that do not belong to clients.
The King in Council (Kongen) may issue regulations (forskrift) on the handling of collected funds and other funds belonging to clients and on the right to interest on such funds.
What does this mean?
§ 16 is about money. Not about who owes what, but about how the debt collector must handle money that comes in.
When you pay a debt collection (inkasso) claim to the debt collector, the money first goes to the debt collector. But the money is not necessarily the debt collector's money. It largely belongs to the creditor, meaning the one who owns the claim. The debt collector is just the middleman who receives the payment and passes it on.
That is why the law says the debt collector must pay collected funds to the creditor "as soon as possible". As soon as possible means as quickly as is practically possible. The debt collector must not hold on to the money for longer than necessary. The money must go on to the person entitled to it.
At the same time, the debt collector may keep its own fee. Fee means payment for the work and costs the debt collector is entitled to. If the debt collector has an agreement with the creditor that certain costs are to be deducted from the payments, the debt collector may withhold an amount corresponding to this.
The rest must be paid on. The debt collector must not use the money as its own cash flow. It must not be used for salaries, rent, marketing or other operating costs. These are client funds. Client funds means money that belongs to clients, not to the debt collector itself.
The second paragraph therefore says that the debt collector must keep collected funds and other client funds separate from its own funds. This means the money must be kept apart from the debt collector's own money. In practice, this is often done through separate client accounts. The point is that it must be clear which money belongs to the clients.
This protects both creditors and debtors. The creditor should be able to trust that money paid in actually reaches them. The debtor should be able to trust that the payment is registered and used correctly. If the debt collector mixes client money with its own money, it can lead to a serious mess.
Why must the debt collector keep the money separate?
Because the money is not the debt collector's. When the debtor pays, the payment is made to settle a claim. The debt collector receives the money on behalf of someone else.
If the debt collector mixes this money with its own money, it becomes difficult to know who owns what. It can also be dangerous if the debt collector runs into financial problems. If client funds are mixed with the company's own operating funds, clients may risk losing money or having to spend time documenting ownership.
A simple picture: Imagine you give a friend NOK 10,000 to pass on to a tradesperson. Your friend should not put the money in their own wallet and use it temporarily for food, petrol or bills. Your friend should keep the money separate and pass it on. The debt collector has a professional version of the same duty.
For debt collection companies (inkassoselskaper), this is especially important because they can handle large amounts. A company may receive thousands of payments every week. Some are full payments. Some are partial payments. Some relate to the principal claim (hovedkrav). Some relate to interest and fees. Without strict routines, errors can happen quickly.
That is why § 16 is a control rule. It is about order, traceability and security. It must be possible to follow the money from when the debtor pays until it is registered, allocated and paid out.
What does "as soon as possible" mean in practice?
"As soon as possible" does not necessarily mean the same minute. The debt collector must be able to register the payment, check which case it relates to and calculate what is to be paid on. But it does mean that the debt collector cannot wait unnecessarily.
Once the money has been received and registered, it must be paid on as quickly as the routine allows. The debt collector cannot hold back the money to improve its own finances. Nor can the debt collector wait for weeks without reason.
In practice, there may be agreements between the debt collector and the creditor on settlement periods. For example, weekly or monthly settlement may be agreed. Such routines must nevertheless be sound. § 16 sets a basic requirement: collected funds must go on to the creditor without undue delay.
If the case is unclear, clarification may be needed. Perhaps the debtor paid the wrong amount. Perhaps the debtor entered the wrong KID. Perhaps there are several cases against the same debtor. But even then, the debt collector must handle the money in an orderly way.
What happens if the debt collector mixes client money and its own money?
Then it can be serious. Keeping client funds separate is a fundamental duty. Breaching this duty can have consequences for supervision (tilsyn), the licence (bevilling), liability and trust.
For the creditor, the consequence may be that money that should have been paid out is delayed or, in the worst case, lost. For the debtor, it can create uncertainty about whether the payment has actually been registered and applied to the right case.
If you as a debtor have paid, the most important thing is that you can document the payment. If you have paid the correct amount to the correct account with the correct KID, you should not have to pay again because the debt collector makes a mess internally. Keep your receipt and bank statement.
If you as a creditor do not receive your money, you should ask for a written settlement and explanation. Refer to the rule that collected funds must be paid out as soon as possible under § 16. Ask for the date the payment was received, the amount, deductions and the planned payout.
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Examples
Sara owes NOK 6,400 to a gym. The claim has been sent to debt collection. She pays the full amount to the debt collection agency (inkassobyrå) with the correct KID number. The debt collection agency registers the payment. Part of the amount relates to the gym's principal claim, part relates to interest and part relates to debt collection costs (inkassokostnader). The debt collection agency may withhold the amount it is entitled to as its fee. The rest must be paid on to the gym. If the debt collection agency leaves the money in a client account for a few days while the settlement is processed, that may be fine. But it cannot use Sara's payment to cover its own bills. The money must be treated as client funds. The outcome is that Sara settles the matter, the gym gets what it is owed, and the debt collection agency gets its agreed fee.
Petter runs a small electrical company. A customer owes him NOK 18,000. Petter sends the case to debt collection. The customer pays the full claim to the debt collection agency. Petter expects the money to arrive quickly. The debt collection agency may deduct its fee, but must pay the rest to Petter. If the debt collection agency does not do so, Petter should ask for a written settlement statement. If the debt collection agency says the money "is with us for now" without a good explanation, that is a warning sign. § 16 says that collected funds must be paid out as soon as possible. Petter is entitled to orderly handling and an overview.
Common mistakes
- Believing that the debt collector owns all the money that comes in
- Waiting too long to ask for settlement as a creditor
- Not checking whether payments have actually been passed on
- Mixing up direct payments to the creditor with payments to the debt collector
- Forgetting that the debt collector's fee may be deducted before payout
What should you do?
If you are a debtor, you should always pay with the correct KID or a clear reference. That makes it easier to link the payment to the right case. Keep your receipt. Do not assume that "it will probably sort itself out" if you have entered the wrong reference.
If you have paid but are still receiving claims, you should send documentation to the debt collector. Write briefly: "I paid the claim on 12 March. See attached receipt. Please confirm that the case is closed."
If you are a creditor, you should agree on clear settlement routines with the debt collector. Ask how often collected funds are paid out. Ask how the fee is deducted. Ask how you receive settlement reports.
When you receive a settlement, you should check the figures. Look at what the debtor was charged, what was paid, what the debt collector has deducted, and what has been paid out to you. This is closely linked to § 15 on the written statement when the assignment ends.