The Finnish debt payment and collection regulations are undergoing remarkable changes in connection with the implementation of the EU Late Payment Directive (2011/7/EU). A new Act on Payment Terms in Commercial Contracts has been introduced, and the Act on Collection of Receivables and the Interest Act have been amended.
The amendment of the Act on Collection of Receivables has reduced the maximum amount of collection charges allowed for consumer payables. New limits of 60, 120, and 210 euros have been introduced for consumer payables of, respectively, 100 euros or less, over 100 but less than 1,000 euros, and over 1,000 euros.
Furthermore, the order of application of proceeds has been amended so that the proceeds will be first applied to the discharge of the principal of the payable and only thereafter to the related expenses. Following the amendment, collecting a receivable that has been time-barred is no longer permitted.
By way of other amendments, debtors have been granted the right to seek the suspension of collection actions, whereupon the collection will be referred to judicial recovery. Presenting such request for suspension may be useful, for example, where it is evident that collection will be unsuccessful and it only serves the purposes of accumulate costs for the debtor.
The Act on Payment Terms in Commercial Contracts is applied to payments by enterprises and authorities to enterprises. The Act covers payments made in consideration for goods or service.
Maybe the most significant change in connection with the Act is the introduction of a 40-euro fixed charge payable by enterprises and authorities for late payments. The charge must be paid irrespective of whether any actual collection charges have incurred to the creditor.
The amendment of the Interest Act separates the penalty interest rate applicable to consumers from that applicable to enterprises and authorities. The rate for enterprises and authorities is one per cent higher than that for consumers. The Act on Payment Terms in Commercial Contracts respectively stipulates that a provision of an agreement whereby the creditor would not be entitled to penalty interest is null and void.
Finally, there will be restrictions on the length of payment term. Where the debtor is an authority, the term of payment will by the provisions of the Act on Payment Terms in Commercial Contracts be limited to no longer than 30 days.
The amendments are intended to implement the EU Late Payment Directive but also to create regulations that are more effective in ensuring compliance with sound collection practices and preventing unreasonable collection expenses from incurring to debtors. One of the key ideas behind the EU Late Payment Directive is to encourage debtors to pay their dues in time. The intention of the Directive is to protect especially small and medium-sized enterprises.
The amendments have taken effect as of 16 March 2013. However, the change to the order of application of proceeds of collection will not come into force until 16 December 2013.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
