Consultation response to consultation note of 17.04.2023 on Establishment of a single payment feature and modernization of the payment process

1 Kapitalkontroll AS

KapitalKontroll AS is a specialist and system supplier to 136 Norwegian municipalities and approx. 200 private businesses within the field of debt collection. We arrange annual user meetings, hold courses and webinars. It is with the background of our contact with municipal customers that we submit our response to the consultation.

2 About municipal fees

Municipal taxes have certain advantages in terms of collection. They are a basis for enforcement, they have a legal lien on the property to which the tax applies and the municipality can act as bailiff for enforcement and garnishment. The reason for this is that this is a type of claim that it is crucial to be settled, because the services that are financed are crucial for the welfare of the residents. It is important that water is brought to households and that sewage is removed and cleaned. It is important that garbage is removed and handled and it is important that chimneys are swept and fireplaces are checked. Due to the cost-effectiveness principle, the price for the services is calculated based on the cost of producing the services. There is no opportunity to charge more, and thus municipalities cannot add to the price to handle non-payment. This means that it is particularly important for the municipalities that invoiced claims are actually settled.

Property tax and parking fees under the Road Traffic Act are not payments for specific services, but taxes and penalties for improper parking. These can be more closely equated with tax claims collected by the state on behalf of tax creditors.

The proposal continues the position that these claims are so important that they should be covered by special collection rules. This is evident in the fact that no changes are proposed to the rules on statutory grounds for enforcement, the rules on legal pledges as security for the claim, and the priority rules for garnishment deductions.

KapitalKontroll AS agrees that municipal fees, property taxes and parking must have a special status in terms of collection.

3 About the process; Risks in large IT and legislative change projects

Based on experiences from other large IT projects, it is easy to be skeptical about the scope and ambitions of this project. In this context, it is enough to refer to the Health Platform in Trøndelag and the learning platform for the exam in spring 2023.

KapitalKontroll AS would definitely argue that the ambitions of this project are too high. The project plans the following:

· Change government collection

· Create a new state entity, the Collection Authority (hereinafter IM).

· Establish a new system for payment of drafts, including

o Payment receipt

o Separate settlement between multiple creditors

o Follow-up of non-payment

· Change the system of special names

· Build IT systems for automatic execution of enforcement proceedings in IM and ordinary bailiff

· Build IT systems to collect information from a variety of sources, including:

o Tax return

o Payroll registers (a-melding today)

o Various asset registers, such as small boat registers, weapons registers and motor vehicle registers

o Data from the Norwegian Mapping Authority that must be compared with the population register to find the real owner.

o Data from the population register for use in assessing payroll deductions

o The expenditure database

· Build IT systems for compiling collected data

· Build IT systems for selecting suitable expenditure objects and prioritizing them to select the most suitable expenditure object

· Challenges of personnel changes

o Get more cultures to establish a common culture

o Training in new systems and regulations at Bailiffs and in IM

· Challenges in making new regulations known among

o Creditors

o Employers

o Debtors

 KapitalKontroll AS has only listed parts of the project, the project is therefore much more extensive than the list gives the impression. We have no basis for assessing the complexity of the actual programming of the IT systems, but we do think that there is good reason to claim that this is a very extensive and complicated project. We therefore believe that the project should be stopped in its current form, and a procedure should be found that increases the chance of success.

4 Changes to the Enforcement Act

4.1 Examination of the petition

No changes are proposed in the examination of petitions. This is KapitalKontroll AS agree.

Much responsibility is transferred to the creditor to provide all necessary information. For creditors who have their own systems, this will be appropriate. However, we are more concerned if the process becomes too cumbersome so that ordinary creditors are forced to use debt collection agencies. We believe this is an unfortunate effect and increases the cost for the debtor.

We believe that simple interfaces must be established for submitting petitions so that non-professionals can submit petitions for enforcement of defaulted monetary claims.

4.2 Reduction of notification and contact with debtor

It is proposed to remove several notifications to the debtor. We believe this is unfortunate. The notification that is proposed to be retained is in advance of the examination of the petition. In this context, there will be a lot of information that must be sent to the debtor. The debtor must deal with the petition and claim at the same time as he deals with any attachment objects and must also deal with requirements for information for use in the assessment of any deduction from salary payments. We believe this increases the risk that more debtors do not understand what is about to happen, and thus are exposed to something they disagree with. This will in turn lead to more complaints and probably more errors that must be corrected.

KapitalKontroll AS believes that the efficiency gains achieved by obtaining information should result in maintaining that the bailiff must have direct contact with the debtor after it has been decided to hold enforcement proceedings.

For most debtors, contact can be made electronically via a portal or "My Page" solution. Notifications can be sent out efficiently via SMS, email or electronic mail.

We see that this does not solve anything when it comes to non-digital users. However, they have already been identified in the project as objects for their own assessments, and we agree with that.

4.3 Selection of the project object

It is planned that the layout object will be selected automatically. Such a solution supports KapitalKontroll AS. However, we see some challenges:

· Assets that do not appear in any registers

o Expensive hobby equipment

o Negotiable rights, such as hunting and fishing

· In the event of multiple suitable attachment objects, the system must be designed to choose what is most beneficial to the creditor and not what is most efficient/simple for the bailiff.

· When choosing an attachment object, registered encumbrances must be assessed against the sales value of the object. Today, real estate is often chosen without the bailiff considering whether the property has real value for the creditor who has requested the attachment. A prioritized list must also be created for choosing an attachment object from several relevant objects, where the one that provides the highest coverage is chosen.

 The proposal maintains the bailiff's obligation to value an attachment object. Kapitalkontroll AS agrees that this obligation should be maintained. Today, very few bailiffs value attachment objects. A change to the text, even if it implies a less exact valuation, will in reality be a tightening of the obligation. We consider this to be positive. However, this will fall under the challenges inherent in training special and ordinary bailiffs, as well as internal follow-up to ensure that the rules are actually followed.

5 One move

5.1 About the One Move principle

KapitalKontroll AS supports the proposal to introduce a single deduction. In our opinion, this will lead to simplifications for the debtor, the creditor and the employer. However, we believe that parts of the proposal should be changed:

1) Which bailiff should follow up on a cancelled bill?

We believe that IM should follow up on all claims, and not just claims that include claims from IM. This would be cost-effective and provide a greater degree of equal treatment. The proposed solution where claims are followed up by both the bailiff and IM leads to a lack of clarity in the system.

2) The order of priority

The proposal maintains the order of priority in the Coverage Act. This is in reality a continuation of the current arrangement where a later-made debt with a higher priority pushes aside a previously made debt. We believe that it should be stipulated by law that the principal must be covered before interest and costs for all claims, including claims not covered by garnishment debt. For most creditors who collect their own monetary claims, this will be in line with current practice. For creditors who use debt collection agencies, this will be a new arrangement. The most common is that interest and fees are covered first. This is disadvantageous for the debtor because the interest calculation runs over a longer period of time.

3) The distribution between claims within a group

We support proportional distribution. However, some claims may be small in relation to other claims. This may mean that small claims, which under the current system could provide coverage to the creditor (assuming the best time), under this system will in practice not receive coverage. This situation will become more prominent if a system is introduced whereby payments of small amounts are not made. The proportional share that falls on a small claim should be collected and then paid to this creditor when the payment amount is high enough.

In our opinion, the fairest thing would be for everyone to receive some coverage and for no one to receive any benefit beyond what follows from the prioritization given in the Coverage Act. We will therefore not support the proposal that small claims within the same priority category be covered before large claims that require longer repayments, i.e. a scheme similar to that in the Debt Settlement Act §4-8.

4) The move should run forever

KapitalKontroll AS does not support the proposal that a deduction can run for an unlimited period of time. When this is combined with the fact that the statute of limitations does not run as long as a claim is covered by a deduction, in our opinion the burden on the debtor becomes too great.

We also believe that such a solution will result in many creditors requesting garnishment to have their wages garnished, so that they receive some coverage while other collection steps are considered. A garnishment that runs for a long time may also result in the debtor being unable to cover new obligations. A garnishment that runs for a long time may result in the garnishment being extended due to new claims being included in the garnishment. Altogether, this could result in a good number of debtors having garnishments running throughout their lives. We believe this is very unfortunate.

KapitalKontroll AS believes that this could also be a violation of the rules on proportionality in the collection work under the rules in ECHR Article 8 and Additional Protocol 1 Article 1.

Kapitalkontroll AS also believes:

· Drawdowns that are expected to last longer than 5 years must result in the debtor being forwarded to the debt settlement institution so that it can be assessed whether a debt settlement should be granted.

o The state with tax claims is obliged to participate in debt arrangements

· New claims cannot be introduced into a claim that is to run for longer than 5 years. Claims that cannot be included in a running claim after this will be registered as automatic charges with no charges.

· If a drawdown has been made with a term of more than 5 years, new claims cannot be included in the drawdown, regardless of priority category.

 In our opinion, these proposals will also resolve the concerns surrounding the proposed changes to the statute of limitations.

5.2 The proposal that municipalities' special bailiff competence be limited and not include the right to conduct enforcement proceedings

Kapitalkontroll AS has had doubts when assessing the proposal that municipalities' special bailiff competence should not include the ability to issue a debt collection order. The reason for our doubts is that we see the possibility of significant automation of the collection process and that this could be cost-saving for the municipality. However, we have come to the conclusion that the municipality should retain the right to issue a debt collection order as a special bailiff.

First of all, we believe that the justification for the proposal is extremely thin and almost frivolous. Municipalities have long experience in making deductions and almost no complaints are filed with the courts. The expertise is therefore present in the municipalities and there is, in our view, no good reason why they should not be able to continue with this scheme.

The cost justification is also thin. New systems must be created for obtaining information for use in case processing. A modern system, and we must assume that what is to be created is modern, will have the ability to set up APIs to share information. The municipalities' suppliers will then connect via the APIs and the municipality will then have the necessary information. It must also be remembered that the municipalities must also have access to this information in the future because the municipalities will still be the bailiff in the event of attachment. The integrations must therefore be created regardless.

For the municipalities, the cost level will be limited. Then Kapitalkontroll AS made integrations with SKD, the municipalities incurred costs equivalent to a few hundred shillings per month. This means that the cost level is very limited.

The proposal appears to fulfill a desire on the part of the state to obtain an advantage in terms of collection in relation to municipal taxes. This is, in our opinion, unreasonable. There is no reason why tax claims should receive advantages at the expense of municipal taxes. The justification for the municipality's special position in collecting municipal taxes is explained above. The proposal maintains the special position by requiring the municipality to have special bailiff competence for garnishment and by the priority rules. There is no reasonable reason why the municipality should lose the right to levy garnishments, other than that the state should be given priority. We believe this is unreasonable.

There are two types of situations where municipalities cancel a draw. The first is where the debtor already has an ongoing draw. In these cases, it should only be considered whether the draw can be cancelled. The municipalities have good expertise in this.

The second is where there is no deduction, in which case the municipality's assessment of the size of the deduction will not affect coverage of claims other than one's own. Kapitalkontroll AS believes that IM should follow up on all closed features, cf. above. This would also include features closed by the municipality.

KapitalKontroll AS is therefore in favor of municipalities being able to issue debt relief. This is despite the fact that the proposed scheme could open up more automation in the petition process. The decisive factor for us is that claims of equal importance should have equal collection opportunities. There is no reasonable reason why the state should have better tools than the municipalities.

If the proposal is upheld, the state will be able to get started with its moves faster than others. KapitalKontroll AS believes that if the proposal is maintained, IM should be obliged to investigate whether there are petitions for claims of the same priority with the bailiffs. If this is the case, IM must be obliged to include these in its processing of drafts. Technically, this will not be difficult since all systems are planned so that all information should be known to everyone.

This consultation response is only delivered electronically.

 Oslo, 18.07.2023

 Kristoffer Blom Årvik

General Manager