What a dunning fee is in legal terms
A dunning fee is neither a price for sending reminders nor a penalty for the customer. It is compensation: the customer pays late, that causes you a loss, and the customer may have to make that loss good. The basis is default of payment under the German Civil Code (sections 280 and 286 BGB). Three rules follow from that and shape the rest of this guide:
- No default, no dunning fee.
- Only the actual loss is recoverable, not an amount you choose freely.
- The reminder that first establishes default does not itself trigger a fee.
Default arises when you send a reminder after the due date. Without a reminder it arises when the payment date is fixed by calendar (“payable by 15 March”) and at the latest 30 days after the due date and receipt of the invoice. Towards consumers the 30-day rule applies only if the invoice expressly says so.
How high may a dunning fee be?
Recoverable are the costs a reminder actually causes: postage, paper, envelope, printing. According to the prevailing view your own time is not recoverable, that is the working hours your accounts team spends on the reminder. A reminder by email costs almost nothing, so a fee for it is hard to justify.
Case law has produced rough benchmarks: flat fees of about two to three euros per postal reminder are regularly accepted, while flat fees of five euros and more in standard terms have repeatedly been declared invalid. If you want to charge more, you must be able to prove the higher cost in the individual case.
For flat fees in standard terms, section 309 no. 5 BGB adds two requirements: the flat fee must not exceed the loss to be expected in the ordinary course of events, and the customer must expressly be allowed to prove that a lower loss or none at all occurred. If that sentence is missing, the clause is invalid and you cannot charge the fee at all.
Towards businesses there is somewhat more room, because the strict rules on standard terms for consumers do not apply in full. The principle stays the same: compensation, not a charge.
Why the first reminder usually carries no fee
The first reminder is usually the one that brings about default. A loss caused by default, however, can only arise after default has begun. The cost of this first reminder is therefore not recoverable; only the second and every further reminder may include dunning costs.
The exception follows from the rule: if default has already occurred, because the payment date was fixed by calendar or the 30 days have passed, then even the first reminder is a reminder after default and its cost is recoverable. Many companies still deliberately waive a fee at the first level, because the payment reminder is meant to protect the customer relationship. How the levels build on each other is shown in the guide on dunning levels.
How to calculate default interest
Default interest is independent of the dunning fee and accrues day by day from the start of default. Under section 288 BGB the statutory rate is five percentage points above the base rate towards consumers and nine percentage points above it towards businesses. The German base rate (Basiszinssatz) is set by the Bundesbank on 1 January and 1 July each year; check the current value before every calculation.
The formula is: claim times interest rate times days in default divided by 365.
An example with an assumed base rate of 2 percent: a business customer pays EUR 10,000 sixty days late. The default rate is 2 plus 9, that is 11 percent per year. EUR 10,000 times 0.11 times 60 divided by 365 gives EUR 180.82 in default interest. For a consumer it would be 2 plus 5, that is 7 percent, and therefore EUR 115.07.
A higher rate may be agreed by contract; it then applies unless it is an unreasonable standard term towards consumers. State on the reminder from which day and at which rate you charge interest, otherwise the customer cannot verify the amount.
The EUR 40 flat fee for business customers
Since 2014 section 288 paragraph 5 BGB provides a flat default fee of EUR 40. It applies only if the debtor is not a consumer, that is towards business customers and public authorities. The fee arises with the start of default, without proof of any loss, and per claim rather than per reminder.
Two restrictions: the fee is credited against further costs of legal enforcement, that is lawyer’s or collection fees you claim later. And it cannot be excluded by standard terms. Towards consumers you may not charge the EUR 40, not even disguised as a dunning fee.
Wording dunning fees in your terms and on the reminder
A valid clause names the amount, the level and the customer’s right of proof, for example: For every reminder after the start of default a flat dunning fee of EUR 2.50 is charged. The customer remains free to prove that no loss or a substantially lower loss has occurred.
On the reminder itself the items should be listed separately: principal, default interest with period and rate, dunning costs per reminder and, for businesses, the flat default fee. Dunning fees, default interest and the flat fee are not subject to VAT, because they are genuine compensation; show them without VAT.
Dunning fees towards consumers and businesses
- Dunning costs: for both only the actual costs from the reminder after default, in practice a few euros.
- Default interest: consumers five, businesses nine percentage points above the base rate.
- Flat default fee of EUR 40: businesses only.
- 30-day rule without reminder: always for businesses, for consumers only with a note on the invoice.
- Flat fees in standard terms: strict review under section 309 no. 5 BGB with right of proof for consumers, somewhat more room for businesses.
Worked example: one reminder with every item
A business customer receives an invoice for EUR 2,500 payable by 1 March. Because the payment date is fixed by calendar, default begins on 2 March. The payment reminder of 15 March deliberately carries no fee. The second reminder of 1 April then contains, again with an assumed base rate of 2 percent:
- Principal: EUR 2,500.00
- Default interest 2 March to 1 April, 31 days, 11 percent: EUR 23.36
- Dunning costs for the second reminder: EUR 2.50
- Flat default fee under section 288 paragraph 5 BGB: EUR 40.00
- Total: EUR 2,565.86
If the customer were a consumer, the EUR 40 would not apply, interest would be 7 percent and thus EUR 14.86, and without a note on the invoice default would have begun only with the payment reminder.
How acucollect handles dunning fees
In acucollect, the receivables management software by RLOX (product page in German), you store the dunning fee per level once; the dunning runs then apply it uniformly:
- The first level stays free of charge; towards consumers the fee is capped automatically.
- A fee arises only once the reminder has actually been sent, at most once per level and receivable.
- Dunning fees are shown on the reminder separately from the principal and inserted into the text via placeholders.
- Debtor groups and individual debtors can have their own fees, for example zero for key accounts.
What follows after the final reminder and which costs arise then is described in what happens after the final reminder.
