The observational effects of the 'Infrared Catastrophe' are discussed in view of the very late observations of the Type Ia SN 2011fe. Our model spectra at 1000d take non-local radiative transfer into account, and find that this has a crucial impact on the spectral formation. Although rapid cooling of the ejecta to a few 100 K occurs also in these models, the late-time optical/NIR flux is brighter by 1-2 magnitudes due to redistribution of UV emissivity, resulting from non-thermal excitation and ionization. This effect brings models into better agreement with late-time observations of SN 2011fe and other Type Ia supernovae, and offers a solution to the long standing discrepancy between models and observations. The models show that spectral formation shifts from Fe II and Fe III at 300d to Fe I at 1000d, which explains the apparent wavelength shifts seen in SN2011fe. We discuss effects of time dependence and energy input from 57Co, finding both to be important at 1000d.