How to claim late payment fees
A sale is not a sale until it is PAID for...
Claiming reasonable debt recovery costs
We are often asked, "Can I claim late payment fees?" The statutory right to interest introduced under the Late Payment of Commercial Debts (Interest) Act 1998 has now been extended to all businesses and public bodies. With effect from August 2002, the Late Payment of Commercial Debts (Interest) Act 1998 was amended to incorporate the features of the European Directive 2000/35/EC.
Under the revised legislation, all businesses can claim reasonable debt recovery costs and can benefit from the simplification of the calculation of Statutory Interest.
Sum to be paid
Up to £999.99
£1,000.00 to £9,999.99
£10,000.00 and over
The rate of interest will be set at the Bank of England base rate plus 8%.
The Bank of England base rate of 31st December will be the reference rate for the six month period 1st January to 30th June.
The Bank of England base rate on 30th June will be the reference rate for the six month period 1st July to 31st December.
You will be entitled to a statutory rate of at least 7% over the European Central Bank Rate for Euro area countries.
When claiming late payment fees, it is recommended that your business makes reference to your right to claim reasonable debt recovery costs in all of your credit management documentation i.e. credit application forms, contracts, order conformation and invoices.
It is recommended that you use wording to the effect of:
"We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to the agreed credit terms."
Payment will be deemed to be late if payment is still outstanding after the last day of the agreed credit period. In the absence of no "agreed credit period" the law sets a "default period" of 30 days.
Where a standard practice on payment has become established, i.e. your customer regularly pays on day 45, this is accepted - in the absence of any other agreement - as the credit period.
Consumers remain unaffected by this law. If you sell to an individual, as opposed to a business, you cannot claim interest on late payments under this legislation.
- Credit Management - A Guide to Risk Reduction
- Client credit risk assessment - Who do you think you are dealing with?
- Obtaining a company credit information report
- Obtaining a company bank reference
- Obtaining a company trade reference
- Customer credit risk assessments - How do you set a credit limit?
- How to get your trade terms right
- How to claim late payment fees
- Credit Management Summary - where to now?