Late payment interest
Under the Late Payment of Commercial Debts (Interest) Act 1998 (as amended by various subsequent regulations) (“the Act”), unpaid suppliers of goods and/or services have a statutory right to claim interest on overdue debts as well as compensation for late payment.
The effect of the Act is to imply certain terms into contracts covered by the Act entitling creditors to interest automatically from the date payment fell due until payment is made, with a set rate of interest of 8% above base rate.
In addition, a creditor has a right to charge collection charges, once an account is overdue, on each and every invoice. Compensation is set at fixed rates depending on the level of the debt:
For debts up to £999.99 – £40;
For debts from £1,000 to £9,999.99 – £70; and
For debts over £10,000 – £100.
Example (for illustrative purposes only):
In the following example we recover a debt owed of £1,500, along with interest and late payment compensation:
|Amount recovered||Our fee||Amount paid to you|
|Interest||£50.00 (example value)|
Please be aware that interest is payable on the principal debt and it is not payable on the compensation amount.