Late Payment of Commercial Debts
Late Payment of Commercial debts (interest) Act 1998
The Late Payment of Commercial Debts (Interest) Act 1998 allows suppliers to charge other business customers’ interest on unpaid accounts they are owed. This interest charged can lessen some of the unavoidable problems of late payment by the business customers. This act enables the suppliers to get timely payment, which helps with the proper functioning of their businesses. Before this Act was passed, interest on outstanding debts could only be demanded where the agreement precisely permitted, or where the supplier prosecuted for payment via the courts.
The interest rate that can be applied under the Act is 8% above Base Rate from the date the invoice becomes overdue.
Late payment compensation costs can also be claimed of £40.00, £70.00 or £100.00 depending on the value of the outstanding invoices.
Reasonable recovery costs can also be claimed if they exceed the compensation costs.
The Act applies to the commercial supply of goods/ services where there is not a provision for interest in the terms of business. It does not apply to consumer contracts.
The first step in the process is to send a letter to the debtor for the amount owed. Here, you are also free to add the interest and compensation costs for late payment.
Even though previously this act only applied to small businesses, it is now applicable to all companies where the contract was made on or after 7 August 2002.
If you need help our debt collection agency team can assist you anytime.