Late Payment of Commercial Debts and Interest
Late Payment of Commercial Debts
Clients and customers paying invoices late can put enormous financial strain on businesses large and small. Late payers can also add stress and worry to business owners and managers, responsible for running a business that must pay rent, staff salaries and all other associated costs to stay afloat.
However, the law does provide legal redress for such breaches of contract via the Late Payment of Commercial Debt (Interest) Act 1998 ('the Act'). Keep reading to find out how.
Purpose of the Late Payment of Commercial Debts (Interest) Act 1998
The primary purpose of the Act is to compensate a creditor who has not received a payment from a debtor. By allowing the creditor to claim a high rate of interest on any debts that remain unpaid the Act also serves a vital secondary purpose of deterring late payment.
What is the level of interest that can be claimed?
The Late Payment of Commercial Debts (Interst) Act 1998 provides that you can claim interest at 8% above the Bank of England Base Rate which provides both a significant power to creditors and a significant deterrent to debtors.
Who can claim the interest?
The Act inserts an implied term for interest on late payments if there has been a contract which:
- is for the supply of goods and/or services;
- is a business to business contract (this includes contracts involving public authorities); and
- does not contain any clause which gives a substantial alternative remedy for late payment.
When can the interest be claimed?
The statutory interest starts running after the end of the agreed payment period or, in lieu of an agreed payment period, 30 days from:
- the date of supply;
- the date of invoice; or
- the end of any checking goods procedures.
What about my costs in instructing a lawyer?
You can claim the reasonable costs that you have incurred while trying to obtain payment from the debtor and this can include the costs of instructing a debt collection solicitor.
This is due to a piece of EU Law called the Late Payments Directive 2011 (2011/7/EU). This Directive created an implied contractual right to costs and at Article 6.3 it specifically states: 'This could include expenses incurred ... in instructing a lawyer'.
Can I get compensation for a late payment?
Compensation is available for every invoice that has not been paid within the agreed or implied (30 day) payment period.
Compensation comes in the form of a sum which is fixed according to the size of the debt:
- Debts below lb1,000 have a fixed sum of lb40;
- Debts between lb1,000 and lb10,000 have fixed sum of lb70;
- Debts above lb10,000 have a fixed sum of lb100.
How can Saunders Law help with debtors?
Our debt collection solicitors understand the importance of recovering debts owed to businesses as soon as possible. They are known for their responsiveness, determination and don't tend to take 'no' for an answer.
We understand that there is a need to balance the amount of the debt against the cost of recovery and therefore will offer you a service that is tailored to the needs of your business.
We will always offer you a free, initial consultation, so call our debt collection solicitors now on 0207 632 4300.