Debt Collection – Legal Right to Interest for Late Payment

legal updates

Effectively the law allows interest to be charged on a debt arising with another business when it becomes late after any agreed credit period.

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Although this has been around for some time there does not seem to be a large take up of its use in the motor trade sector.  

Effectively the law allows interest to be charged on a debt arising with another business when it becomes late after any agreed credit period.  

The rate of interest is 8% over the Bank of England reference rate (currently 0.5%).  It is a statutory right but can become a contractual right if you include it in your terms and conditions of the business.  

As well as claiming interest you can also claim debt recovery costs.  The costs you can legally charge are:

Debt                Debt Recovery Cost
<£1,000                                     £40
 £1,000 – £9,999.00                  £70
>10,000                                   £100

It’s definitely worth considering if you have frequent late payers.

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