Late Payment of Interest Act
The Late Payment of Commercial Debts (Interest) Act of 1998 is a piece of legislation from the United Kingdom. The act allows small businesses to charge interest when large businesses and public sector company customers fail to pay their debts.
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Who May Collect Interest?
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Originally, the act was created to assist small businesses in collecting interest on debts owed to them by larger businesses and public sector companies. After two amendments, the act now allows any business to collect interest from any other business.
When is Interest Collected?
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Interest may be collected on qualifying debts, generally under a contract. According to the act, recipients of goods and services without a contract have 30 days to pay or interest will start accumulating. If the two parties did establish a contract, repayment must be received by the day after the contract ends or interest will be added to the total.
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Interest Rate and Other Information
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According to the act, the interest rate will be the Bank of England base rate plus 8 percent. If the company pays part of the amount it owes, the money will be applied to the interest first. Debts may be sold to other collectors. The debtor must be alerted in writing when this happens.
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