The Late Payment of Commercial Debts (Interest) Act 1998 (“Act”) implies an interest term into a commercial contract. This act only applies to business to business contracts for the supply of goods, it does not apply to consumer contracts.
When a debt becomes due and interest becomes payable you may be able to claim interest at a rate of 8% above the base rate of the Bank of England. The Act also allows the creditor to claim a fixed sum in addition to the interest.
The date when interest starts to accrue is slightly more complex than you may imagine. It varies depending on whether a fixed date for payment is contained within the contract, the nature of the body party to the contract (i.e. public or private sector) and the date which the contract was entered into (Pre- March 2013, March – May 2013 and post May 2013 periods have different rules).
As stated above there are certain fixed costs that are recoverable depending on the size of the debt, these are as follows:
Debt due below £1,000: fixed sum £40.
Debt due £1,000 to £10,000: fixed sum £70.
Debt due £10,000 or more: fixed sum £100.
It is possible for the creditor to recover reasonable legal costs incurred for the purpose of recovering the debt. This may include the cost of a solicitor drafting a debt collection letter or the cost of instructing a debt collection agency to recover the debt.
For more information please contact our commercial litigation department.
Paul is our Managing Director in Leicester. All of our staff in Leicester are experts in their fields and dedicated to quality client care. If you would like to find out more about our solicitors in Leicester please contact us.
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