Interest and the Statutory Collection Fee

You have the right to claim interest and a statutory collection fee under the Late Payment of Commercial Debt Regulations, which came into force in August 2002 as an amendment to the Late Payment of Commercial Debts (Interest) Act 1998.

The Regulations enable UK businesses to claim statutory interest in respect of all contracts for the supply of goods or services entered into on or after the 7th of August 2002 where both parties to the contract are acting in the course of a business. The legislation included Hire Contracts, but not Consumer Credit Agreements, Mortgages, and pledges and charges where some other form of security is usually supplied.

Statutory interest is fixed by the Government twice in every hear. At present, the total statutory interest rate is 10 per cent simple interest. You can find a statutory interest calculator on-line at http://www.payontime.co.uk/calculator/statutory.html.

The Regulations also provide a right to claim compensation for your recovery costs - and that applies even if you are doing the recovery yourself. Compensation for recovery costs can be claimed once statutory interest begins to accrue, and is an additional sum:

• Up to £999.99 - £40.00
• More than £1,000, but less than £10,000 - £70.00
• £10,000 or more £100.00

The entitlement to claim interest is an implied term in any contract to which the Act applies: it can only be ousted or varied by express terms that provide a 'substantial remedy' for late payment. Consequently, all other late payment terms purporting to exclude the right to statutory interest in relation to the debt are void. However, creditors do retain the right to claim more interest or compensation under their own Terms & Conditions of Sale.