Sunday, 18 February 2018

The Curse of Interest on Business Debts: New Laws

If you aren't in business then I suggest you do something more worthwhile than reading this post - like washing your hair or cutting your toenails, or both. It's about interest which one business has to pay to another business when it is late in settling a debt. The terms and conditions of the creditor  business may dictate the interest rate for which the debtor business is stung. Where it is silent or the creditor wishes to take advantage of it then the The Late Payment of Commercial Debts (Interest) Act 1998 kicks in and allows for statutory interest at 8% over bank base rate for goods and services debts and a fixed enforcement prize to the creditor (£40 for debts under £1,000, £70 for £1,000 plus and £100 for £10,000 and over). 


As from 26 February 2018 the representative bodies for businesses like trade associations are given the power to challenge ‘grossly unfair’ terms and practices of creditor businesses relating to the date or period for payment of a debt, the right to interest for late payment and compensation for late payment by way of a court injunction application. This is thanks to the Late Payment of Commercial Debts (Amendment) Regulations 2018 SI2018/117 which are themselves ridiculously late in being given the kiss of life following an EU directive and previous domestic legalisation which should have gone further than it did.