Liam Hastings of Hastings & Co Solicitors based in Chelmsford, Essex looks at recent changes to the late payment legislation.
The Late Payment of Commercial Debts (Interest) Act 1998 came into force in November 1998. It entitled businesses to charge interest on outstanding commercial debts at a generous rate of 8% above the Bank of England base rate.
In August 2002 the Late Payment of Commercial Debts (Interest) Act 1998 was amended by the Late Payment of Commercial Debts Regulations 2002. It was amended so that businesses could claim compensation on outstanding debts in addition to interest at the following rates:-
(a) for a debt less than £1,000, the sum of £40;
(b) for a debt of £1,000 or more, but less than £10,000, the sum of £70;
(c) for a debt of £10,000 or more, the sum of £100.
The Late Payment of Commercial Debts Regulations 2013
The Late Payment of Commercial Debts Regulations 2013 has made minor changes to the Late Payment of Commercial Debts (Interest) Act 1998. The key changes, which came into force on the 16th March 2013, are as follows:-
(1) Changes to payment periods – where the purchaser is a public authority and payment terms have been agreed – the payment period cannot exceed 30 days. Where the purchaser is a private sector business and payment terms have been agreed the payment period cannot exceed 60 days unless agreed and provided the payment period is not “grossly unfair” to the supplier.
(2) Creditors are now entitled to recover any reasonable costs of recovering the debt, over and above the fixed sum compensation.
We are big fans of the Late Payment of Commercial Debts (Interest) Act 1998. The compensation, together with the fixed costs that we, as solicitors, are able to recover when commencing legal proceedings, mean that we are often able to recover our charges, in addition to the full face value of the debt, in undisputed cases. If the new right to recover reasonable costs, enables us to recover costs in disputed cases below £10,000 (ie the current small claims track limit) where previously we were not able to recover reasonable costs, this will be great news for creditors who are owed money.
Hastings & Co Solicitors specialise in debt collection and litigation. They offer a low cost debt collection service but have the skill and experience if the debt is disputed. Please telephone Liam Hastings on 01245 835 305 for further advice or assistance.
Disclaimer: this blog is intended to give a brief overview of the law and does not substitute for independent legal advice.