Applying interest in the event of late payment

Late payment is a harsh reality which numerous creditors all too often have to face. But exercising your legal right to claim interest from a late payer can encourage your clients to pay you on time.

First of all, precisely when can a payment be considered late?

Where the payment period is 

stipulated in a contract

, a payment is considered late from the day following the due date. Penalty interest can thus be claimed by the creditor from that date. If the payment period has 

not been contractually stipulated

, it is then determined by the relationship between the creditor and the debtor. If the debtor is a consumer, the invoice has to be paid on receipt or, if there is no invoice, on receipt of the goods or services. In business relationships (B2B), the law requires invoices to be settled within 30 days. This legal period commences from receipt of the invoice or, if there is no invoice, from receipt of the goods or services. Beyond these 30 days (or beyond any other period agreed between the parties), the law stipulates that penalty interest shall become due 

automatically and without prior formal notice

.

What interest rates should be applied?

• Interest rate applicable to civil and commercial matters

If the contract between the two parties specifies an interest rate to be applied in the event of late payment, this “contractual” interest rate, which is often higher than its legal equivalent, shall take precedence. Conversely, if no interest rate has been contractually agreed, it is the legal system, and therefore the legal interest rate, which shall apply. We should specify, however, that this legal interest rate, set each year by the Federal Public Service Finance, can be applied solely to private matters between natural and legal persons and to transactions between private individuals and retailers. For the year 2017, it has been set at 2.0%.

• Interest rate applicable to commercial transactions

In the same way as for civil and commercial matters, the legal interest rate applicable in the event of

late payment in commercial transactions

applies only if the two parties have not agreed on another interest rate in the contract binding them. This rate is set twice a year by the FPS Finance and stands at 8.0% for the first half of 2017. According to the Law of 2 August 2002 on combating late payment in commercial transactions, this rate applies to “all transactions between companies or between companies and public authorities that lead to the delivery of goods, the provision of services or the design and execution of public works and building and civil technical works against payment.”

• Should you claim interest?

One thing is beyond dispute: the creditor is fully entitled to claim penalty interest from the debtor. This interest first and foremost serves to cover certain costs potentially arising from this type of situation, but it can also help to make a person or company more credible in the eyes of bad payers. No creditor can support numerous unpaid debts without adverse effects, so penalty interest exists quite simply to compensate the unfortunate creditor and to encourage clients to pay on time.   Would you like more details on what we could do for you? Then visit our 

website

 or 

contact us

!

Late payment is a harsh reality which numerous creditors all too often have to face. But exercising your legal right to claim interest from a late payer can encourage your clients to pay you on time.

First of all, precisely when can a payment be considered late?

Where the payment period is 

stipulated in a contract

, a payment is considered late from the day following the due date. Penalty interest can thus be claimed by the creditor from that date. If the payment period has 

not been contractually stipulated

, it is then determined by the relationship between the creditor and the debtor. If the debtor is a consumer, the invoice has to be paid on receipt or, if there is no invoice, on receipt of the goods or services. In business relationships (B2B), the law requires invoices to be settled within 30 days. This legal period commences from receipt of the invoice or, if there is no invoice, from receipt of the goods or services. Beyond these 30 days (or beyond any other period agreed between the parties), the law stipulates that penalty interest shall become due 

automatically and without prior formal notice

.

What interest rates should be applied?

• Interest rate applicable to civil and commercial matters

If the contract between the two parties specifies an interest rate to be applied in the event of late payment, this “contractual” interest rate, which is often higher than its legal equivalent, shall take precedence. Conversely, if no interest rate has been contractually agreed, it is the legal system, and therefore the legal interest rate, which shall apply. We should specify, however, that this legal interest rate, set each year by the Federal Public Service Finance, can be applied solely to private matters between natural and legal persons and to transactions between private individuals and retailers. For the year 2017, it has been set at 2.0%.

• Interest rate applicable to commercial transactions

In the same way as for civil and commercial matters, the legal interest rate applicable in the event of

late payment in commercial transactions

applies only if the two parties have not agreed on another interest rate in the contract binding them. This rate is set twice a year by the FPS Finance and stands at 8.0% for the first half of 2017. According to the Law of 2 August 2002 on combating late payment in commercial transactions, this rate applies to “all transactions between companies or between companies and public authorities that lead to the delivery of goods, the provision of services or the design and execution of public works and building and civil technical works against payment.”

• Should you claim interest?

One thing is beyond dispute: the creditor is fully entitled to claim penalty interest from the debtor. This interest first and foremost serves to cover certain costs potentially arising from this type of situation, but it can also help to make a person or company more credible in the eyes of bad payers. No creditor can support numerous unpaid debts without adverse effects, so penalty interest exists quite simply to compensate the unfortunate creditor and to encourage clients to pay on time.   Would you like more details on what we could do for you? Then visit our 

website

 or 

contact us

!