CCSCollect’s Perspective: Late Payment of Commercial Debts (Interest) Act 1998.

In 1998, the Late Payment of Commercial Debts (Interest) Act was introduced. Originally created to give businesses, with 50 or less employees, the right to charge interest to larger businesses and public sector organisations of any size, the Late Payment of Commercial Debts (Interest) Act technically has two main purposes. CCSCollect are well aware of the ever-changing financial services field and understand that the two purposes sometimes go overlooked…but this is where we come in.

The point of this blog is to enlighten those interested, or even those who are a little confused, on the reasoning behind the Act – and the ways it can even help you. Yes, you.

The first reason behind the Act is to compensate creditors regarding the late payment of debts. The second reason is to deter late payments occurring again. It’s really that simple. An Act introduced to benefit smaller companies sounds too good to be true, especially if you’ve been burned by those pesky late payers previously. But I can assure you that this really is the case.

Unfortunately, the Act is only applicable to B2B supply of services, where the provision of interest is not included in your Terms of Business. However, you can claim Late Payment Interest if:
– You have supplied goods and services
– Your buyer bought for business purposes
– The contract is not a consumer credit agreement
– The contract does not contain terms regarding overdue invoice, or any other remedy for non-payment
If any of the above applies to you, it maybe of interest to note that you’re able to claim 8% on top of the Bank of England’s base rate, which is currently 0.5%. From here, you can then calculate against individual invoices from the date the payment fell due. You have six years to claim the interest.

You are able to claim compensation for every invoice that was not paid within the credit period and you are even able to claim compensation if the invoice has now been paid. However, there is a banding regarding the amount of compensation you’re able to claim:
Invoice Amount: Compensation:
Up to £999.99 £40 per invoice
£1000 – £9,999.99 £70 per invoice
Over £10,000 £100 per invoice

This may sound rather ridiculous – the fact you can claim up to £100 in compensation when an invoice has already been paid but late payers occur too often. It’s best to advise customers if you tell them in advance of your intentions, should payment be late, but this is not necessarily required of you. It’s just a handy way of informing your customers of the consequences should they breach your payment terms; including warnings on your invoices, your statements and in your terms of business is helpful in the sense that it should deter late payers in the first instance. And if it doesn’t, they can’t say you didn’t warn them…

So how does this newfound knowledge benefit your company and where do CCSCollect come in?
Should you require help addressing your late payers, CCSCollect will calculate the amount due and add it on to the original balance. You can just sit back and relax in knowing CCSCollect’s high collection rates will guarantee you receive the money owed to you. Successful collections means the added late payment fee should settle against the commission owed to CCSCollect, meaning there really is no added fee owed by your company, which is a bonus for everyone. It’s practically a zero cost way of debt collection. You receive the original balance owed and CCSCollect walk away knowing we’ve helped to combat a late payer.

We live in a world where people will only pay for things when they’re ready. They pay when they see fit, if they pay at all. This culture is fast becoming known as ‘The Culture of Late Payers.’ One of the most important points towards The Late Payment of Commercial Debts (Interests) Act 1998 is that it quickly rehabilitates customers, in the sense that once they’ve witnessed the Late Payment Compensation fees, they rarely pay late again. This means you’re likely to continue business with them, and you’re rarely at a loss.

A couple of tips regarding the Act, because we’re nice like that, would be to incorporate the mention of Late Payment Compensation into your business Terms & Conditions. This reduces the amount of disputes received and acts as a pre-warning for anybody even thinking about paying later…
It’s also best to check that the Late Payment Compensation doesn’t conflict with any Terms & Conditions already set out in your Terms of Business. From a legal point of view, building the interest into your contract provides you with a standing. Again, customers are unable to say you didn’t warn them.

The Late Payment of Commercial Debts (Interests) Act 1998 is really as simple as this. Or it can be. CCSCollect are experts in the financial services/debt collection industries and have been studying the likes of this Act since it was introduced. The benefits of having the services of a company like CCSCollect means you’re unlikely to be at a loss and the manual work is covered by professionals. Late payers occur too frequently but they don’t have too.