At long last, late payers are now being made responsible for the costs of recovering debts owed by them. The Late Payment of Commercial Debts (Interest) Act 2013 comes into force on 16th March 2013. This amendment has been driven by changes in European Legislation under the European Directive 2011/07/EU and has to be implemented by all member states by the above date.
Presently, creditors are entitled to interest at 8% above the Bank of England Base Rate (currently 0.5%) from the date that their invoices became due, until the date that they receive payment. Additionally, creditors are also entitled to compensation depending on the size of the debt outstanding:
Upto £1000 £40.00
Over £1,000 but under £10,000 £70.00
Over £10,000 £100.00
Under the new rules, creditors are now also entitled to claim ‘reasonable costs’ if they have to employ a Solicitor or Licensed Debt Collection Agency to recover their money.