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The time frame for introduction is:
1 November 1998 - Small businesses (less than 50 employees) can claim interest from large companies and most public services.
1 November 2000 - Small businesses can claim from each other in addition to the above.
7 August 2002 - the following apply:
a) All commercial traders can claim interest from each other. The 7 August 2002 legislation is not retrospective, but small businesses with invoices dated between 1 November 1998 and 6 August 2002 can claim for late payment interest (but not compensation for debt collection administration as in the 7 August 2002 legislation). The period for making a claim for late payment interest is six-years from the invoice date (five-years in Scotland) but not to include any period before 1 November 1998. In reality this will not become an issue until 2004 (2003 in Scotland).
b) Where two parties agree on a rate of late payment interest - contractual interest - the Act will not apply. However, if default arises and the rate/period agreed is not considered to be a 'substantial remedy', the courts will act in favour of the aggrieved party who has a right to either: a better remedy or the basic remedy offered within the Act. The concern of the government was that large companies will extract unfair credit periods or interest rates from the smaller and more conciliatory supplier when sourcing business.
c) Further, a claim for 'reasonable' compensation can be sought from the debtor for collection costs (this is in addition to court fees if the creditor sues and wins). However, if you have your own late interest payment conditions in your terms of sale you cannot claim for 'reasonable costs' or statutory interest (see 3) page).
Reasonable Recovery Costs | Invoice Amount | Costs Claim | | up to £999.99 | £40.00 | | £1000.00 to £9999.99 | £70.00 | | over £10,000 | £100.00 |
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d) Further, a 'representative body' - I expect in the mould of the Federation of Small Business and Chamber of Commerce - acting on behalf of SME's (under 500 employees) can argue for a litigant, or group of litigants, if the terms and conditions of sale of a large corporate is considered to be grossly unfair contractual terms. I am not fully appreciative of this move as I thought we already had a sufficient group of professionals for arguing over unfair contractual, or otherwise, terms. |
