Can a small business charge finance charges on a service performed without disclosing the rate of finance charges up front?

We had a lawn service perform work on our lawn. We were unaware that we still owed them money as they did not send out a statement. About a year after the services were performed the lawn service sent out a statement with about $700 worth of finance charges added to the original bill which was only about a $1,000. Is this a legal practice and do we owe the finance charges as we have already paid the original amount? Now we are getting statements where they are charging finance charges on the finance charges already owed.

Asked on June 4, 2012 under Business Law, Minnesota

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Interest, late fees, and finance charges of all types may only be charged to the extent they are agreed to in advance. The agreement does not always have to be explicit--for example, if you sign a service agreement even though the company's marketing materials or  service proposal state that interest of 1.5% per month is charged on late payments, then the fact that you signed the agreement could taken to be your consent to the charge, even if the agreement itself does not specifically mention it--but there must always, at a minimum, be disclosure of the charge or fee prior to entering into the relationship or having the work done. So you legally are only obligated to pay finance charges that they can show you agreed to.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.