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


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.

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