What is the percentage a vendor can charge as a late payment fee for unpaid services?

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What is the percentage a vendor can charge as a late payment fee for unpaid services?

I’m a freelance graphic designer. I designed some web banners for my client. I invoiced them 3 months ago and my invoice clearly states that if payment is not received in full within 30 days a 20% late payment fee will be charged and an invoice will be reissued. I’ve submitted an updated invoice for the late 3 months and received confirmation each time that I would be paid the new amount. Now I’m am getting a response that my percentage is higher then the law allows and will only be paid the original amount and not be compensated for the 3 months of late charges they have accumulated.

Asked on September 10, 2010 under Bankruptcy Law, Indiana

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The ability to charge a late payment fee may indeed be regulated by your state depending on who you are and the type of business you do.  For example, Indiana has a law a to late payment fee amounts that are permissible on public contracts.  This is a private contract, though.  Do you have a contract wherein you and the client agreed to the late fee before the invoice stating such?  Then you have a contractual issue.  But remember: contract provisions can not run a foul of state laws that may apply like state usury laws.  In Indiana it is my understanding that the legal rate of interest is 10% and that are presently no usury laws, but legislation pending.  It may be best to learn your lesson here, negotiate the amount in late fees to a specific dollar amount and finally get paid.  Good luck.


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