Legal Question in Credit and Debt Law in California

Maximum Finance Charge for Overdue Payment under Usury Laws

Is there a maximum percentage or amount of late payment fee or interest/finance charge that I, as a small service-based business owner, can legally charge my clients for failing to pay their invoice on time?

I was thinking about 3% or $15, whichever is greater, per payment period, being NET15, so every 15 days that they're late. Because everywhere I've looked, I always come across a 1.5% per month figure, I'm hesitant to implement my own policy because of the usury statute in California or federal law that I might infringe upon.


Asked on 8/09/02, 1:31 am

1 Answer from Attorneys
Hollie Lemkin Law Offices of Hollie A. Lemkin

Re: Maximum Finance Charge for Overdue Payment under Usury Laws

In California the maximum legal rate of interest is 10%. I would advise that if you wish to charge interest on overdue accounts that you give your customers advance notice that you intend to do that before you actually charge them late charges. I would also include such notice in any contracts or purchase orders that you issue as well as post the notice in your business or office.

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Answered on 8/09/02, 8:16 pm


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