The government legislation covering the Late Payment of commercial debts was introduced in November 1998 and amended on August 7th 2002, which incorporated EU Directive 2000/35/EC on combating late payment in commercial transactions.
The point of this legislation is to allow a creditor to impose a charge on the debtor in addition to the debt incurred, as penalty for late payment. The charge varies according to the amount of the debt as shown in the table below.
Size of unpaid debt Sum to be paid to the creditor
Up to £999.99 £40.00
£1,000.00 to £9,999.99 £70.00
£10,000.00 or more £100.00
In addition to this, the creditor can likewise claim reasonable costs incurred in the Debt collection process and also interest on the debt. So, along with this information, the creditor may be able to make a reasonable case for the debtor to pay up as soon as possible after the date for payment has elapsed. This date should date the law assumes a credit period of 30 days, which may be used as an interest free loan period on the part of the debtor.
The creditor must decide on the best strategy to manage this late payment problem, as the longer it continues the more expensive it can become, due to reduction in income and possible increasing costs waiting to be charged against the debtor. The creditor must always take the first step of getting in touch with the debtor and courteously remind them that the account is unpaid and the final payment date has elapsed. If this fails to instigate payment then they will need to take into account what further steps to raise the pressure on the debtor. It would be rather ill advised for the creditor to build up a steep bill for Debt collection because if the debtor finally ends up going into administration, the creditors may not receive their claims in full, so it is best to be careful when thinking about the next steps.
The next steps include talking with a solicitor, talking with a Debt collection agency or taking a DIY approach by the use of Debt collection software that incorporates templates for the creation of Debt collection letters. The solicitor should be someone who specialises in Debt collection and can produce good quality Debt collection letters on your behalf, but there will be a businesses and it would be wise for the creditor to try and find one that has a proven record of professional approaches to the debtors they have been successful with, as the creditor may wish to keep on good terms with the client in the hope of obtaining future projects. The Debt collection organisations may set a charge based on the value of the debt, or a set figure if the debt is below a threshold value, so this can be expensive. For the DIY approach, the creditor should be able to work within the Debt collection software to edit the wording of the Debt collection letters to ensure that they are fulfilling this need. The templates for Debt collection letters should be provided for all of the likely stages in the Debt collection process, and should contain references to the costs allowed by Late Payment of Commercial Debts legislation. The DIY approach should be the cheapest and the creditor must examine the various packages of Debt collection software to ensure that they meet the criteria set out above.
Quoting the legislation to a large debtor would be unlikely to antagonise them because being a large company they may have their own legal department, or an agreement with a legal practice and so should be aware of this legislation in order to collect their own debts efficiently.
