"May I charge interest on overdue invoices? How much may I charge?"
1. The National Credit Act 34 of 2005 (hereinafter referred to as “the Act”) makes provision for charging interest on “incidental credit agreements”. You do not need to be a registered credit provider to charge this type of interest.
2. An “incidental credit agreement” is defined in the Act as an agreement, irrespective of its form, in terms of which an account was tendered for goods or services that have been provided to the consumer, or goods or services that are to be provided to a consumer over a period of time and either or both of the following conditions apply:
a.) a fee, charge or interest became payable when payment of an amount charged in terms of that account was not made on or before a determined period or date; or b.) two prices were quoted for settlement of the account, the lower price being applicable if the account is paid on or before a determined date, and the higher price being applicable due to the account not having been paid by that date.
3. If this Act is applicable, you may charge interest at the rate of 2% per month
4. The National Credit Act is only applicable to Juristic Persons as Consumers if their annual turnover or asset value is lower than the amount determined by the Minister (Section 4(1)(a)(i) of the Act)
5. The Minister proclaims what this amount mentioned in point 4 above shall be in terms of section 7(1) the Act.
6. This amount is currently R 1 million and if it is exceeded, the Act does not apply to the juristic person.
7. Where the Act does not apply, the Prescribed Rate of Interest Act applies, if there is no agreement as to what the rate of interest should be. The current legal rate of interest in this instance is 10% per annum (straight – not compounded). This applies through application of law once a debtor is in default and does not need to be in your agreement although you may need assistance of the court to enforce it if it is disputed.
By: Bilaal Dawood Attorneys This article is for educational purposes only and is not legal advice.