Your customer is buying on terms; paying the balance over time. Can you charge interest on a New York commercial debt and include the interest in New York commercial debt litigation?
Yes, you can definitely charge interest. Here are some factors to consider:
1) Unlike consumer transactions, the laws of usury in New York do not apply to a commercial transaction (lending to a business).
- Although there is no limit on the amount of interest you may charge, the interest rate in a business transaction should be reasonable and not excessive. If the case is brought to Court in New York, the Court may determine reasonable and fairness. As a point of reference, quite a few of our clients charge 1 1/2% interest per month (18% per year) which has been accepted by the New York Courts without a second look.
2) The customer’s agreement to pay interest must be in writing.
- Many of our clients include a provision on their invoice(s) that the customer agrees to pay the interest on unpaid balances. Other clients include terms whereby the customers agree to pay the interest and attorney’s fees in the credit application. Regardless which documents you choose, it must be signed by your customer.
- An unsigned writing for a higher rate of interest is not enforceable in Court. If the invoices and/or credit application are not signed by the customer, you will not be entitled to recover the pre-agreed rate of interest. You will be entitled to demand the “legal” rate of interest which is 9% in New York State.
- Approach the transaction as if the customer is going to default so that you are not financing the customer’s business.
For help drafting credit documents, questions regarding New York State commercial debt litigation or to collect from a non-paying customer, contact us now.