[Question] Charging interest on overdue debt

[Tonio]

Hello Forum Members,

I would really appreciate your help.

My employer (SA PTY LTD company) won a contract with a customer in Lesotho to provide Management Consultancy services.

Our first invoice was presented on 21st September and the contract terms are 21 days (18th October). According to the contract, we can charge interest but we must wait for a grace period of 15 days (2nd November) before doing so.

Our bank received the transfer on 22nd November, which cleared on 25th November. This is 35 days late (18th October to 22nd November).

We want to present an interest invoice for this period to send a clear message and to concentrate their minds for future contractual payments due throughout 2020. I am not sure of the Invoice wording required (to sound official quoting Acts, clause numbers etc)) and also the rate of interest to use. Researching on-line, I see 2% per month (24% per year) or 10% (base rate Repo + 3.5%), depending if it is Incidental Credit or the Prescribed Rate.

Over to you.

Thanks,Tonio

[dellatjie]

As far as I understand legislation, this agreement falls under the incidental credit agreement definition, as you did not go into this agreement planning to charge interest.

[GCE]

Did your contract data not have an interest rate and clause ?

[Andromeda]

If your contact only states the starting date, not the rate, then you must not exceed the maximum allowed by the NCA, which is 2% per month. That means it is enforceable in a South African Court.

You should probably say something to the effect "Finance charge on late payment. X days (date less date) at 2% per month in accordance with Sec 103 of National Credit Act (No. 34 of 2005)."

Or some such jargon.

[Tonio]

Many thanks everyone.

No the contract did not state a rate of interest. Other sources are saying that I should charge the Lesotho rate, which is 10.25%.

[Tonio]

In fact, on reading the small print of the contract, it says that Lesotho law applies.

Anyone know if Lesotho has a similar act to the National Credit Act of SA?