Question about interest rate

[eitai2001]

Hi Guys.

I have a question about an interest rate I received on an overdue payment.
I just received a statement for a payment I apparently owed in March last year, although I have no record of an invoice or statement for it from a courier company.

I have asked them to furnish the actual invoice in the mean time, and if they can and it tallies up, I will pay the amount.

However, the guys have charged me a nominal rate of 5% per month, which over 9 months has worked up to be 45% and 12 months is 60%. My question is, is that legal ... to charge a nominal 60% interest rate per year compounded monthly? Is there now some in the NCA or similar that goes against this? Please let me know you advice.

Regards

Itai

[Taxempt]

Penalty Interest
The decision as to whether or not you can levy penalty interest on your late payers is not as simple as it may first appear. We often get legal advice from friends who aren’t lawyers, which leads us to believe that the way we are doing our business is the right way. Here’s what you need to know when you charge or agree to interest:


If your debtor is in default, interest can be claimed:

- from the date of summons; or

- from the due date for payment, but only if there is an agreement to pay interest.


Compound interest can only be claimed if there is an agreement for compound interest. If there is no agreement, then only simple interest can be claimed.

How much interest?
Interest should be paid at the rate that was agreed upon between the parties. If you have failed to meet this criteria for paying interest, then interest must be calculated at the rate prescribed by s 1(2) of the Prescribed Rate of Interest Act 55 of 1975. This rate is currently 15,5% per annum.

How does the National Credit Act affect the interest you’re paying?
The Usury Act of 1968 provided the rates that you should be paying. The Usury Act was repealed by the National Credit Act (“NCA”), with effect from 1 June 2006. In terms of the NCA, the maximum penalty interest that can be agreed to is 2% per month.

Hope that helps.
Basically, anything more than 2% per month is not allowed