[Question] Charging interest - overdue customers/debtors

[greghsa]

A client asked me whether it is legal to charge his debtors/customers interest on outstanding (30 days +) balances.
According to him only registered financial service providers are allowed to charge interest?
South African accounting software such as Pastel does have built in options to charge interest.
If it is permissable to charge interest at what rate can it be charged?

[Dave A]

Interesting one

You can charge interest - the challenge is you have to comply with the provisions of the National Credit Act which make it a little complex.

First off - If you have less than 50 credit agreements you don't have to register as a credit provider anyway.

But you will have to meet requirements like the pre-agreement disclosure requirements, a bit tricky in an incidental credit agreement situation - but easily done if you require formal credit applications before your client may open an account.

There have been times when I've been tempted just to charge interest on overdue accounts anyway. If you read how restricted activities by unregistered persons is dealt with, what's the worst that could happen? You'll be told to stop doing it.