Impact of New Debt Recovery Regulations on Small Business
Late payments can have a serious impact on the cash flow of businesses of all sizes and so the Late Payment Act of Commercial Debts (Interest) Act 1998 provides a little comfort by giving suppliers a right to at least 8% a year interest on overdue payments for goods or services, plus a fixed sum and reasonable costs of recovering the debt. Many large firms take advantage of this Act, and the impact this has on small businesses in particular is staggering.
The Late Payment of Commercial Debts (Amendment) Regulations 2018 which came into force on 26 February 2018 are supposed to assist smaller businesses and enable representative bodies to challenge the use of certain grossly unfair contractual terms and practices, mostly by larger businesses.
The new Regulations enable the High Court to:
“grant an injunction on such terms as it thinks fit, restraining the person from relying on a term in the contract, or engaging in a practice in relation to the contract, where that term or practice relates to:
- the date or period for payment of a debt;
- the right to interest for late payment of a debt; or
- compensation arising out of late payment of a debt;
and in all the circumstances of the case that term or practice appears to the High Court to be grossly unfair.”
Exactly what is deemed to be “grossly unfair" however is yet to be clarified by case law.
Samuels Solicitors has well developed, and tried and tested methods for helping you recover debt from late payers. Should you have any queries concerning the impact of the Regulation on your company’s debt collecting procedures contact us for a no obligation discussion today.