Debt Recovery Case Study One – Claiming Late Payment Interest

Case Study 1 – Claiming Late Payment Interest


Claiming interest, compensation and reasonable litigation costs.


Our client is the supplier of packaging goods to industry. It offers its customers 45-day credit terms.

We were instructed to recover a number of accounts that had become overdue. Each account comprised several invoices which were between 60 and 150 days past due.

On receipt of our client’s instructions, we considered its terms of business. These were silent on late payment interest and therefore we recommended that it rely on the provisions contained in the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment Regulations 2013.

The Act entitled our client claim interest at the rate of 8.5% per annum together with a fixed amount of compensation on each invoice, as set out in the table below.

Where the compensation was insufficient to cover our client’s costs in pursuing the debt, it was entitled to pursue the shortfall from its customer.

Our client employed two full-time credit controllers and their procedure was to send at least three reminder letters before referring the account to solicitors. They would follow up on each letter by telephone and were spending a considerable amount of time on pursuing delinquent debtors.

Our client calculated the overhead of the time spent by its credit controllers and on approximately 60% of cases the compensation claimed under the Act was insufficient. We calculated the shortfall and included this in the demands for payment.


Size of unpaid debt Sum to be paid to the creditor
Up to £999.99 £40.00
£1,000.00 to £9,999.99 £70.00
£10,000.00 or more £100.00


We issued a Letter of Claim to each customer which contained a schedule setting out a calculation of interest, compensation and reasonable costs. The letters demanded payment within 14 days.

Two-thirds of the debts were paid by the deadline and a third of those that paid, also paid compensation and interest without further prompting. A further 50% paid compensation and interest after receiving a second letter.

Our client instructed us to take proceedings against the 30% of debtors that did not respond to the letter of claim and each claim included our client’s reasonable litigation costs in addition to the court fee and statutory solicitor’s costs.


Because our client claimed compensation interest and costs in the Letter of Claim on all of the accounts it referred to us for collection, it was able to recover a sufficient sum to mitigate the costs it incurred on the minority of cases on which it was required to issue proceedings.

rhw Solicitors LLP dispute resolution team will always look for ways to recover interest compensation and costs from your debtor with the ultimate goal of achieving costs neutral litigation.

Where we believe your costs recovery could be improved by amending your terms of business we can give guidance on the changes needed.

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