Q: What is the maximum finance fee or interest rate I can charge my customer on overdue invoices in Louisiana?
I sell goods in a business to business setting. Most of my customers are on Net 30 day payment term accounts. I have a customer that is months past due on a large balance. My credit application states in short that "we have the right to charge a 1.5% finance charge on past due invoices. They are arguing that in Louisiana "conventional interest cannot exceed twelve percent per annum." La. R.S. § 9:3500. Moreover, La. R.S. 9:3501 states that "[a]ny contract for
the payment of interest in excess of that authorized by law shall result in the forfeiture of the entire
interest so contracted."
1. Is my finance charge on his balance owed considered "conventional interest?
2. If so, is it correct that I can only charge him 12% per year? The 1.5% per month finance charge seems to be pretty industry standard.
A: Your contractual interest is limited by statute. This is "business owner 101". I recommend that you retain an attorney on a professional basis to take a look at your invoices and contracts to ensure that you are complying with Louisiana law, and to be your "go-to" guy when you have legal questions or issues. Try to arrange it so that you pay the guy on an ad hoc basis if possible, meaning that you pay him when you need him.
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