This case study is a good example of how you can use the Late Payment legislation to claim interest, compensation and costs to cover your internal and external costs when pursuing unpaid invoices. It also highlights that the Late Payment legislation can be a strong negotiation tool to ensure full collection of all your unpaid invoices. In this particular case, an additional £2,000 in compensation was recovered on top of the debt of £27,000 for our client. This covered all their legal & internal costs of recovery.
As a firm of debt recovery solicitors, we’re always looking for ways to make the cost of recovery as little as possible for our clients. In this case, our client instructed us to recover a debt of £27,000 – they provided us with a copy of their terms of business that governed the contract. The terms highlighted that they were entitled to claim their legal costs, along with Late Payment Interest and Compensation under the Late Payment of Commercial Debts (Interest) Act 1988.
A Late Payment demand (essentially, a Letter Before Action with full invoice details) was promptly sent to the debtor, requesting payment for the overdue invoices, along with the entitled compensation. The value of compensation claimed totalled £2,480.00 which was made up of compensation on each individual invoice that had not been paid within the credit period!
On receipt of the demand, the debtor made a £10,000.00 payment asserting that the balance of the debt was disputed. The client did not accept the dispute and a Claim Form was then issued including the claim for interest, compensation and costs under contract. Upon receipt of the Claim Form, the debtor made contact looking to reach a settlement to avoid a County Court Judgment (CCJ) being registered against them which would affect their credit rating. The client then offered to reduce the additional compensation claimed by £500.00 for a quick settlement. The debtor accepted this and paid in full. Even with this reduction, the client was left with an additional £2,000 to cover legal and credit control costs.
Find out more?
If you are unsure whether you’re entitled to claim costs under contract, or Late Payment Interest, Compensation and Costs, or if you need advice on what to add to your terms to ensure you can claim these costs, please speak to us today!