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  1. #1
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    May 2014
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    Default Can You Apply Interest to Invoices That Are Past Due

    My question involves collection proceedings in the State of: New York

    I was just hired as an office manager for a Restoration Company who left many extremely past due A/R accounts unattended to for a very long period of time.
    Longest so far is 60 months. With past experience in running an A/R Dept. I have had the shameless duties to pursue past due accounts 30+ months and in some cases I was in fact successful on receiving payments in full plus interest. However, is there a law against applying the 1.5% interest per month to a 60 month old account (customer was indeed aware of the interest that could be applied and acknowledged at time of contract). I will be issuing a final demand notice and would like to include interest as long as I am legally able to. What would be the best recommended approach for this type of situation?

    The amount past due is $8,918.89
    (if able to apply interest of 1.5% per month 62 months = interest accrued to date 13,530.55)
    making total amount due $22,449.44

    This appears to be far fetched to attempt but one last ditch effort to collect something prior to pursuing via litigation.

  2. #2
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    Jan 2006
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    Default Re: Can I Apply Interest to Invoices That Are Past Due (60 Months)

    However, is there a law against applying the 1.5% interest per month to a 60 month old account (customer was indeed aware of the interest that could be applied and acknowledged at time of contract)
    if you have a contract that states there is a 1.5% interest rate on unpaid balances, they why would you think the contract would not be enforceable?

  3. #3
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    Default Re: Can I Apply Interest to Invoices That Are Past Due (60 Months)

    Quote Quoting RJSteele
    View Post
    My question involves collection proceedings in the State of: New York

    I was just hired as an office manager for a Restoration Company who left many extremely past due A/R accounts unattended to for a very long period of time.
    Longest so far is 60 months. With past experience in running an A/R Dept. I have had the shameless duties to pursue past due accounts 30+ months and in some cases I was in fact successful on receiving payments in full plus interest. However, is there a law against applying the 1.5% interest per month to a 60 month old account (customer was indeed aware of the interest that could be applied and acknowledged at time of contract). I will be issuing a final demand notice and would like to include interest as long as I am legally able to. What would be the best recommended approach for this type of situation?

    The amount past due is $8,918.89
    (if able to apply interest of 1.5% per month 62 months = interest accrued to date 13,530.55)
    making total amount due $22,449.44

    This appears to be far fetched to attempt but one last ditch effort to collect something prior to pursuing via litigation.
    Check the statute of limitations for your state (or the state where the customer is located) to make sure that you are still within the statute.

  4. #4
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    Default Re: Can You Apply Interest to Invoices That Are Past Due

    Does the contract refer to the amount as a 1.5% "late fee", or as a monthly rate of interest of 1.5%? If it's the latter, you could run into usury issues (see General Obligations Law Sec. 5-501) and I suggest having the language referred by the company's lawyer. Does the contract refer to how the 1.5% is to be calculated -- whether it's based upon the original balance, whether it's compounded, or anything else relevant to the calculation?

  5. #5
    Join Date
    Apr 2014
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    15

    Default Re: Can You Apply Interest to Invoices That Are Past Due

    You need to have a written contract which provides for interest at the rate of 18% per annum in order to sue for the interest. You cannot simply claim that the defendant knew interest would be charged. It must be in writing. In NY, 18% is not considered usurious. As far as the older accounts, the statute of limitations in NY is six years (CPLR 213).

  6. #6
    Join Date
    May 2014
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    4

    Default Re: Can You Apply Interest to Invoices That Are Past Due

    It is in fact in writing and verbally reiterated at the time of contract by the job managers.

    All the past due invoices in which I am in the process of pursuing have the following clause stated.
    "The Company General Manager must approve any exemptions and a finance charge of 1.5% per month (minimum of $2.00) will be applied to any unpaid balances after 30 days."

    Upon communicating with a friend that works for a lien company stated that if the interest rate exceeds the amount invoiced regardless to the time frame of 62 months which invoice one particular is past due I would not be able to charge interest in excess of the original invoice amount?

    I never had to pursue anything this old, 30 months was the oldest.

    I know it is a long shot that I would be able to collect on a 62 month past due invoice but if I am able to recover something that would be better than writing it off.

  7. #7
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    Jan 2006
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    Default Re: Can You Apply Interest to Invoices That Are Past Due

    All the past due invoices in which I am in the process of pursuing have the following clause stated.
    "The Company General Manager must approve any exemptions and a finance charge of 1.5% per month (minimum of $2.00) will be applied to any unpaid balances after 30 days."
    but what does the contract that is the basis for that statement say to interest on unpaid balances after 30 days.



    tossing it onto the invoice is not adequate as the customer did not agree to that contract prior to entering into the contract.

    that would be like me sending you a bill for the widgets you bought from me and tacking on the bottom:

    you owe me for widgets: $100

    fee because I want to tack it on: $10

    you didn't agree to the added fee so I cannot charge it. Unless your customers acknowledged the interest charge after 30 days, you cannot unilaterally amend the contract.

  8. #8
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    May 2014
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    Default Re: Can You Apply Interest to Invoices That Are Past Due

    It is in the authorization / direction to pay which is an industry standard contract.

  9. #9
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    Default Re: Can You Apply Interest to Invoices That Are Past Due

    Quote Quoting NY Atty
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    In NY, 18% is not considered usurious. As far as the older accounts, the statute of limitations in NY is six years (CPLR 213).
    New York has both a civil and a criminal usury statute. The criminal usury statute is triggered by a 25% interest rate. Penal Law § 190.40. The civil usury statute can come into play when an interest rate exceeds 16%. Are you assuming that the debtors under discussion are all corporations? Also, what about the issue of the monthly compounding of interest, which in this case results in an effective interest rate of about 22%? See, e.g., Giventer v Arnow, 37 NY2d 305 (1975).
    Quote Quoting Tower Funding v Berry Realty, 302 AD2d 513 (2003)
    A loan is usurious if its interest rate exceeds 16% per annum (see General Obligations Law § 5-501 [1], [2]; Banking Law § 14-a [1]). A corporation may not interpose a defense of civil usury (see General Obligations Law § 5-521 [1]). An individual guarantor of a corporate obligation is also precluded from asserting such a defense (see Schneider v Phelps, 41 NY2d 238, 242 [1977]).

  10. #10
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    Default Re: Can You Apply Interest to Invoices That Are Past Due

    Quote Quoting RJSteele
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    It is in the authorization / direction to pay which is an industry standard contract.
    and that means what?

    either the the interest was known prior to entering into the contract or they didn't. Industry standard means nothing other than it, in general, is similar to other contracts in the same industry.

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