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Interesting times for interest claims

View profile for Leigh White
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The Telegraph recently reported that the Bank of England’s latest Inflation Report suggests that “fundamental forces are moving in favour of an interest rate rise”, if the UK votes to stay in the >EU this coming June. Click here for the full article.

As this would be the first rise since interest was cut to 0.5% in 2009, and the long awaited increase may be here sooner that many expect, this is a good opportunity to revisit your entitlement to recover interest debts owed to you and our application of the law in this area when acting on your behalf.

There are three ways in which you may be entitled to claim interest on an unpaid debt:

Contractual Interest

If your contractual terms provide that you are entitled to interest at a certain rate, then you are bound by those terms. This is the same whether you have a particular contract, which covers the debt in question, or general terms and conditions that apply.

As part of our fixed-priced Pre-Action Stage, we will consider terms dealing with interest to calculate your full entitlement then add this to the sum we are pursuing,

County Courts Act 1984 and Senior Courts Act 1981

The County Courts Act and Senior Courts Act entitle all claimants to include a claim for interest at 8% per annum on any debt when issuing proceedings. There is no right to this type of interest unless, and until, a claim is issued.

The same legislation also allows you to recover interest at the rate of 8% per annum on any Judgement debt in excess of £5000. There is no statutory interest on Judgment debts of less than £5000. However, if the Judgment is transferred up to the High Court for Enforcement, interest at 8% per annum applies from the date that it is transferred up.

We apply the above interest wherever no other entitlement to interest applies.

Late Payment of Commercial Debts (Interest) Act 1998

If the debt is owed to a business by a business, you may have a statutory entitlement to:

  • charge interest at the rate of 8% above base rate on all debts that are not paid within trading terms. At this time interest is 8.5% per annum but watch out for that potential increase;
  • charge a fixed sum of between £40 and £100 by way of compensation for late payment for each unpaid debt; and
  • recover the other reasonable costs of recovery that are not covered by the above compensation.

You do not have to issue proceedings to be entitled to recover these amounts. Your entitlement arises as soon as a debt is overdue. You could issue legal proceedings just for the recovery of the interest, compensation and recovery fees if you wish to do so.

Your rights to use this legislation are not compulsory. We assume, however, that if you are using our services, you would want to recover as much as you can. Therefore, we will always include a claim for interest, late payment compensation and recoverable costs for eligible debts, unless you tell us otherwise!>

If you have any queries regarding you entitlement to recover interest, please do not hesitate to contact the Debts Team on 01775 764156.