Late Payments in Commercial Transactions Regulations 2002
An EU wide law came into effect on 7 August 2002 to combat late payment in commercial transactions. This law was implemented in Ireland by Regulations which provide that penalty interest will become payable if payments for commercial transactions are not met within 30 days, unless otherwise specified in a contract or agreement. You should first of all read our guide to the Regulations, the regulations themselves can be accessed HERE.
Sections 4 to 11 of the Prompt Payment of Accounts Act 1997 were repealed by these Regulations that apply to payments for commercial transactions in both the public and private sectors. The European Communities (Late Payment in Commercial Transactions) Regulations 2002 (SI 388 of 2002) came into operation on 7 August 2002.
The Regulations, which apply equally to the public and private sectors, provide an entitlement to interest if payment for commercial transactions is late. The new Regulations provide that unless otherwise specified in an agreed contract, the interest rate will be the European Central Bank main refinancing rate plus 7 percentage points. The ECB rates in force on 1 January and 1 July apply for the following six months in each year. Only one rate will apply to a late payment - that is the rate in force on the payment date.
From the 1st January 2011, the late payment interest rate is 8% per annum (that is based on the ECB rate of 1% plus the margin of 7%). That rate equates to a daily rate of 0.022%. Penalty interest due for late payments should be calculated on a daily basis. However, the late payment interest rate will not change again until 1st July 2011. The ECB rate can be checked on the Central Bank and Financial Services Authority of Ireland website HERE.
The above information has been produced by the Irish Department of Trade, Enterprise and Employment, we wish to extend our appreciation in allowing Recoup Limited to reproduce it here. Their website contains the answers to many frequently asked questions regarding the late payment in commercial regulations.