Payment Regulations

Commercial Transactions Regulations 2002 and Prevention Of Late Payments

In order to deal with late payments in commercial transactions across the European Union, a law was enforced on August 7, 2002. When this law came into force in Ireland, it said, unless otherwise mentioned in a contract, you would have to pay penalty interest in case you did not pay for business transactions within 30 days. Please go through our guide to the Regulations, which you can access by clicking HERE.

These regulations, which are applicable to payments for business transactions in both the public and the private sectors, have rendered Sections 4 to 11 of the Prompt Payment of Accounts Act 1997 redundant.

It was on 7 August 2002 that the European Communities (Late Payment in Commercial Transactions) Regulations 2002 (SI 388 of 2002) was enforced. These regulations are applicable for both the public and the private sectors. They make you liable to pay interest in case you delay the payment for any business transactions.

As per these regulations, the European Central Bank’s main refinancing rate, plus seven percentage points, would be the interest rate—unless otherwise mentioned in an agreement. The European Central Bank (ECB) rates in force on January 1st and July 1st will be applicable for the next six months in each year. Only one rate that is in force on the date of payment will be applicable for the late payment.

The rate of interest on late payment is eight percent every year, from January 1, 2011. This rate of interest is based on the ECB rate of one percent plus the margin of seven percent. It equates to a daily rate of 0.022 percent. We should calculate penalty interest for late on a day-to-day basis. Nevertheless, the interest rate on the late payment won’t change again until July 1, 2011. You can check the ECB rate 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.