Most Americans know the feeling of rushing to pay taxes or that pesky parking ticket. Federal, state and municipal governments consistently impose high penalty fees for late payments of income, property and other taxes, parking tickets or other fines and other payments owed. Other types of very common contracts, such as for home and auto insurance, may not charge late fees at all but may simply cancel the service after a brief grace period if a premium is not paid by the due date. You should assess a late charge only if the client was on notice, at the outset, that you reserved the right to do so. If you have a written agreement with the client, it should specify how long they have to pay and the flat fee or monthly finance charge for paying late. If your written agreement and invoice did not include provisions regarding late fees, you likely cannot impose finance charges.
All late fees must be explicitly outlined to borrowers and must also be reasonable. Use these free email templates to send invoice follow-ups and payment requests https://quick-bookkeeping.net/ to your customers. If you cannot pay online, and you mail us a partial payment, you must include the coupon that was included with your property tax bill.
How to create a late fee policy
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Use a payment plan
Under the Credit Card Accountability Responsibility and Disclosure Act of 2009 , late fees must be “reasonable and proportional” to the costs that credit card issuers incur as a result of late payments. Moreover, the Bureau arbitrarily considers only pre-charge-off costs to be permissible or relevant for issuers to consider and ignores post-charge-off costs. This exclusion also has no basis in economic principles or general business practices. In addition, late fees offset the operational and administrative costs Late Fees And Interest Charges to the bank of collecting late payments and the risk that late payment will lead to default, resulting in even higher costs to the issuer. They are also an important factor in managing credit risk and promoting safety and soundness in the banking system, as required by regulators under prudential standards. Banks are most successful when their customers are successful, and any narrative or claim that banks want customers to pay late so they can generate significant late fees is contradicted by the facts and data.