Interest On Past-due Account

[Nachton]

What is the law regarding the charging of interest on past-due accounts in a situation where interest charges were not specified prior to the transaction?  The debtor firm is a Pennsylvania corporation, we are a California corporation.  The debt in on the order of $2000, and is about 3 years old.  The debtor continues to promise to 'take care of this,' but only a couple of token payments of $50 have been forthcoming.  Because of the distance involved, I am reluctant to engage an attorney, but if interest were indeed allowed this could make it worthwhile.  Many thanks.

[Rangy]

James, Most contracts should indicate if interest will be "tacked" on, in the event of a delinquency.  There are maximum interest laws in most states, and you may need to check with an attorney for what is allowable by law in your area.  

You could always incur interest and late penalties, in hopes the debtor will comply.  Be very careful of finding out the maximums in advance for your state, as the government is very strict on usery laws(interest charged on interest...this is a big NO-NO).  

Maybe a letter to the debtor indicating you are going to incur interest, penalties, late fees and attorney fees will encourage them to step up to bat and resolve the balance.  You may also want to consider a settlement.  This could get you a lump sum NOW, in lieu of waiting around for months for small, insignificant payments.  (ie:  would you rather have $1000 now and call it quits, or get small payments over the course of time?)

Hope you get it worked out.  Let me know if you need additional help, and if my advice has been helpful, feel free to leave positive feedback at the www.allexperts.com site.  They love to hear good things about us!

Kathleen Crabtree