A guide to UK debt collection costs & interest

UK Debt Collection Costs & Interest Guide

At DebtCo, we are dedicated to helping our clients recover outstanding debts efficiently and fairly. Below you will find information on the costs and interest that can be added to both B2B (Business-to-Business) and B2C (Business-to-Consumer) cases.

B2B (Business-to-Business) Cases

Interest and Costs on Unpaid Debts:

1. Interest:
   • We apply statutory interest at 8% plus the Bank of England base rate to overdue invoices. This interest begins to accrue from the day after the payment due date.
2. Compensation for recovery costs:
   • Debts up to £999.99: £40
   • Debts between £1,000 and £9,999.99: £70
   • Debts of £10,000 or more: £100
3. Reasonable recovery costs:
   1. If the costs of recovering the debt exceeds the fixed compensation, additional reasonable costs may be claimed.

Our practices for business cases follow the regulations set out in the Late Payment of Commercial Debts (Interest) Act 1998.

‍

B2C (Business-to-Consumer) Cases

Additional Information on Consumer Debts:

1. Contractual Interest:
   • If the original agreement includes a clause about charging interest on overdue accounts, the creditor can charge the interest as specified in the contract.
2. Statutory Interest:
   • Unlike commercial debts, statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 does not apply to consumer debts.
3. Cost on Consumer debts:
   • Court costs: If a creditor takes legal action to recover the debt, they can claim court fees and legal costs. These are usually added to the debt of the court grants a judgement in favour of the creditor.
   • Collection costs: Debt collection agencies may add reasonable costs for recovering the debt, but these must be outlined in the original credit agreement or be legally permissible.
   • Default charges: Creditors can add default charges, such as late payment fees, but these must be fair and proportional to the costs incurred by the creditor. Excessive fees can be challenged under the Unfair Terms in Consumer Contracts Regulations 1999.

Interest and Costs on Unpaid Debts:

1. Interest:
   • For consumer debts, we would advise the interest at the Bank of England base rate from the due date of the invoice, ensuring fairness and transparency. The base rate (8%) would not be applied.
2. Late payment fees:
   • Based on our experience, we have found the following to be fair:
     • Debts up to £999.99: £20
     • Debts between £1,000 and £9,999.99: £35
     • Debts of £10,000 or more: £50

Uploading and Managing Cases

1. Easy case management:
   • Our platform provides an intuitive interface for uploading and managing debt cases, ensuring you have complete visibility over the recovery process.
2. Breathing Space and Collections Workflow:
   • Breathing Space: During the first 15-day period, no costs or interest will be added, giving your customer a fair change to settle the debt.
   • Collections: If the debt remains unresolved, the case will automatically move into the collections workflow, where costs and interest as outlined above will be applied.