If you are a business owner in North Dakota seeking to recover unpaid invoices, it is essential to understand the legal framework around charging interest on overdue payments. The North Dakota Century Code governs this area, specifying the requirements and limitations regarding interest and fees for overdue invoices.
Giving written notice
Before you can add interest to an overdue invoice, you must take certain steps. Start by sending a written notice to the debtor. This notice should clearly state the amount they owe, the interest rate you will charge and when the interest will begin to accumulate. Keep your communication professional and open.
Reasonable interest rates
The interest rate you intend to use must be fair and not too high. Ensure it is in line with common rates and does not burden the debtor unfairly.
North Dakota law sets a standard interest rate. Interest on any legal debt must be at a rate of six percent per year unless you both agree to a different rate in writing. Note that you can only charge interest on overdue invoices if there is a contract to charge interest on overdue interest. Even so, it must be at a legal rate. Violation of these rules is considered usury.
North Dakota has laws that limit how much interest can be charged. These laws are in place to prevent extremely high interest rates. You can’t charge more than the law allows. The highest rate you can charge is seven percent, but it can be higher if it’s in line with the law.
Exceptions from usury laws
Some transactions, like pawnbroking and loans to specific entities, do not follow these laws. Certain loans above a specific amount are also exempt. State-chartered banks and the Bank of North Dakota have their own regulations.
To sum up, North Dakota law permits charging interest on overdue invoices, but you must follow the rules. Make sure your interest rates are reasonable and be aware of the laws on maximum interest. If you are unsure, it is wise to consult a legal professional to ensure you are following the law and protecting your interests.