Late Fee Laws by State

Why this page exists

Most published 50-state guidance on late fees is wrong in the same way, and the error is worth naming before you read the table.

A widely republished guide, circulated by accounts-receivable software vendors and copied onward by everyone who found it first in search results, offers Colo. Rev. Stat. § 38-12-105, Me. Rev. Stat. tit. 14 § 6028 and Nev. Rev. Stat. § 118A.210 as authority for caps on business invoice late fees. All three sit in residential landlord-tenant chapters and govern what a landlord may charge a tenant for late rent — a relationship legislatures regulate heavily, with mandatory grace periods and statutory caps, because residential tenants are a protected class. None speaks to an invoice between two businesses, which is the subject of the invoice late fee calculator.

The result is a set of numbers circulating as commercial law that are nothing of the kind: five percent caps and seven-day waiting periods, presented as limits on what a supplier may charge. The reverse assumption, that the 1.5 percent per month invoicing convention travels into a residential lease, is just as costly.

This dataset keeps the two apart: residential provisions appear only in their own fields, with their own citations, and are never used as authority for a commercial question. Everything here is general information about statutory rates and doctrine, not legal advice, and it does not create an attorney-client relationship.

Four things to keep separate

Nearly every mistake here comes from collapsing two of these four questions into one. They are governed by different statutes, decided by different tests, and answered differently within one state.

1. Usury: is there a ceiling on the rate of interest? Usury statutes reach interest on the loan or forbearance of money, and many answer differently for corporate borrowers, larger loans and licensed lenders. Most states exempt business-purpose credit; a few do not.
2. Enforceability: will a court uphold this charge? A late fee on an invoice is generally analysed not as interest but as liquidated damages, which carries its own test, restated in Restatement (Second) of Contracts § 356(1): a reasonable forecast of harm that was hard to estimate, unenforceable as a penalty if grossly disproportionate to the actual loss. A fee below every usury ceiling in the state can still fail it.
3. Consumer or business purpose? Consumer transactions carry regulation with no commercial analogue: the Truth in Lending Act and Regulation Z, the CARD Act's reasonable-and-proportional standard for credit card late fees, state retail instalment sales acts. A figure routine on a business invoice can be unlawful on a consumer one.
4. Residential tenancy or commercial invoicing? Residential caps are real and enforceable — against landlords, and set out on the rent late fee page. Commercial invoicing is governed by contract law and the penalty doctrine, and in most states no statute caps the charge.

Settle which of the four you are asking about before using any number below. A rate from the wrong category is the most expensive error in this area.

How to read a statutory rate

The rates below are mostly defaults, not ceilings — a legal rate of 6 percent is not a maximum anyone may charge, it is what applies if nobody wrote anything down; the provisions that do cap agreed rates are the usury statutes, reported separately. Nearly every judgment-interest and legal-rate statute here applies only where the parties have not agreed a rate, so the first question in a real dispute is what the contract says. An agreed rate almost always governs, and several states say so in the statute itself: a judgment on a contract bears the contract's rate, with the statutory number applying only in its absence.

• Many of these figures move, floating against prime, a Federal Reserve rate or a Treasury yield and resetting annually, semiannually or quarterly. Where a rate floats, the formula is given rather than a number, because a number would be wrong within months.
• Prompt-pay rates are context-specific. Every state fixes interest on late payment in defined settings — public agencies paying vendors, payments down the construction chain — often whether or not the contract mentions interest. They are widely misquoted: Texas fixes its public-contract rate at prime plus 1 percent per year, not per month. A rate governing a state agency's late payment does not govern a private invoice.
• A rate is not a characterisation. Whether your late charge is interest at all, or liquidated damages outside the usury analysis, is a separate question.

What a blank cell means

Some fields below are empty. That is deliberate, and the most important thing to understand here.

Where a figure could not be confirmed against a primary source, nothing is shown — no plausible number, no widely-reported figure quietly promoted to fact. Every jurisdiction's judgment-interest provision was read; where an adjacent field such as a usury ceiling or the scope of a business-purpose exemption rested on a source that could not be retrieved in full, the numeric field is empty and the note says so.

The effect is that only a minority of states carry a stated general usury ceiling here, and fewer still a confirmed answer on whether business-purpose obligations are exempt. That is under-claiming on purpose: reproducing the commonly-circulated figures would put unverified numbers into a table readers treat as authoritative. Where such a figure is a useful pointer, it appears in the note with the citation to check, not in the numeric column.

So read the notes, not just the numbers. The note often carries the operative qualification: that a headline ceiling has a complete business-purpose exemption behind it, or that a residential provision is listed only because it is often miscited. Confirm whichever figure you land on against the source cited, and take advice from a lawyer licensed in that jurisdiction.

The table

Two columns of this table describe commercial and general contractual obligations. One column, kept deliberately apart, describes residential rent. Conflating the two is the single commonest error in published guidance on this subject, and it is why the rent column carries its own citations.

This dataset is general information about statutory rates and doctrine. It is not legal advice, it does not create an attorney-client relationship, and it should not be relied on for any specific transaction or dispute without advice from a lawyer licensed in the relevant jurisdiction. Three cautions in particular. First, a contract's agreed rate almost always governs over the statutory default: nearly every judgment-interest and legal-rate statute in this dataset applies only where the parties have not agreed on a rate, or caps what an agreed rate may be, so the first question in any real dispute is what the contract says. Second, these numbers move. Many are floating rates tied to prime, a Federal Reserve discount or primary credit rate, or a treasury yield, and reset annually, semiannually or quarterly; others are fixed by statute and change only when the legislature acts, which it does. Verify the current figure against the primary source cited before relying on it. Third, the correct rule depends on facts this dataset cannot know: whether the obligation is consumer or business-purpose, whether it arises from a loan or from a sale of goods or services, whether the payer is a government body, whether the project is construction, and whether the underlying relationship is a residential tenancy. Using a rate from the wrong category is the most common and most expensive error in this area.

Why late fees usually sit outside the usury cap

A late charge is usually liquidated damages, not interest on a loan

Usury statutes, almost without exception, are written to reach interest charged on 'the loan or forbearance of money.' A late charge added to an unpaid invoice is generally not treated as either. The seller did not lend the buyer money; it delivered goods or services and the buyer failed to pay on time. The most quotable statement of the rule is the New York Banking Department (now Department of Financial Services) Office of General Counsel opinion of 22 March 2000, which addressed exactly this question - what may a company charge on delinquent accounts - and concluded that late charges on delinquent accounts are not interest subject to New York's 16 percent civil usury limit in General Obligations Law section 5-501. The reasoning is that 'the 16% rule only applies in cases in which there is intent to lend money, not to a late charge,' and that courts treat such charges as liquidated damages compensating the creditor for the additional expense of carrying and collecting a late account rather than as a price paid for the use of money. That is why a business can invoice '1.5% per month on past due balances' - an 18 percent annualized figure - in a state whose civil usury ceiling is lower, without the charge automatically being usurious.

Two constraints survive: agreement with notice, and criminal usury

The liquidated-damages characterization does not make late fees unlimited. Two constraints remain. First, the charge has to be part of the bargain. There must be an express or implied agreement, and the customer must have had notice of the late charge before incurring the obligation - the DFS opinion states that 'a customer must be given notice of the existence of a late charge being imposed prior to incurring the obligation.' In practice this means the late-fee term belongs on the quote, the contract, the credit application or the purchase order terms, not merely stamped on the invoice that arrives after the work is done; a term first disclosed on a past-due notice is the weakest possible position. Second, a criminal usury ceiling can still apply even where the civil one does not. The same DFS opinion warns that a rate above 25 percent 'could be viewed by a court as illegal under the criminal usury prohibition contained in Section 5-521(3)' - New York's criminal usury threshold is 25 percent, it reaches corporate borrowers who are otherwise barred from raising civil usury as a defence, and it is the practical outer boundary on aggressive late-fee and default-interest terms in that state. Most states have an analogous criminal or absolute ceiling, though the numbers and their reach differ.

Penalty versus liquidated damages: a fee grossly disproportionate to actual harm is unenforceable

Calling a charge liquidated damages invites the oldest test in contract law: a stipulated-damages clause is enforceable only if it is a reasonable forecast of harm that is difficult to estimate, and is unenforceable as a penalty if it is grossly disproportionate to the loss the breach actually causes. This is the general common-law rule, restated in Restatement (Second) of Contracts section 356(1), and it applies to late fees with real force. A flat late charge that is small in relation to the invoice, or a periodic percentage roughly in line with the creditor's own cost of money plus collection cost, is easy to defend. A charge that compounds aggressively, that is imposed repeatedly on the same missed payment, that is levied on the entire remaining balance rather than the overdue instalment, or that produces an effective annual rate far above any plausible carrying cost, is exposed. The same logic constrains default-interest step-ups: courts have struck them where the increment bore no relation to the increased risk or administrative burden. The practical drafting rule is to set one clearly disclosed charge that a court can see as compensation, not as in terrorem pressure to pay.

Consumer and business-purpose transactions are governed by different law

The single largest source of error in published guidance on this topic is treating consumer rules as if they applied to commercial invoicing. They generally do not, and vice versa. Most states either exempt business-purpose or commercial transactions from their usury ceilings outright, exempt corporate and LLC borrowers, or set a much higher ceiling above a dollar threshold - Georgia, for instance, lets parties contract for any rate on loans of 3,000 dollars or more and any rate and charges at 250,000 dollars or more under Ga. Code Ann. section 7-4-2, while capping loans of 3,000 dollars or less at 16 percent. Conversely, consumer transactions carry a layer of federal and state regulation that has no commercial analogue: the Truth in Lending Act and Regulation Z disclosure regime, the CARD Act's reasonable-and-proportional standard and safe-harbour dollar amounts for credit-card late fees, state retail instalment sales acts, and state UDAP statutes. A late-fee figure that is routine on a B2B invoice can be unlawful on a consumer account, and a citation drawn from a consumer credit statute proves nothing about a commercial one. When using any of the numbers in this dataset, first ask whether the obligation is consumer or business-purpose.

Residential tenancy law is not commercial invoicing law

The second large error, and the specific one this dataset exists to correct, is citing residential landlord-tenant statutes as authority for what a business may charge on a commercial invoice. A widely republished 50-state 'late fee laws' guide circulated by accounts-receivable software vendors does exactly this, offering Colo. Rev. Stat. section 38-12-105, Me. Rev. Stat. tit. 14 section 6028 and Nev. Rev. Stat. section 118A.210 as caps on business invoice late fees. Every one of those provisions sits in a residential tenancy chapter and regulates what a landlord may charge a residential tenant for late rent - a heavily and deliberately regulated relationship with mandatory grace periods, statutory dollar-or-percentage caps, notice requirements and anti-retaliation rules that exist precisely because residential tenants are a protected class. None of them speaks to an invoice between two businesses. Commercial leases, by contrast, are usually governed by ordinary contract law and the penalty doctrine rather than by these caps. In this dataset residential caps are reported in their own fields, with their own citations, and are never offered as authority for anything commercial.

State prompt payment acts

Separately from usury law and judgment interest, every state has one or more prompt-payment statutes that fix a mandatory interest rate on late payments in specified contexts - most commonly payments by public agencies to their vendors, and payments down the construction chain from owner to contractor to subcontractor. These are the statutes that most often supply a hard number for a business-to-business late payment, and the numbers diverge wildly: some states use a flat monthly percentage, some peg to prime, some to a treasury or state-set rate. They typically apply whether or not the contract says anything about interest, and in construction they are frequently non-waivable. If an unpaid invoice is on a public contract or a construction project, check the state prompt-pay act before falling back on the general judgment or legal rate.

The verified examples above span from 4.75 percent per annum (federal Prompt Payment, second half of 2026) to 12 percent per annum (New York private construction and Illinois State Prompt Payment, both expressed as 1 percent per month), with Texas sitting in between at prime plus 1 percent per year. That is a range of roughly two and a half to one for what is nominally the same idea: statutory interest on a late payment. Never assume one state's prompt-pay rate resembles another's, and never assume a prompt-pay rate applies to an ordinary private invoice.

How to read the confidence column

Of the 51 jurisdictions here, 31 are marked high confidence, meaning the provision was located and read in a primary source — a state legislature's own site, an official court or agency publication, or a mirrored code text. The remainder are marked medium, which means the provision was located but at least one adjacent field could not be confirmed to the same standard.

Where a number could not be verified, this page shows not verified rather than a plausible figure. That is a deliberate choice. A table that looks uniformly complete and is quietly wrong in a dozen cells is worse than one that admits its gaps, because a reader has no way to tell which cells to check. If you are relying on a figure here for anything that matters, read the statute.

Residential rent caps were confirmed for 19 jurisdictions. The absence of a confirmed cap does not mean a landlord may charge anything: a fee grossly disproportionate to the actual loss can still be unenforceable as a penalty, and city or county ordinances frequently impose limits the state code does not.