How to Review Default Interest Against Statutory Late-Payment Interest

Pia, Ops at a 21-person UK B2B services firm, is about to treat “2% over base” as protection. Finance said standard. Knowing how to review default-interest against statutory late-payment interest is a 25-minute hunt: write the named rate, put it next to the 1998 Act floor, test the substantial-remedy sticker, then keep, raise, or walk. The named rate is not the floor.

September 2026. English law; exclusive courts of England and Wales. The packet — the exact file set that will be signed — is the customer MSA (master services agreement — the frame contract vendors hang order forms on) plus the order-form payment terms. Clause 8.4: 2% per annum above Bank of England base current at the date of Customer’s default, simple, from written notice of a properly submitted overdue invoice.

Clause 8.5: no interest on any disputed amount. Clause 8.6: a £250 fee. Clause 8.7: Supplier acknowledges the rate is a substantial remedy. AE Slack: “We already have late interest — don’t poke the rate.” Last quarter two invoices sat 47 and 61 days; AP queried the whole file. Friday is booked.

Writing “this is a substantial remedy” does not make 2% over base one. CMS (17 Oct 2024): Yuanda struck 0.5% above base; 5% over base can still be a substantial remedy. A&V held 2% was not on frozen take-it-or-leave-it paper — the sticker was “competent drafting,” not a bargain. Bank of England MPC ending 16 September 2026 held Bank Rate at 3.75%. The Commercial Payments Bill would, if enacted as drafted, void a lower contractual rate. It is not law today.

Disclaimer: Checkory provides AI support, not legal advice. Consult a qualified lawyer for binding decisions.

How do you log the named rate and the day the clock starts?

Circle clause 8.4. A named 2% per annum above Bank of England base current at the date of Customer’s default is frozen, one-way, and simple, and it starts on written notice — not the day after the due date. Log %, simple versus compound, which day’s base, and the start event — or “unnamed / notice-gated — fail.”

Do: write the exact machine. Don’t: treat “we have default interest” as a number. For example, Late Payment Act s.4 starts statutory interest the day after the relevant day. If the fight is when Net 30 starts, withhold, or pause, that is a different hunt: payment terms Net 30 review. Stay here for the rate.

What does the statutory floor do if the clause is silent?

Silence is not a zero rate. On a qualifying B2B debt, the 1998 Act already implies statutory interest at 8% above the official dealing rate on the 30 June / 31 December snapshot, plus a fixed recovery sum. GOV.UK: you cannot claim statutory interest if the contract sets a different rate — buyers treat that as an ouster. Sections 8–9 still require a substantial overall remedy.

Do: put 8% + snapshot + £40 / £70 / £100 on the log. Don’t: invent today’s combined % from a random day’s Bank Rate. SI 2002/1675 uses 30 June or 31 December. Principal includes VAT (OSBC); VAT exclusive versus inclusive / gross-up is a different hunt: VAT exclusive / gross-up review.

Why does a substantial-remedy sticker not oust the Act?

A sticker is not section 9. A remedy is substantial unless it is insufficient to compensate or deter late payment and it would not be fair or reasonable to let it oust statutory interest. Circumstances at agreement include bargaining strength and whether the term was imposed.

Do: demand a two-way rate at least in the 5%-over-base band (or keep the Act), not frozen at first default, actually discussed. Don’t: treat clause 8.7 as a win. Section 8 makes ouster conditional. Section 9 looks at bargaining strength and standard terms. 0.5% is theatre (Yuanda). 2% failed on paper like Pia’s (A&V). Do not write “2% is unenforceable” as a blanket.

Can they freeze interest on a disputed invoice?

A bona fide line-item dispute can pause statutory interest. A query on the whole file is not a dispute. Clause 8.5 freezes interest on any disputed amount. Tata colour: undisputed debts can still carry a penal rate while genuine disputes wait — the Act targets feckless non-payment.

Do: rewrite — line-item disputes in a written window; pay the rest. Don’t: accept a freeze of the whole file plus a scare £250 fee. s.5A already gives £40 / £70 / £100. In practice, a stacked admin fee is penalty-adjacent; delay LD versus penalty is a different hunt: liquidated damages vs penalty. “Max permitted by law” is not a number on England-and-Wales commercial paper.

Will the 2026 Bill already kill a lower contractual rate?

No. The Commercial Payments Bill is in Parliament. GOV.UK overview (19 May 2026): it would mandate interest at 8% above Bank of England base; not retrospective. Trowers (1 September 2026): Lords Report 15 September 2026; it might reach the statute book next year. Baker McKenzie: as drafted, a different rate, conditions, or a later start including during a dispute would be void.

Do: log a watch-note for new in-scope contracts after commencement. Don’t: tell Friday the Bill already killed 2%. Stay on the rate.

How do you keep, raise to a substantial rate, or walk?

Keep only if the log shows a named, two-way rate that is a plausible substantial remedy — case colour: 5% over base, or keep the Act — a clock that starts the day after the due date, disputed = line-item plus pay the rest, no scare fee, and a Bill watch-note. Raise means redline 2% plus the sticker, freeze, and £250. Walk — do not sign Friday — if that package remains.

Success bar: a one-page log plus one Friday pause sentence. Workflow: named rate / clock → statutory floor → substantial-remedy ouster → disputed / penalty-risk fees → Bill watch → keep / raise / walk. Optional: upload the same PDF to document analysis for a first-pass — first machine pass extracting clauses before a human reads every page. A human still opens clause 8. Verify every High flag — an item scored high severity a named human still opens. Escalate to counsel — a qualified lawyer, not the chatbot.