Interest for Delay

If a payment of debt is delayed, a defaulting party has an obligation to pay interest for late payment in accordance with the Interest Act. The interest for delay has to be paid even if there is no agreement on it, unless it is a question of certain exceptional cases.

According to the Interest Act the delayed debtor has to pay an annual interest on the delayed payment. The interest is seven percentage points higher than the reference rate of interest applied by the European Central Bank, which is defined in section 12 of the Interest Act.

If the parties have fixed the due date in advance, the interest for delay has to be paid from the due date onwards. If the parties have not agreed the due date in advance, the interest for delay has to be paid when 30 days have passed since the date on which the creditor sent an invoice to a debtor or otherwise requested payment. However, the debtor is not obligated to pay the interest of delay for the period before he/she received the invoice or request.

The parties may agree on the amount of interest for delay and the payment of it with an agreement. However, if the debtor’s obligation is related to a contract concerning consumer credit or consumer good or service between a businessman and a consumer, or a contract according to which the debtor purchases or rents accommodation, the obligation to pay interest for delay is not valid in so far as the debtor would be liable to pay higher interest for delay than laid down in the Interest Act.

Interest for delay may be adjusted on certain conditions, if the debtor is a so called natural person and the debt is not related to a pursuit of a business. The interest of delay may be adjusted e.g. if the delay is due to financial difficulties, which the debtor has suffered because of illness, unemployment or other specific reason which is primarily not attributable to the debtor himself/herself.