Allowable Retail Interest Rate

M

Macbeth

Registered User
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Hi All,
A relative has recently shown me a statement from a grain supplier where transactions from 2010 to mid-2012 are shown. There was an opening balance of about €200 and two invoices totalling approx. €1300 in the period. The problem is that monthly interest was added to the account during time and the total interest was eventually more that the the opening balance and purchases combined, coming to about €1400. I had a quick look at the statement and saw that the monthly interest rate varied wildly, sometimes being as high as 200% on an annual basis. I have three questions.
1. Can interest be added to retail accounts without prior agreement with the customer?
2. If interest is allowed, must the customer be advised of interest rate changes?
3. Is there any legal limit on such interest rates?
I understand that there may be EU legislation in some of these areas.

Many thanks for any help.
 
I was just wondering,are these interest payments calculated manually by someone in the grain office?
Scenario:eek:ffice junior is told that they charge say 12% on overdue accounts.Obviously,this is per annum.But,if instead of charging 1% on the balance,the yearly interest rate was incorrectly applied as a monthly charge this could give rise to the charges you outline.
 
No, the interests payments are not calculated manually. I've seen the statement of account and it was generated by a computer. It shows the various interest payments being accumulated as I described earlier. My relative spoke to the merchant and he insists that it is correct - mainly because "the computer" says so! I'm not sure if he is being difficult or genuinely does not understand it. He says that the interest rate is 9% and this may be true in some instances but it fluctuates from this to 200%. I told my relative to ask him when and how the rates are set but she said that there was a blank expression when this was asked. Does anyone know what (if any) is the maximum legal limit on interest chargeable in these circumstances? Thanks.
 
9% per annum works out at .72% per month.On a bill of €1500 this would be 10.80 in the first month,and a bit more thereafter.Do any of the months have an interest bill of this order?
 
This what you are looking for?

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Last edited:
Q3. What is the interest rate and how do I calculate the interest charge?

Unless otherwise specified in an agreed contract, the penalty interest rate is the European Central Bank main refinancing rate plus 7 percentage points. The ECB rates in force on 1 January and 1 July apply for the following six months in each year. Only one rate will apply to a late payment - that is the rate in force on the payment date.
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So it looks as if the contract could specify a higher interest rate. Check the contract. If there is no contract, the rate should be between 8% and 10% over the past few years

It is your legal right to challenge terms in a contract that you consider grossly unfair. Criteria for testing whether terms are grossly unfair are specified in the Regulations and include the following:
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If the contract allows for 100% interest per annum, it would likely be deemed grossly unfair.

There is something odd though about this story. Why did he buy goods in 2010 and has still not paid for them? Why did the supplier pay them again?

It looks like a systems error to me.
 
If I put the whole 1500 as owing from Jan 2010 I get the following:

Late Payment Penalty Interest Calculator Notes
Invoice Amount €1,500.00
Invoice Date 01/01/2010
Invoice Due Date (30 Days) 31/01/2010 (Default from legislation is for 30 days payment terms)

Current Date 14/09/2012
Number of Days Since Due Date 957

Current Rate in Force Until 30/06/2010 (ECB Rate @ 1/01/2010 + 7%) 8% (Rate is based on ECB rate at last 6 month interval)
Daily Rate to apply 0.022%

Total Interest Due €315.81

Total Amount Due (Invoice + Penalty Interest) €1,815.81
 
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