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What is the maximum finance charge for past due balances in the state of NY

Bohemia, NY |
Filed under: Credit

I would like to add to my invoice and contracts taht a finance charge will be applied to past due balances. I am hearing different things about the maximum allowable. Can you help?

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Attorney answers 2


The usual number is 1.5% per month, or 18% per year. Any more then that and you may upset and lose your clients. Commercial contracts really don't have the same protections as contracts with individuals so the numbers vary.


The maximum rate of interest provided for in section 5-501 of the general obligations law is sixteen per centum per annum.

FYI: NY CLS Penal § 190.42 (2011)
Criminal usury in the first degree is over 25%/year.

However, retail installment contracts are governed by Personal Property Law § 404.
§ 404. Credit service charge limitation
1. A seller may, in a retail installment contract or obligation, contract for and, if so contracted for, the holder thereof may charge, receive and collect a credit service charge computed on the principal balance of the contract or obligation from the date thereof to and including the date when the final installment is payable, at the rate or rates agreed to by the buyer.

That means that the parties dictate the terms of the finance charge rates. Note that it has to be in writing and signed off by the customer at the time of sale.

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