Late-fee rules by state: the maximum an agency can actually charge

A late fee does two useful things: it nudges a slow payer to move you up the queue, and it compensates you for the time your money spent in someone else's account. But "add a late fee" is not as simple as picking a scary number. How much you can actually charge — and make stick — depends on your contract and on where your client is.

This is a plain-English overview, not legal advice. When real money is on the line, check your state's rules or ask a lawyer.

The fee has to be in the contract first

The most common mistake is inventing a late fee on the invoice after the work is done. If your agreement never mentioned it, it's hard to enforce and easy for a client to wave away. Put it in the master services agreement or the statement of work, in one clear sentence: the rate, when it starts, and how it's calculated.

A typical, defensible clause is a 1–1.5% monthly finance charge on past-due balances — see what makes a late fee actually hold up for how to word and apply one — often written as "1.5% per month" or an annualized rate. That range is common in professional services and reads as reasonable rather than punitive. It is also, as the Michigan, Minnesota and Ohio rows below show, above the written ceiling in at least three states, so "common" is not the same as "safe everywhere".

What is the maximum late fee an agency can charge?

There is no single national maximum, and no federal statute sets one. The ceiling is set state by state, and two different numbers get confused with each other constantly:

• The rate you agreed to in writing. In a business-to-business contract this is usually the number that governs, and many states give commercial parties wide latitude to agree on it — but not all of them. Michigan caps a written rate at 7% a year, Ohio and Minnesota at 8%, and New York at 16%. At the other end of the same question, Arizona sets no ceiling on a written rate at all and Massachusetts sets none civilly — so one clause runs into a wall in one state and into nothing in another.
• The rate that applies when your contract is silent. This one is fixed by statute. It is the number you fall back to when the late-fee clause is missing, vague, or struck down — which is exactly when you need it.

Both numbers are worth knowing: the first tells you what you may write into the agreement, the second is what a court reaches for when your clause fails. Twelve states are quoted directly from their own statutes below, and two of them — Arizona and Massachusetts — answer "what is the maximum?" with there isn't one, provided it is in writing.

Each row is quoted in full underneath, in the same order.

Arizona: ten percent by default, and no ceiling at all on a rate you put in writing

Arizona is the cleanest "no cap" state on this page, and it settles the question in a single sentence. A.R.S. § 44-1201(A)(2) provides:

For any loan, indebtedness or obligation other than medical debt, interest shall be at the rate of ten percent a year, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to.

There are two numbers in that sentence and only one of them is a limit. The fallback is ten percent a year — what applies when the agreement says nothing. The clause that follows it is what separates Arizona from Michigan, Minnesota, Ohio and New York: any rate of interest may be agreed to. A 1.5%-per-month clause, 18 percent a year, is nowhere near a limit in Arizona, because § 44-1201 imposes none on an ordinary commercial obligation.

What the section does require is the writing. "Contracted for in writing" is the only thing that moves an agency off the ten percent — the same condition Washington and Wisconsin spell out in their own statutes, and the same one Massachusetts makes a rule of evidence. The single rate ceiling anywhere in § 44-1201 is the one subsection (A)(1) puts on medical debt, under a lesser-of test whose second limb is three percent a year. An agency invoice is not medical debt, and no other cap in the section reaches it.

California: 10 percent a year when the contract is silent

California sets a default of 10 percent per year. California Civil Code § 3289(b) reads:

If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach.

That rate applies after a breach — so for an agency, it starts running when the invoice goes unpaid past the agreed date, not from the day you issued it. A written 1.5%-per-month clause (18% a year) is higher than California's silent-contract default, which is the practical argument for having the clause at all rather than relying on the statute. Section 3289(b) sets the fallback and does not itself cap what you may agree to.

Florida: a number that changes every quarter

Florida is the one state on this page where "what's the maximum?" has no permanent answer. Florida Statutes § 687.01 declines to name a rate at all:

In all cases where interest shall accrue without a special contract for the rate thereof, the rate is the rate provided for in s. 55.03.

Section 55.03(1) then hands the number to Florida's Chief Financial Officer and specifies how to compute it: by averaging "the discount rate of the Federal Reserve Bank of New York for the preceding 12 months, then adding 400 basis points to the averaged federal discount rate." The CFO resets it on the first day of every calendar quarter.

For the quarter beginning 1 July 2026 that rate is 8.06 percent a year — a daily rate of 0.0220822% — as published in the Chief Financial Officer's own table of judgment interest rates. It was 8.25% for the quarter before it and 8.44% for the one before that. The trend matters more than the snapshot: whichever quarter your Florida invoice sits unpaid in is the quarter whose number applies, and a figure copied off a blog post written a year ago will be wrong by roughly a full percentage point.

Two practical consequences. A written 1.5%-per-month clause (18% a year) sits far above Florida's statutory fallback, which is the argument for having the clause rather than leaning on the statute. And § 55.03(1) ends by saying that "nothing contained herein shall affect a rate of interest established by written contract or obligation" — the quarterly rate is the fallback when you agreed nothing, not a ceiling on what you did agree.

Illinois: five percent a year on a settled account

Illinois sets its silent-contract default at 5 percent a year, and one clause of it is written for something very close to an unpaid invoice. 815 ILCS 205/2 provides:

Creditors shall be allowed to receive at the rate of five (5) per centum per annum for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing; on money lent or advanced for the use of another; on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance...

The phrase to notice is "money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance" — the clock starts once the parties have settled what is owed, not on the day the work was delivered. The older general rate in 815 ILCS 205/1 is the same five percent, written in nineteenth-century form: "five dollars ($5) upon one hundred dollars ($100) for one year."

Illinois also adds a procedural step none of the other states here impose. The same section lets a creditor's agent or assignee collect that interest on the creditor's behalf where no rate was agreed, but only "upon 30 days' written notice to the debtor." An agency that hands an Illinois file to a collections agent should treat that notice as a precondition, not a courtesy.

Massachusetts: six percent by default, twenty percent as a criminal line, and a notice that moves even that

Massachusetts splits the question across two chapters and gives a different answer in each. The civil rate is in M.G.L. c. 107 § 3:

If there is no agreement or provision of law for a different rate, the interest of money shall be at the rate of six dollars on each hundred for a year, but, except as provided in sections seventy-eight, ninety, ninety-two, ninety-six and one hundred of chapter one hundred and forty, it shall be lawful to pay, reserve or contract for any rate of interest or discount. No greater rate than that before mentioned shall be recovered in a suit unless the agreement to pay it is in writing.

That last sentence is the sharpest statement on this page of what a contract has to say for a fee to hold, and it is worth reading twice. Six percent is the default. Anything above six percent is not recoverable in a Massachusetts suit unless the agreement to pay it is in writing — not implied by a course of dealing, not announced on the invoice, in writing. Above that line the chapter sets no civil ceiling whatsoever: it is "lawful to pay, reserve or contract for any rate of interest or discount."

The outer bound lives in the criminal code instead. M.G.L. c. 271 § 49(a) makes it criminal usury to knowingly contract for, charge, take or receive "interest and expenses the aggregate of which exceeds an amount greater than twenty per centum per annum upon the sum loaned." The word doing the work there is aggregate: the section counts "brokerage, recording fees, commissions, services, extension of loan, forbearance to enforce payment, and all other sums charged against or paid or to be paid by the borrower," so a charge relabelled as an administrative or rebilling fee still counts toward the twenty.

Two limits stop this from being a plain 20 percent cap on an agency invoice. The first is scope: § 49 is written about "a loan of money or other property," and an overdue invoice for work already delivered is not plainly either — the same question Washington's statute raises, taken up in the section below. The second is that the line moves. Section 49(d) exempts a person who notifies the Attorney General of an intent to engage in such transactions, valid for two years and conditional on keeping records of each one, and § 49(e) removes the section altogether where the rate is regulated under other law. A twenty percent ceiling with a filing requirement attached is a different kind of number from Michigan's flat seven.

Michigan: seven percent is the ceiling, even in writing

Michigan carries the tightest written ceiling on this page, and it is the one most likely to catch a standard agency clause. MCL 438.31 provides:

The interest of money shall be at the rate of $5.00 upon $100.00 for a year, and at the same rate for a greater or less sum, and for a longer or shorter time, except that in all cases it shall be lawful for the parties to stipulate in writing for the payment of any rate of interest, not exceeding 7% per annum.

Two numbers in one sentence: 5 percent a year when nothing is agreed, and 7 percent a year as the most the parties may stipulate in writing. A 1.5%-per-month clause annualises to 18 percent, which is two and a half times Michigan's written ceiling. The section carries the popular name "Usury Act", and it is the general rule rather than a niche provision.

There is a carve-out in the same section that an agency should read closely, because it may take a service invoice outside the cap entirely. MCL 438.31 says the act "shall not apply ... to any time price differential which may be charged upon sales of goods or services on credit." A charge for the privilege of paying later on services already sold on credit is at least arguably a time price differential rather than interest on a loan. That is an argument, not a guarantee, and it is a poor substitute for a savings clause capping the charge at the maximum rate permitted by applicable law.

Minnesota: six percent silent, eight percent in writing — and a forfeiture trap

Minnesota sets 6 percent when nothing is agreed and 8 percent as the written maximum, but the provision that matters most to a late-fee clause is neither of those. Minnesota Statutes § 334.01, subdivision 1 provides:

The interest for any legal indebtedness shall be at the rate of $6 upon $100 for a year, unless a different rate is contracted for in writing. No person shall directly or indirectly take or receive in money, goods, or things in action, or in any other way, any greater sum, or any greater value, for the loan or forbearance of money, goods, or things in action, than $8 on $100 for one year.

The trap is in the next sentence of the same subdivision:

Contracts shall bear the same rate of interest after they become due as before, and any provision in any contract, note, or instrument providing for an increase of the rate of interest after maturity, or any increase therein after making and delivery, shall work a forfeiture of the entire interest.

Read that against how most late-fee clauses are written. A clause that says nothing accrues until the due date and then 1.5% a month starts is, on its face, a provision for an increase in the rate of interest after maturity — and the penalty is not that the increase is read down to the legal rate, it is forfeiture of the entire interest. Subdivision 1 does exempt "notes or contracts which bear no interest before maturity", which is the exemption most agency invoices would need to rely on. Subdivision 2 removes the rate limit altogether for contracts of $100,000 or more.

New York: sixteen percent a year, once you follow the cross-reference

New York's operative ceiling is 16 percent a year, and getting to it takes two statutes rather than one. General Obligations Law § 5-501 states that the rate of interest "shall be six per centum per annum unless a different rate is prescribed in section fourteen-a of the banking law" — so the six percent on the face of § 5-501 is not the answer. Banking Law § 14-a(1) supplies the number that cross-reference points at:

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

Sixteen percent a year is the figure to work from in New York, not six. A 1.5%-per-month clause annualises to 18%, which sits above that ceiling — and while the section below on loans explains why an overdue service invoice is analysed differently from lending, 18% in New York is precisely the number a client's lawyer will point at. A savings provision capping the charge at the maximum rate permitted by applicable law is the cheap protection against having the clause read down.

General Obligations Law § 5-501 also carves out large transactions by size: it exempts loans of $250,000 or more (excluding loans secured by residential property under that amount), and imposes no interest rate cap at all on loans of $2.5 million or more.

Ohio: eight percent in writing, and a silent rate that is recertified every year

Ohio splits the answer across two sections, and the silent-contract number changes annually. Ohio Revised Code § 1343.03(A) covers an unpaid invoice explicitly — note the phrase "upon any book account":

...when money becomes due and payable upon any bond, bill, note, or other instrument of writing, upon any book account, upon any settlement between parties, upon all verbal contracts entered into, and upon all judgments... the creditor is entitled to interest at the rate per annum determined pursuant to section 5703.47 of the Revised Code, unless a written contract provides a different rate of interest.

Section 5703.47 hands the number to the Tax Commissioner, who certifies it each October for the following calendar year. For calendar year 2026 that certified rate is 7.0 percent a year, accruing at 0.58% a month. It was 8.0% in both 2025 and 2024, and 5.0% in 2023 — so like Florida's, this is a number to re-read rather than remember.

The written ceiling is in the neighbouring section. ORC 1343.01(A) permits the parties to stipulate "for the payment of interest upon the amount thereof at any rate not exceeding eight per cent per annum payable annually", and division (B)(1) lifts that cap only where "the original amount of the principal indebtedness ... exceeds one hundred thousand dollars". For an agency, that threshold does real work: a $250,000 retainer balance is outside the 8 percent cap, and a $12,000 invoice is not.

Texas: six percent — and the clock does not start for thirty days

Texas is the most permissive state on this page on what you may agree to, and the slowest on when a silent-contract rate begins. Texas Finance Code § 302.002 provides:

If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due.

Six percent a year is unremarkable — it is the same figure as Minnesota's. The clause that matters is the last one. Every other state on this page runs its silent-contract rate from the breach, or from the day the account is settled; Texas alone gives the client a thirty-day head start after the due date before any interest accrues at all. On a net-30 invoice that is effectively net-60 before the statute does anything for you, which is the strongest argument on this page for writing the rate into the contract rather than leaning on the fallback.

What you may write in is set two sections earlier. § 302.001(b) states the general rule:

The maximum rate or amount of interest is 10 percent a year except as otherwise provided by law. A greater rate of interest than 10 percent a year is usurious unless otherwise provided by law.

"Except as otherwise provided by law" is doing the work there, and Chapter 303 is the law it points at. § 303.009(a) puts a floor of 18 percent a year under the computed ceiling, and § 303.009(c) raises it for exactly the kind of contract an agency signs:

For a contract made, extended, or renewed under which credit is extended for a business, commercial, investment, or similar purpose, the limitation on the ceilings determined by those computations is 28 percent a year.

So a standard 1.5%-per-month clause — 18 percent a year — sits comfortably inside the Texas commercial ceiling, while the same clause is two and a half times Michigan's. Texas and Michigan are the two ends of this table, and one agency agreement used in both states cannot be right in both unless it carries a savings clause.

Washington: twelve percent, if the invoice counts as a forbearance

Washington carries the highest silent-contract default on this page. RCW 19.52.010(1) provides:

...every loan or forbearance of money, goods, or thing in action shall bear interest at the rate of twelve percent per annum where no different rate is agreed to in writing between the parties.

Two limits are built into that sentence, and both matter to an agency. The first is scope: it governs a loan or forbearance, not every unpaid balance, and an overdue invoice for work already delivered is not obviously either — the same distinction the section below on loans takes up. The second is form: the different rate has to be agreed to in writing. An oral understanding does not displace the twelve percent, and neither does a rate that appears for the first time on the invoice itself.

Wisconsin: five percent, and a case about announcing the fee too late

Wisconsin's legal rate is 5 percent, and its statute makes the writing requirement unusually explicit. Wisconsin Statutes § 138.04 provides:

The rate of interest upon the loan or forbearance of any money, goods or things in action shall be $5 upon the $100 for one year ... but parties may contract for the payment and receipt of a rate of interest not exceeding the rate allowed in ss. 138.041 to 138.056, 138.09 to 138.14, 218.0101 to 218.0163, or 422.201, in which case such rate shall be clearly expressed in writing.

The reason this state is worth reading is the annotation the Legislature publishes underneath it, which is the first section of this page turned into a decided case. In Severson Agri-Service, Inc. v. Lander, 172 Wis. 2d 269, 493 N.W.2d 230 (Ct. App. 1992), summarised on the statute's own page: "A merchant who first informed the customer of the 24 percent interest to be charged on an open account in statements of the account provided after the account was opened violated s. 422.302(2). The merchant was only entitled to interest under this section."

A merchant announced 24 percent on the statements it sent after the account was open, and a Wisconsin appellate court cut it to the section's own 5 percent. That is roughly a fifth of what was charged, and the reason was timing, not the size of the number. If you take one thing from this page, take that one.

A service invoice is not a loan, and the distinction matters

Usury statutes govern loans and forbearances of money. An overdue invoice for work already delivered is not a loan, which is why a finance charge on a late invoice is often analysed differently from lending interest — and why the caps above are a guide to what a court considers reasonable rather than a hard ceiling stamped on your invoice. Michigan's time-price-differential carve-out is one statutory version of exactly this distinction. The related question of whether your charge is interest or liquidated damages changes the test entirely; late fees that hold up covers how to draft for both.

The practical takeaway is unchanged: a modest monthly percentage, agreed to in writing, is almost always safe. Aggressive numbers are where you get into trouble — both legally and with the relationship.

Which states are covered here, and why the rest are not

Twelve: Arizona, California, Florida, Illinois, Massachusetts, Michigan, Minnesota, New York, Ohio, Texas, Washington and Wisconsin, each quoted from primary statute. The other 38 are not listed, and a number invented for them would be worth less than no number at all. This page gets a state added whenever its statute has actually been read, rather than a full table assembled from summaries of summaries. Michigan, Minnesota, Ohio and Wisconsin were added on 21 August 2026, Texas on 26 August 2026, and Arizona and Massachusetts on 27 August 2026.

Texas took four attempts. The Legislature's own site serves Finance Code Chapter 302 as an Angular application: on 21 August 2026 both the Docs/FI/htm/FI.302.htm and Docs/FI/pdf/FI.302.pdf paths returned 200 with an identical 250 KB bundle and no statutory text at either one, and a plain fetch of that path still returns the same shell today. The section was finally read on 26 August 2026 by rendering the page in a headless browser and taking the text the application writes into the DOM. That is why the Texas row exists now and did not before, and the rule that kept it off this page until the statute had actually been read still governs the other 40. Florida's row carries a date because Florida's number carries one, and Ohio's carries a year for the same reason: both are re-read from the state's own published table every time this page is revised.

If your client sits outside those twelve states, the savings provision described in late fees that hold up — "not to exceed the maximum rate permitted by applicable law" — is what protects you in the meantime. On the evidence of the five states added most recently, that clause is not a formality: three of the four added on 21 August 2026 cap a written rate below the 18% a year that a standard 1.5%-per-month clause produces, while Texas permits 28% and neither Arizona nor Massachusetts sets a written ceiling at all. The spread is the point — the same clause is conservative in one state and usurious in another.

Give notice before the fee lands

Even a valid fee will cost you goodwill if it shows up as a surprise. Build in a grace step: a reminder a few days before the fee applies gives an honest-but-busy client a chance to pay and avoid it. Most will. The ones who don't have told you something useful. Where that reminder sits in the wider sequence is its own decision — see a follow-up cadence that gets agencies paid.

Make it consistent, or don't bother

A late fee you apply to some clients and forget on others isn't a policy — it's a mood. Inconsistent fees are the ones that get disputed. If you're going to charge them, charge them the same way, every time, on the same schedule.

That consistency is the hard part when you're running dozens of invoices by hand. Automating it is the pitch behind most receivables tools — Paidnice builds a business on it. FetchDue applies your late-fee policy for you — within the terms you set, with a heads-up reminder first — so the fee is fair, predictable, and always in your voice. On copilot, the mode you start in, you approve every step.