Maximum Late Fee Laws by State - 2024 Update
Editors note: Our team has vigorously searched the available legislation (and created citations for your reference) for all the Late Fee laws across every US State. Please note that the information found in this blog serves to inform but does not constitute legal advice. For information specific to your industry or needs, contact a legal professional.
Newly updated in 2024. Last updated January 03 2024.
What are the maximum late fees by state?
Late fee laws differ from state-to-state, this guide outlines maximum late fees in all 50 US states. With all the relevant legal information into one place to offer a jumping-off point. By understanding the legal requirements and best practices in your state, you’ll be in the best position to apply legally enforceable late fees while maintaining healthy relationships with your clients.
What is a grace period?
A grace period is the amount of time immediately after a balance becomes overdue that isn’t liable for late fees. The grace period you allow your customers can vary. In some parts of the world, the expectation is that businesses give a 30-day grace period; in other areas, there is no grace period at all. However, as we have found in our research for this guide, the typical grace period is between 5 to 7 days.
Alabama
✅ No Max Late Fee
✅ No Grace Period
In Alabama, there is no maximum late fee specified by law. Businesses in Alabama are not subject to any legally mandated grace period.
However, when dealing with commercial leases, the court may refuse to enforce lease terms deemed unconscionable, offering some protection.
Source: Ala. Code § 35-9A-1e
Alaska
🔴 Maximum Late Fee: 5% above Federal Reserve discount rate or 10.5%
✅ No Grace Period
In Alaska, late fees for overdue invoices are capped at 5% points above the Federal Reserve discount rate, or if no precise rate is specified, at 10.5%. There is no specific grace period mandated by Alaska law.
Source: Alaska Stat. § 45.45.01
Arizona
✅ No Max Late Fee
✅ No Grace Period
In Arizona, there is no maximum late fee for overdue invoices, and no minimum grace period on all business transactions.
However, for mobile home lot tenancies, late fees cannot exceed $5 per day. Additionally, for these tenancies, a grace period of at least 5 days is required before late fees can be charged.
Source: Ariz. Rev. Stat. §§ 33-1414(C), 33-1368, 33-1414(A)ce
Arkansas
✅ No Max Late Fee
✅ No Grace Period
In Arkansas, there is no maximum late fee specified by law. Businesses in Arkansas are also not obliged to provide a grace period before applying a late fee; however, we recommend allowing seven days as best practice.
The absence of legal limits means that business owners in Arkansas are not bound by statutory restrictions regarding late fees.
Source: The State of Arkansas has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
California
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices or for businesses located in California. Californian businesses are also not required to provide their clients with a grace period before charging late fees on overdue balances.
For commercial leases in California, there is case law dictates that any late fee must be reasonably related to the costs the landlord faces as a result of rent being late.
Source: Orozco v. Casimiro121 Cal.App.4th Supp. 7 (2004), Harbor Island Holdings LLC v. Kim 107 Cal.App.4th 790 (2003), Cal. Civ. Code § 1942.9.
Colorado
🔴 Max Late Fee: Greater of $50 or 5%
🔴 7 Day Grace Period
In Colorado, the law specifies that late fees for overdue invoices, including rent on leases in businesses cannot exceed the greater of $50 or 5% of the amount of rent past due. Colorado law mandates a 7-day grace period before a late fee can be charged.
Source: Colo. Rev. Stat. § 38-12-105(1)(a), § 38-12-105(b), § 38-12-105(1)(c), § 38-12-213.
Connecticut
✅ No Max Late Fee (Must be reasonable)
🔴 9 Day Grace Period (monthly) / 4 Day (weekly)
In Connecticut, while there is no statutory maximum late fee for businesses, case law requires that any late fee must bear a reasonable relationship to the actual damages the business sustains (such as interest or use of money charges).
Connecticut businesses must allow a grace period of 9 days for overdue invoices for businesses, and monthly leases. For weekly leases, a 4 day grace period on invoices for weekly leases before late fees can be applied.
Source: Food Studio v. Fabiola’s 1998 WL 32193, Begin v. Reissman 1995 WL 348043, Conn. Gen. Stat. § 47a-15a.
Delaware
🔴 5% per month
🔴 5 Day Grace Period (8 days if no office in county)
The maximum late fee applicable to overdue invoices, and business lease obligations in Delaware is 5% of the overdue balance per month.
Delaware businesses must also provide their clients with a five-day grace period (extending to 8 days if the business is not located in the county) before charging late fees on overdue balances.
Source: Del. Code tit. 25 § 5501.
D.C. (District of Columbia)
✅ No Max Late Fee
✅ No Grace Period
In the District of Columbia, there is no statute specifying a maximum late fee or a grace period for overdue invoices in businesses, or for commercial real estate.
The absence of legal limits means that business owners in D.C (District of Colombia) are not bound by statutory restrictions regarding late fees.
However, for residential housing, which is a maximum late fee of 5% of the total owing, and a minimum 5 days as a grace period before adding a late fee (Source: D.C. Law 21-172).
Source: D.C or District of Columbia has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Florida
✅ No Max Late Fee
✅ No Grace Period
Businesses in Florida, the law states that there is no maximum late fee for business activities, or in commercial leases. Additionally, it there is no legally mandated grace period for late payments. It is good practice in Florida to allow five to seven days of grace as a goodwill gesture.
However, there is for residential housing, which is a maximum late fee of 5% of the total overdue, and a minimum grace period of 15 days before adding a late fee.
Source: Fla. Stat. § 83.45. , Fla. Stat. 494.00791
Georgia
✅ No Max Late Fee
✅ No Grace Period
In Georgia, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Georgia businesses may immediately apply late fees without the need for a grace period. However, many businesses allow five to seven days of grace as a goodwill gesture.
The absence of legal limits means that business owners in Georgia are not bound by statutory restrictions regarding late fees.
Source: The State of Georgia has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Hawaii
🔴 Max Late Fee: 8% of the overdue amount
✅ No Grace Period
In Hawaii, late fees for overdue invoices are capped at 8% of the amount of rent due. There is no specific grace period mandated by law.
Hawaiian businesses do not, however, need to provide their clients with a grace period before charging late fees on overdue balances. Still, many businesses offer five to seven days of grace as a gesture of goodwill.
Source: Haw. Rev. Stat. § 521-21
Idaho
🔴 5% of the amount of the payment past due
🔴 10 Day Grace Period
In Idaho, 5% late fee is the maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Idaho must allow a grace period of 10 days before applying late fees.
Source: Idaho Stat. § 28-42-301
Illinois
✅ No Max Late Fee (Must be reasonable)
✅ No Grace Period
In Illinois, there is no stated maximum late fee a business can charge, but case law indicates that any late fee must be reasonable. This is based on precedents where courts enforced unreasonable late charges in contracts.
Source: Collins v. Hurst 736 N.E.2d 600 604 (2000), Hidden Grove Condo. Ass’n v. Crooks 744 N.E.2d 305 307 (2001).
Indiana
✅ No Max Late Fee
✅ No Grace Period
In Indiana, there is no maximum late fee for overdue invoices. Businesses in Indiana do not need to provide a grace period before applying late fees. However, many businesses allow five to seven days of grace as a gesture of goodwill.
The absence of legal limits means that business owners in Indiana are not bound by statutory restrictions regarding late fees.
However, for residential housing, which is a maximum late fee of $8 (monthly) or $3 (weekly, or $5 (bi-weekly) (Source: IN Code § 24-7-5-5 (2022).).
Source: The State of Indiana has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Iowa
✅ No Max Late Fee
✅ No Grace Period
In Iowa, there is no maximum late fee for overdue invoices. Businesses in Iowa do not need to provide a grace period before applying late fees. However, many businesses allow five to seven days of grace as a gesture of goodwill.
The absence of legal limits means that business owners in Iowa are not bound by statutory restrictions regarding late fees.
However, for residential housing, there is a maximum late fee of $12/day, or $60/month for rent. All late fees must be in the rental agreement. (Source: Iowa Code § 562A.)
Source: The State of Iowa has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Kansas
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in Kansas. Businesses also do not have to provide their clients with a grace period before charging late fees on overdue balances, however, we recommend allowing five to seven days as best practice.
Important note: A court can refuse to enforce contract terms deemed unconscionable.
Source: Kan. Stat. § 58-254.
Kentucky
✅ No Max Late Fee
✅ No Grace Period
In Kentucky, there is no maximum late fee specified by law. Businesses in Kentucky do not need to offer a grace period before applying late fees. However, as best practice, we would advise offering five to seven days as a goodwill gesture.
The absence of legal limits means that business owners in Kentucky are not bound by statutory restrictions regarding late fees.
Important note: If supplying the state of Kentucky or its affiliated agencies with products or services, a maximum 1% late fee can be applied to approved invoices, but must not be added more than 30 days after the services were provided, and invoiced.
However, for residential housing, late fees must be reasonable and are generally deemed to be $20 or 20% of the rental fee for each month. A landlord cannot charge a late fee until 5 days after the rent is due. (Source: Ky. Rev. Stat. § 359)
Source: Ky. Rev. Stat. § 45.454
Louisiana
✅ No Max Late Fee
✅ No Grace Period
In Louisiana, there is no statute specifying a maximum late fee or a grace period for overdue invoices in businesses. However, it is opined that a late fee cannot be charged if it is not included in the written rental agreement.
The absence of legal limits means that business owners in Louisiana are not bound by statutory restrictions regarding late fees.
Source: The State of Louisiana has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Maine
🔴 4% per month
🔴 15 Day Grace Period
In Maine, 4% per month is the maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Maine must allow a grace period of 15 days before applying late fees.
Source: Me. Rev. Stat. tit. 14 § 6028(1), § 6028(2), § 6028(3)
Maryland
🔴 5% per month
✅ No Grace Period
In Maryland, the maximum late fee that can be charged is 5% of the overdue balance per month. Businesses in Maryland do not need to allow a grace period before applying late fees, however, we recommend allowing five to seven days as best practice.
Source: Md. Code Real Prop. § 8-208.
Massachusetts
✅ No Max Late Fee
🔴 30 Day Grace Period
There is no maximum late fee applicable to overdue invoices in Massachusetts. Businesses do, however, need to provide their clients with a 30-day grace period before charging late fees on overdue balances.
Source: Mass. Gen. Laws ch. 186 § 15B.
Michigan
✅ No Max Late Fee
✅ No Grace Period
In Michigan, the law does not specify a maximum late fee you can charge for almost all businesses. Businesses in Michigan do not need to offer a grace period following the due date before applying late fees.
Source: The State of Michigan has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Minnesota
🔴 8% per month
✅ No Grace Period
In Minnesota, there is an 8% per month cap on late fees for overdue invoices and commercial lease payments. The late fee policy must be agreed upon in writing. After a balance becomes overdue, businesses in Minnesota are not required to allow a grace period, however, we recommend allowing five to seven days as best practice.
Source: Minn. Stat. § 504B.177(a)
Mississippi
✅ No Max Late Fee
✅ No Grace Period
In Mississippi, there is no state legislation specifying maximum late fees or grace periods for overdue invoices in business activities or leases. This absence of legal limits means that business owners in Mississippi are not bound by statutory restrictions regarding late fees.
Source: The State of Mississippi has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Missouri
✅ No Max Late Fee
✅ No Grace Period
Missouri does not have state legislation specifying maximum late fees or grace periods for business transactions. Business owners in Missouri operate without statutory late fee constraints.
Source: The State of Missouri has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Montana
✅ No Max Late Fee
✅ No Grace Period
Montana's legislation does not specify maximum late fees or grace periods for business-related overdue invoices. Consequently, business owners in Montana are not subject to state-imposed late fee limitations.
Source: The State of Montana has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Nebraska
✅ No Max Late Fee
✅ No Grace Period
Nebraska does not have specific statutes regarding maximum late fees or grace periods for business leases. However, courts may refuse to enforce unconscionable lease terms.
Source: Neb. Rev. Stat. § 76-1412. Additionally, the State of Nebraska does not have specific late fee legislation for business activities, allowing courts to exercise discretion in enforcing lease terms.
Nevada
🔴 5% per month
🔴 3 Day Grace Period
In Nevada, legislation caps late fees at 5% for overdue invoices and in business leases. Businesses in Nevada must use a minimum of a 3-day grace period before late fees can be charged.
Source: Nev. Rev. Stat. § 118A.210 outlines the legal limits for late fees in business leases in Nevada, ensuring fairness and predictability in commercial tenancies.
New Hampshire
✅ No Max Late Fee
✅ No Grace Period
In New Hampshire, there is no state legislation specifying maximum late fees or grace periods for overdue invoices in commercial leases. The absence of legal limits means that business owners in New Hampshire are not bound by statutory restrictions regarding late fees.
Source: The State of New Hampshire has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
New Jersey
✅ No Max Late Fee
✅ No Grace Period
In New Jersey, while there is no statutory maximum late fee for businesses, along with no minimum grace period. However, case law stipulates that landlords cannot evict based on nonpayment of late fees unless the agreement states that late charges are to be considered part of the rent.
Source: Associates v. Miranda 115 N.J. 522 (1989).
New Mexico
🔴 Max Late Fee: 10% of the amount of the payment past due
✅ No Grace Period
In New Mexico, late fees for overdue invoices in businesses are capped at 10% of the total that is past due. The late fee policy must be included in writing in the rental agreement. There is no statutory minimum grace period required before applying late fees in New Mexico.
Source: N.M. Stat. § 47-8-15.
New York
🔴 $50 or 5% per month
🔴 5 Day Grace Period
In New York, the maximum late fee is $50 or 5% of the outstanding balance per month, whichever is lower. After a balance becomes overdue, New York businesses must allow a grace period of five days before applying late fees.
Source: N.Y. Real Prop. Law § 238-a.
North Carolina
🔴 $15 or 15% per month
🔴 5 Day Grace Period
In North Carolina, the maximum late fee is $15 or 5%, whichever is greater. Businesses may provide a grace period before applying late fees if they so choose. We recommend offering five to seven days as best practice.
Source: N.C. Gen. Stat. § 42-46.
North Dakota
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in North Dakota. Businesses are also not obligated to provide their clients with a grace period before charging late fees, although many offer five to seven days as a goodwill gesture.
However, business and rental agreements must clearly state if a late fee is applicable, its amount, and when it is charged. Courts can refuse to enforce contract terms deemed unconscionable.
Source: N.D. Cent. Code § 47-16-13.3 and Tenant Rights, North Dakota Attorney General's Office.
Ohio
✅ No Max Late Fee
✅ No Grace Period
Ohio does not have state legislation specifying maximum late fees for business activities. Case law in Ohio indicates that any late fee must be reasonable and proportionate to the damages incurred due to late payment.
Source: The State of Ohio has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Oklahoma
✅ No Max Late Fee
✅ No Grace Period
In Oklahoma, there is no state legislation specifying a maximum late fee or minimum grace period for overdue invoices or commercial leases. Business owners in Oklahoma are not bound by statutory restrictions regarding late fees.
The absence of legal limits means that business owners in Oklahoma are not bound by any restrictions regarding late fees.
Source: The State of Oklahoma has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Oregon
✅ No Max Late Fee
✅ No Grace Period
Oregon does not have any statutes regarding maximum late fees or minimum grace periods for business invoices or leases. Businesses in Oregon, don't need need to offer any mandatory grace period before issuing late fees on overdue balances.
The absence of legal limits means that business owners in Oregon are not bound by any restrictions regarding late fees.
Source: The State of Oregon has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Pennsylvania
✅ No Max Late Fee
✅ No Grace Period
In Pennsylvania, there is no maximum late fee specified by law. Businesses in Pennsylvania may charge late fees without offering a grace period, however, many choose to provide a seven-day window.
The absence of legal limits means that business owners in Pennsylvania are not bound by any restrictions regarding late fees.
Source: The State of Pennsylvania has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Rhode Island
✅ No Max Late Fee
✅ No Grace Period
In Rhode Island, the law does not specify a maximum late fee you can charge. Businesses in Rhode Island may apply fees without offering a late payment window. However, as best practice, we would advise offering a five to seven-day grace period as a goodwill gesture.
The absence of legal limits means that business owners in Rhode Island are not bound by any restrictions regarding late fees.
Source: The State of Rhode Island has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
South Carolina
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in South Carolina. Businesses are not required to provide their clients with a grace period before charging late fees on overdue balances, although many allow seven days.
Courts can refuse to enforce lease terms deemed unconscionable, which provides a level of protection against unreasonable fees.
The absence of legal limits means that business owners in Rhode Island are not bound by any restrictions regarding late fees.
Source: S.C. Code § 27-40-230.
South Dakota
✅ No Max Late Fee
✅ No Grace Period
In South Dakota, there is no maximum late fee for overdue invoices. After a balance becomes overdue, businesses may apply late fees without the need for a grace period. Business owners in South Dakota operate without statutory late fee constraints.
The absence of legal limits means that business owners in South Dakota are not bound by any restrictions regarding late fees.
Source: The State of South Dakota has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Tennessee
🔴 10% per month
🔴 5 Day Grace Period
In Tennessee, the maximum late fee specified by law is 10% of the monthly balance, whichever is greater. Businesses in Tennessee must allow a grace period of five days following the due date before applying late fees.
Source: Tenn. Code § 66-28-201(d).
Texas
✅ No Max Late Fee
🔴 2 Day Grace Period
In Texas, while there is no stated maximum late fee for businesses, the fee must be reasonable. Late fees are presumed reasonable if they are not more than 10-12% of the total owing. Businesses in Texas must allow a grace period of two days following the due date before applying late fees.
Source: Tex. Prop. Code § 92.019.
Utah
🔴 10% or $75, which ever is greater
✅ No Grace Period
In Utah, a late fee cannot exceed the greater of 10% of the amount owning, or $75. Which ever is greater. However, after a balance becomes overdue, Utah businesses are not bound by a minimum grace period. We recommend offering a five to seven-day grace period as a goodwill gesture.
Source: Utah Code § 57-22-4.
Vermont
✅ No Max Late Fee
✅ No Grace Period
In Vermont, there is no maximum late fee for overdue invoices. Vermont has no specific statute for maximum late fees in business transactions or leases. However, case law indicates that any late fee must be reasonably related to the damages incurred due to late payment.
Source: The State of Vermont has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Virginia
✅ No Max Late Fee
🔴 5 Day Grace Period
There is no laws restricting a maximum late fee to overdue invoices or minimum grace periods in Virginia. Business owners in Virginia operate without statutory late fee constraints.
Source: The State of Virginia has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Washington
✅ No Max Late Fee
✅ No Grace Period
In Washington, there is no state legislation specifying maximum late fees or grace periods for overdue invoices or in commercial leases. This absence of legal limits means that business owners in Washington are not bound by any restrictions regarding late fees.
Source: The State of Washington has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
West Virginia
✅ No Max Late Fee
✅ No Grace Period
In West Virginia, the law does not specify a maximum late fee you can charge. Businesses in Virginia are also not required to allow a grace period before charging late fees. As a best practice, many Virginia businesses offer seven-day grace periods by choice.
This absence of legal limits means that business owners in West Virginia are not bound by any restrictions regarding late fees.
Source: The State of West Virginia has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Wisconsin
✅ No Max Late Fee
✅ No Grace Period
In Wisconsin, there is no statute specifying a maximum late fee or a minimum grace period for overdue invoices in businesses. This absence of legal limits means that business owners in Wisconsin are not bound by any restrictions regarding late fees.
Source: The State of Wisconsin has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
Wyoming
✅ No Max Late Fee
✅ No Grace Period
In Wyoming, there is no state legislation specifying maximum late fees or grace periods for overdue invoices in commercial leases. This absence of legal limits means that business owners in Wyoming are not bound by any restrictions regarding late fees.
Source: The State of Wyoming has no late fee legislation for business activities or leases in force, so there are no legal limits business owners need to abide by.
What if my state does not have a maximum late fee?
In states where there is no regulation governing maximum late fees (and there are many), the expectation is that you will keep your fee reasonable. Case law across multiple states shows that what is reasonable is approximately 5-12% of the total amount.
As a business, this means not charging exploitative late fees and only charging what is necessary to offset the negative consequences of late payment (such as use of money interest, or other finance charges you may incur from late payment)
As a general guideline, the majority of US businesses who use Paidnice charge annualised interest of 7-8% + the Federal Reserve rate + an admin charge of $50-$75.
Automatically issue late fees with Paidnice
Late fees are a proven and very effective way to encourage your clients to pay on time. But it has traditionally been a manual process. Even with popular accounting tools, such as QuickBooks or Xero, requires a human to manually input the late fee into each invoice, or to issue a new one. That is until Paidnice was created.
Paidnice will automatically issue late fees when your invoices go overdue. Paidnice helps you paid on time, every time. Our easy to use late fee software connects to QuickBooks and Xero and gives you complete control of how your create, and issue late fees across the US and the world.
Customize the late fee settings of Paidnice to suit your business, including state by state restrictions on late fees. Businesses using Paidnice are getting paid 40% faster than before using any late fee automation. Making Paidnice an essential addition to your accounts receivable setup as a small, medium or big business. This is how it works:
Step 1. Work out your late fee (or payment charge)
Work out what late payments would cost your business in financing costs, or work out a fair penalty for late payments for your business. Use this guide to help guide you to ensure you are creating a late fee, and grace period that meet the statutory maximum late fees (and minimum grace period) obligations in your state.
Step 2. Setup a free account, and automate your late fee
Create an account with Paidnice for free. Connect your accounting system, and create a late payment policy (with the fee amount, and grace period). You can back date this to existing overdue invoices, or leave this to activate for future ones. It's important to remember that in most states, you need to include late fee penalties in your terms & conditions. For help with writing your policy, see examples of late fee policy, with free templates you can use.
Step 3. Enjoy getting paid on time, every time!
Sit back and relax, let Paidnice's powerful late fee automation do its thing, implementing your late fees based on your exact preferences and client groupings.
Want to see Paidnice in action? Watch our tutorial video and learn more about getting started with Paidnice today.
Please note that the information found in this blog serves to inform but does not constitute legal advice. For information specific to your industry, contact a legal professional.
