BadCop › Late fees by jurisdiction › Canada

Charging interest on overdue invoices in Canada

Canada's federal Interest Act has a trap for small businesses: if your terms state interest for a period shorter than a year ("2% per month") without also stating the equivalent annual rate, the recoverable interest is capped at 5% a year. State both rates and you can charge what was agreed.

The rules

• Section 4 of the Interest Act: interest expressed per day, week or month is limited to 5% per annum unless the contract also states the equivalent yearly rate. "1.5% per month (18% per annum)" is enforceable; "1.5% per month" alone may be cut to 5%.
• The clause must be agreed before the debt arises, in the contract or accepted terms, not added on the invoice afterwards.
• The Criminal Code caps the effective annual rate on any agreement; commercial rates in the 12% to 24% range are far below it, but a fee structure that compounds or stacks flat penalties can push the effective rate up.
• Provincial court-ordered interest rules apply if you sue; they differ from what you can charge contractually.

Configuring it in BadCop

Use a monthly late_fee_pct and make sure the templates and your terms state both figures, for example "1.5% per month (18% per annum)". BadCop computes simple interest by month, which matches that wording.

Work the numbers with the late-fee calculator, and see the final-notice template that applies the fee.

Sources

• Charging interest and late fees on overdue invoices in Canada (Vanguard Collection)
• Is your interest rate enforceable? (Andriessen & Associates)
• How much can I charge for late fees in Canada? (Paidnice)

General information, not legal advice. Verified against the sources above in September 2026; rates and rules change. If money is at stake, ask a lawyer or accountant in your jurisdiction.