INTEREST ON DELINQUENT ACCOUNTS: Proper Disclosure on Legal Documents
In a November 10, 2017 Alberta Court of Queen’s Bench case, the amount of a creditor’s claim was challenged after an uncontested default judgment. The claim included interest calculated at 1% per month as stated in the contract. However, where a rate is not stated in per annum terms, the legal maximum is capped at 5% annually under the Canada Interest Act. Therefore, the interest payable was legally capped at 5% per year, rather than the 1% per month specified by the contract.
Action Item: If stating interest rates in legal contracts, ensure to also state them in per annum terms.
The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.
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