Late Fee Laws by State: Interest Limits (2026)

There's no federal cap on late fees or invoice interest — limits come from state usury and contract law, and they vary by state. This guide verifies four: Florida's 18% usury line, Texas's 10% default, California's reasonableness test, and New York's 6% default — plus how to check your own state.

This is general information, not legal advice — check your state's statute or talk to an attorney before you set a policy.

Why late fee law is messier than the roundups suggest

Most roundups of "late fee laws by state" blend three separate bodies of law into a single table: residential landlord-tenant statutes (which cap fees on rent, not invoices), consumer credit law (which governs personal loans and credit cards), and commercial usury and contract law (which governs invoices between businesses). A number that's accurate for a landlord charging a tenant is often wrong, or simply inapplicable, to a contractor invoicing a commercial client. This guide covers only the last category — B2B service invoices — and only for the states we've checked directly against the statute.

Is there a federal cap?

No — there's no federal law that caps late fees or interest on commercial invoices. Federal rules like the Truth in Lending Act govern consumer credit, not business-to-business billing, so the limits that actually apply to your invoices come entirely from state usury and contract law. That's why the number changes at the state line, and why "the legal late fee rate" isn't a single figure.

Here's what we've verified against the underlying statutes, as of July 2026:

State	Default or cap	Statute	Source
Florida	Above 18% simple annual interest is usurious	Fla. Stat. §687.02–687.03	florida.public.law
Texas	10%/year default absent a contract rate; ceilings set via Finance Code Ch. 303	Tex. Fin. Code Ch. 303	ghristlaw.com
California	No fixed cap; reasonableness test applies	Cal. Civ. Code §1671	landager.com
New York	6%/year default statutory rate	N.Y. Gen. Oblig. Law §5-501	law.justia.com

Florida: the 18% usury line

Florida draws the line at 18% simple annual interest: charge more than that on an unpaid invoice and you're past the usury threshold set by Fla. Stat. §687.02–687.03, as of July 2026. That works out to roughly 1.5% per month before you're at the edge of the cap — go higher and you're over it, regardless of what your invoice terms say. Florida's usury statute applies broadly to contracts for the payment of money, which covers invoices for services rendered, not just formal loans.

Texas: 10% default and contract ceilings

Texas defaults to 10% per year in interest on an unpaid invoice when your contract doesn't specify a rate, and a separate, higher ceiling applies when it does. If your invoice terms or service agreement are silent on late fees, Texas law fills the gap with a 10%/year rate, as of July 2026. Charge more than that and you need a contract that states the rate in writing, capped by the ceilings set out in Texas Finance Code Chapter 303 — see this primer on Texas usury law for how those ceilings are calculated. The practical takeaway: put your late-fee rate in your contract before relying on anything above the 10% default.

California: the reasonableness test

California doesn't set a fixed percentage cap on late fees — instead, courts test whether the fee reasonably relates to the actual cost of a late payment, under the state's liquidated-damages statute. Under California Civil Code §1671, a late fee in a commercial contract functions as liquidated damages, and it has to bear a reasonable relationship to costs like collections effort and lost use of funds, as of July 2026. A fee disproportionate to that cost risks being struck down as an unenforceable penalty, even with both parties' signatures on the contract. Document how you arrived at your rate — even a rough estimate of collections time and lost cash flow — so it holds up as reasonable if it's ever challenged.

New York: the 6% default

New York's statutory default interest rate is 6% per year — the rate that applies when a contract is silent on interest. Absent a contract term specifying a different rate, N.Y. General Obligations Law §5-501 sets the default at 6% per year, as of July 2026. Want a higher rate? Spell it out in your invoice terms or service agreement — New York treats the statutory rate as a fallback, not a ceiling, for contracts that state otherwise, though any contract rate still has to clear the state's separate usury limits.

How to verify your own state's rule (and why we don't list all 50)

We don't list all 50 states because most roundups that do are citing landlord-tenant statutes, consumer-credit tables, or numbers with no statute attached at all — we'd rather verify four properly than publish fifty we haven't checked. To check your own state:

1. Find the usury chapter of your state code. Search "[your state] usury statute" or "[your state] general obligations law interest rate," not "[your state] late fee law" — that search tends to surface landlord-tenant results instead.
2. Distinguish consumer credit, commercial transactions, and rent. Many state codes set separate rates for each. A cap written for a car loan or an apartment lease often doesn't apply to a B2B service invoice.
3. Check for contract-rate exceptions. Most states set a default rate that only applies when your contract is silent, plus a separate ceiling for what you can charge if you specify a rate in writing. Silence and disclosure change your number, as the Texas and New York examples above show.

For the underlying question of whether you can charge interest at all, see can you charge interest on overdue invoices. Once you've confirmed your state's number, word it correctly in your invoice terms and run it through a late fee calculator to see what it does to a typical overdue balance. Whatever lawful rate you land on, LateFee enforces it consistently on your Jobber invoices — set a cap once, and with approval mode on by default, review every fee before it goes out, so every overdue invoice gets the same treatment.

Frequently asked questions

Does my state have a late fee law?

Every state has some form of usury or contract law governing interest on unpaid amounts, but few states have a rule that specifically names "late fees" on invoices. What actually applies is usually your state's general usury statute or commercial code, not a standalone late-fee law, so search for that instead.

What if my state has no cap?

A few states, like California, don't set a fixed percentage cap and instead test whether your rate is reasonable. If your state works this way, don't treat "no cap" as "no limit" — courts can still strike an unreasonable fee as an unenforceable penalty, so keep your rate in line with your actual collection costs and what comparable businesses charge.

Is 1.5% per month always legal?

No. 1.5% per month annualizes to 18%, which sits right at Florida's usury line and can exceed Texas's or New York's default rate if your contract doesn't specify one. It's a common figure precisely because it clears most default limits, but common isn't the same as verified for your state — check the statute before you standardize on it.

Do I need a lawyer to check?

Not necessarily, for a first pass. The steps above — finding your state's usury chapter and confirming it covers commercial invoices rather than rent or consumer credit — get most business owners to a defensible number on their own. If you're setting a rate close to a cap, invoicing large balances, or operating across multiple states, a short consult with an attorney is worth it before you lock in a policy.