Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Arizona.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Arizona for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Arizona.
No general usury cap (deregulated in 1982)
Arizona eliminated its general usury cap in 1982, making it one of the most business-friendly states for interest rate agreements. Parties are free to agree to any interest rate in their contracts. The default judgment interest rate is 10% per annum.
Since Arizona has no general usury cap, commercial exemptions are unnecessary. All parties, including consumers and businesses, can agree to any interest rate, though consumer protection laws may still apply to predatory lending.
Understanding what you can and cannot charge for late payments in Arizona.
Arizona allows parties to agree on late fees in their contracts. Since there is no usury cap, late fee interest rates are flexible. However, late fees must still be reasonable under general contract law principles and cannot function as unconscionable penalties.
No statutory maximum. Arizona's deregulated environment allows parties to set their own late fee amounts.
Arizona courts will still review late fees for unconscionability. A fee that is grossly disproportionate to actual damages may be struck down, even in the absence of a usury cap.
Arizona Prompt Payment Act sets deadlines and penalties for late payments in Arizona.
30 days after receipt of a correct billing statement (A.R.S. § 35-342).
Interest accrues at 1% per month on overdue amounts.
Arizona's Prompt Payment Act (A.R.S. § 35-342) requires government agencies to pay contractors within 30 days of receiving a correct invoice. For construction contracts, prime contractors must pay subcontractors within 7 days of receiving payment. The Act provides strong protections for contractors working on public projects.
Certain industries in Arizona have additional rules around payment timelines, liens, and collection procedures.
Construction: Arizona's mechanics' lien law (A.R.S. § 33-981) requires a 20-day preliminary notice. Liens must be recorded within 120 days of completion. Residential projects have additional notice requirements.
Government contracts: Arizona's Prompt Payment Act (A.R.S. § 35-342) mandates 30-day payment for government contracts with 1% monthly interest on late payments.
Real estate: Arizona has specific disclosure requirements for real estate transactions that may affect payment terms and late fee enforceability.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Arizona law.
Payment is due within 30 days of invoice date. Invoices unpaid after the due date will accrue a late fee of 1.5% per month (18% per annum). Arizona does not impose a general usury cap, but this rate represents a reasonable estimate of administrative costs and damages from delayed payment.
This wording works because it clearly states the rate, when it applies, and references Arizona legal standards. Always ensure your stated rate complies with Arizona's usury limits.
Practical tips for invoicing within Arizona's legal framework.
Before you can charge a late fee in Arizona, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Arizona caps interest rates at No general cap (deregulated 1982). Charging above this limit can void your right to collect interest entirely and may expose you to penalties.
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Compare Arizona's rules with neighboring and commonly referenced states.
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