Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Colorado.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Colorado for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Colorado.
8% default rate; 45% maximum legal rate
Colorado sets a default interest rate of 8% per annum (C.R.S. § 5-12-101) when no rate is agreed upon. The maximum permissible rate is 45% per annum (C.R.S. § 5-12-103). Charging above 45% constitutes criminal usury. The gap between default and maximum provides significant flexibility for commercial parties.
Colorado's relatively high 45% ceiling means most commercial transactions can be structured without usury concerns. The state distinguishes between consumer and commercial credit, with consumer transactions subject to the Uniform Consumer Credit Code.
Understanding what you can and cannot charge for late payments in Colorado.
Colorado allows late fees on commercial invoices when agreed upon in the contract. Late fees must be reasonable and not constitute an unenforceable penalty. The high usury ceiling of 45% provides significant room for late fee structuring.
No specific statutory cap on late fees, but combined interest and fees should not exceed the 45% maximum rate.
Colorado courts assess whether a late fee is a reasonable estimate of anticipated damages. Fees that are grossly disproportionate to actual losses may be unenforceable as penalties.
Colorado Prompt Pay Act sets deadlines and penalties for late payments in Colorado.
30 days for government agencies; 7 days for construction subcontractor payments after prime receives payment.
Interest at 15% per annum or 1.5% per month on late payments.
Colorado's prompt payment provisions cover both government contracts and construction projects. For public contracts, agencies must pay within 30 days. In construction (C.R.S. § 24-91-103), prime contractors must pay subcontractors within 7 days of receiving payment. Retainage has specific release requirements.
Certain industries in Colorado have additional rules around payment timelines, liens, and collection procedures.
Construction: Colorado's construction trust fund statute (C.R.S. § 38-22-127) makes it a criminal offense for contractors to divert construction funds. Mechanics' liens must be filed within 4 months of completion.
Government contracts: Colorado's Prompt Pay Act (C.R.S. § 24-91-103) applies to state and local government contracts with 30-day payment deadlines and 15% annual interest on late payments.
Oil and gas: Colorado has specific payment provisions for royalty payments (C.R.S. § 34-60-118.5) requiring payment within 6 months of first production and monthly thereafter.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Colorado law.
Payment is due within 30 days of invoice date. A late fee of 1.5% per month (18% per annum) will be assessed on all invoices unpaid after the due date, in accordance with Colorado law (C.R.S. § 5-12-101). This charge represents agreed-upon liquidated damages for costs incurred in managing overdue accounts.
This wording works because it clearly states the rate, when it applies, and references Colorado legal standards. Always ensure your stated rate complies with Colorado's usury limits.
Practical tips for invoicing within Colorado's legal framework.
Before you can charge a late fee in Colorado, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Colorado caps interest rates at 8% (default) / 45% (maximum legal). Charging above this limit can void your right to collect interest entirely and may expose you to penalties.
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Compare Colorado's rules with neighboring and commonly referenced states.
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