Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Connecticut.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Connecticut for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Connecticut.
12% per annum
Connecticut sets the maximum allowable interest rate at 12% per annum (Conn. Gen. Stat. § 37-4). The default legal rate when no rate is specified is 8%. Charging above 12% may result in forfeiture of all interest and the contract being deemed usurious.
Business loans above certain thresholds may be exempt from the usury cap. Banks and licensed financial institutions operating under federal or state charters are generally exempt from Connecticut's usury limits.
Understanding what you can and cannot charge for late payments in Connecticut.
Connecticut allows late fees in commercial contracts when agreed upon by the parties. Late fees must be reasonable and bear a rational relationship to the creditor's anticipated damages from late payment. Excessive fees may be voided.
No statutory cap; must stay within the 12% usury limit when characterized as interest.
Connecticut courts apply the liquidated damages standard. The fee must be reasonable in light of anticipated or actual harm, and the harm must be difficult to estimate at the time of contracting.
Connecticut Prompt Payment Act sets deadlines and penalties for late payments in Connecticut.
30 days for state contracts; 30 days for construction retainage release after completion.
Interest at 1% per month on late payments from government agencies.
Connecticut requires state agencies to make timely payments on contracts. For construction contracts, Conn. Gen. Stat. § 49-41a requires retainage to be released within 30 days of completion and acceptance. The state also has provisions for late payment penalties on government contracts.
Certain industries in Connecticut have additional rules around payment timelines, liens, and collection procedures.
Construction: Connecticut's mechanics' lien law (Conn. Gen. Stat. § 49-33) requires filing within 90 days of last furnishing services or materials. No preliminary notice is required for commercial projects.
Government contracts: Connecticut mandates timely payment by state agencies with interest penalties for late payments. Retainage must be released within 30 days of project completion and acceptance.
Insurance: Connecticut requires prompt payment of insurance claims (Conn. Gen. Stat. § 38a-816) within 45 days, with penalties for unfair claim practices.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Connecticut law.
Payment is due within 30 days of invoice date. Invoices unpaid after the due date will accrue a late fee of 1% per month (12% per annum), the maximum rate permitted under Connecticut law (Conn. Gen. Stat. § 37-4). This fee is agreed upon as reasonable liquidated damages for costs associated with administering overdue accounts.
This wording works because it clearly states the rate, when it applies, and references Connecticut legal standards. Always ensure your stated rate complies with Connecticut's usury limits.
Practical tips for invoicing within Connecticut's legal framework.
Before you can charge a late fee in Connecticut, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Connecticut caps interest rates at 12% (statutory). Charging above this limit can void your right to collect interest entirely and may expose you to penalties.
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Compare Connecticut's rules with neighboring and commonly referenced states.
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