Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in District of Columbia.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in District of Columbia for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in District of Columbia.
24% per annum
The District of Columbia sets the maximum lawful interest rate at 24% per annum (D.C. Code § 28-3301). The default legal rate when no rate is specified is 6% per annum. The relatively high cap provides flexibility for commercial transactions while still offering consumer protections.
Banks, savings institutions, and other licensed lenders may be exempt from the general usury cap under federal preemption. Business-to-business transactions between sophisticated parties have greater flexibility.
Understanding what you can and cannot charge for late payments in District of Columbia.
DC allows late fees on commercial invoices when specified in the contract. Late fees must be reasonable and comply with the 24% usury cap when characterized as interest. The District's courts apply general contract law principles to assess enforceability.
No specific cap on late fees, but interest-based late fees must not exceed the 24% annual maximum.
DC courts assess late fees under the liquidated damages framework. The fee must be a reasonable forecast of damages caused by late payment and not a penalty.
DC Quick Payment Act sets deadlines and penalties for late payments in District of Columbia.
30 days after receipt of a proper invoice for District government contracts.
Interest at 1.5% per month on late payments plus potential penalty fees.
The DC Quick Payment Act (D.C. Code § 2-221.01 et seq.) requires District agencies to pay contractors within 30 days of receiving a proper invoice. If the agency fails to pay on time, the contractor is entitled to interest at 1.5% per month. The Act also covers subcontractor payments.
Certain industries in District of Columbia have additional rules around payment timelines, liens, and collection procedures.
Construction: DC mechanics' lien law (D.C. Code § 40-301.01) requires filing within 90 days of project completion. A notice of intent must be served at least 30 days before filing. Federal projects in DC may follow the Miller Act instead.
Government contracts: The DC Quick Payment Act mandates 30-day payment with 1.5% monthly interest penalties. Given DC's large concentration of government contractors, this law is frequently invoked.
Federal contractors: Many DC-area businesses also work with federal agencies, which are subject to the federal Prompt Payment Act (31 U.S.C. § 3901) with separate rules and timelines.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with District of Columbia 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), within the limits of D.C. Code § 28-3301. This fee represents reasonable liquidated damages for the administrative costs of managing overdue accounts.
This wording works because it clearly states the rate, when it applies, and references District of Columbia legal standards. Always ensure your stated rate complies with District of Columbia's usury limits.
Practical tips for invoicing within District of Columbia's legal framework.
Before you can charge a late fee in District of Columbia, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
District of Columbia caps interest rates at 24% (statutory). Charging above this limit can void your right to collect interest entirely and may expose you to penalties.
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Compare District of Columbia's rules with neighboring and commonly referenced states.
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