Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Kentucky.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Kentucky for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Kentucky.
8% legal rate; no cap for written commercial
Kentucky's legal rate is 8% per annum (KRS § 360.010). Written commercial agreements have no cap. Judgment rate is 12% or contract rate, whichever is higher.
Written commercial agreements are broadly exempt from the 8% rate.
Understanding what you can and cannot charge for late payments in Kentucky.
Late fees are allowed when specified in a written agreement. No cap on written commercial agreements.
No statutory cap for written commercial agreements.
Courts evaluate late fees as liquidated damages. Written agreements are generally enforced.
Kentucky Prompt Payment Act sets deadlines and penalties for late payments in Kentucky.
30 days for government contracts.
Interest at 1% per month plus attorney's fees.
KRS § 45A.495 requires state agencies to pay within 30 days. Covers government procurement and public construction.
Certain industries in Kentucky have additional rules around payment timelines, liens, and collection procedures.
Construction: KRS § 376.010 requires mechanics' lien filing within 6 months of last furnishing labor or materials.
Government contracts: KRS § 45A.495 mandates 30-day payment with interest and attorney's fee recovery.
Equine industry: Kentucky's horse racing industry follows standard commercial law for stud fees and training contracts.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Kentucky law.
Payment is due within 30 days. A late fee of 1.5% per month (18% per annum) will be applied to unpaid invoices. Per KRS § 360.010, written commercial agreements may specify any interest rate.
This wording works because it clearly states the rate, when it applies, and references Kentucky legal standards. Always ensure your stated rate complies with Kentucky's usury limits.
Practical tips for invoicing within Kentucky's legal framework.
Before you can charge a late fee in Kentucky, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Kentucky caps interest rates at 8% (legal) / no cap written commercial. Charging above this limit can void your right to collect interest entirely and may expose you to penalties.
A reminder 3 days before the due date and a follow-up the day after dramatically reduces late payments. Automated reminders ensure nothing slips through the cracks.
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Compare Kentucky's rules with neighboring and commonly referenced states.
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