Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Maryland.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Maryland for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Maryland.
8% general; 24% commercial
Maryland sets the general max at 8% per annum (Md. Code, Com. Law § 12-102). Commercial transactions up to 24%. Default rate is 6%.
Commercial transactions up to 24%. Banks and licensed lenders have additional flexibility.
Understanding what you can and cannot charge for late payments in Maryland.
Late fees are allowed when contractually agreed. The 24% commercial cap provides ample room.
No specific cap; interest-based charges limited to applicable rate (8% general / 24% commercial).
Standard liquidated damages test. Must be a reasonable pre-estimate of damages.
Maryland Prompt Payment Act sets deadlines and penalties for late payments in Maryland.
30 days for state contracts; 7 days for construction subcontractor payments after prime receives payment.
Interest at 1% per month plus attorney's fees.
Md. Code, State Fin. & Proc. § 15-104 requires state agencies to pay within 30 days. Construction subcontractors within 7 days of prime receiving payment.
Certain industries in Maryland have additional rules around payment timelines, liens, and collection procedures.
Construction: Md. Code, Real Prop. § 9-101 requires mechanics' lien filing within 180 days. Notice of intent 30 days before filing.
Government contracts: 30-day payment with 1% monthly interest. Construction subcontractors within 7 days.
Healthcare: Specific prompt payment for insurance claims within 30 days of a clean claim.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Maryland law.
Payment is due within 30 days. A late fee of 1.5% per month (18% per annum) will be assessed on unpaid invoices, within limits for commercial transactions under Maryland law (Md. Code, Com. Law § 12-102).
This wording works because it clearly states the rate, when it applies, and references Maryland legal standards. Always ensure your stated rate complies with Maryland's usury limits.
Practical tips for invoicing within Maryland's legal framework.
Before you can charge a late fee in Maryland, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Maryland caps interest rates at 8% (general) / 24% (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.
If you ever need to escalate collection efforts in Maryland, documented reminder history strengthens your position. Automated systems keep logs automatically.
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Compare Maryland's rules with neighboring and commonly referenced states.
Get industry-specific invoice reminder templates and strategies.
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