Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Michigan.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Michigan for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Michigan.
7% default; 25% maximum
Michigan's default rate is 7% per annum. Maximum contract rate is 25% (MCL 438.31). Criminal usury above 25%.
Banks, credit unions, and licensed financial institutions are exempt from the 25% cap.
Understanding what you can and cannot charge for late payments in Michigan.
Late fees are allowed when contractually agreed. Must comply with the 25% maximum rate.
No specific cap; interest-based charges limited to 25%.
Standard liquidated damages test. Fees must be reasonable.
Michigan Prompt Payment Act sets deadlines and penalties for late payments in Michigan.
30 days for state contracts.
Interest on late government payments.
Michigan requires state agencies to pay within 30 days. Construction has specific subcontractor provisions under MCL 570.1101 et seq.
Certain industries in Michigan have additional rules around payment timelines, liens, and collection procedures.
Construction: Michigan Construction Lien Act (MCL 570.1101) requires filing within 90 days of last furnishing.
Government contracts: 30-day payment with interest penalties.
Automotive: Michigan's large auto industry uses standard commercial terms.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Michigan 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 the limits of Michigan law (MCL 438.31, 25% maximum).
This wording works because it clearly states the rate, when it applies, and references Michigan legal standards. Always ensure your stated rate complies with Michigan's usury limits.
Practical tips for invoicing within Michigan's legal framework.
Before you can charge a late fee in Michigan, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Michigan caps interest rates at 7% default / 25% maximum. 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 Michigan's rules with neighboring and commonly referenced states.
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