Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Tennessee.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Tennessee for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Tennessee.
10% default; 24% written
Tennessee's default rate is 10% (Tenn. Code § 47-14-103). Written agreements up to 24%.
Business loans of $50,000+ may have even higher limits. Banks and licensed lenders exempt.
Understanding what you can and cannot charge for late payments in Tennessee.
Late fees are allowed when contractually agreed. Written agreements may specify rates up to 24%.
Up to 24% for written agreements. Higher for certain business loans.
Standard liquidated damages test.
Tennessee Prompt Payment Act sets deadlines and penalties for late payments in Tennessee.
30 days for state contracts.
Interest at 1% per month.
Tenn. Code § 12-4-701 requires state agencies to pay within 30 days.
Certain industries in Tennessee have additional rules around payment timelines, liens, and collection procedures.
Construction: Tenn. Code § 66-11-115 requires mechanics' lien filing within 90 days.
Government contracts: Tenn. Code § 12-4-701 mandates 30-day payment.
Music and entertainment: Tennessee's Nashville entertainment industry follows standard commercial terms.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Tennessee 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 Tennessee law (Tenn. Code § 47-14-103, up to 24% for written agreements).
This wording works because it clearly states the rate, when it applies, and references Tennessee legal standards. Always ensure your stated rate complies with Tennessee's usury limits.
Practical tips for invoicing within Tennessee's legal framework.
Before you can charge a late fee in Tennessee, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Tennessee caps interest rates at 10% default / 24% written. 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 Tennessee's rules with neighboring and commonly referenced states.
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