Last Update: 22. Juli 2025

What are late payment damages?

Late payment damages refer to the financial loss that occurs when an invoice is not paid on time. This does not mean the original invoice amount or principal claim, but additional costs that result from the delayed payment.

These costs can vary widely. They may include dunning fees, late payment interest, or charges from a debt collection agency. Even the creditor’s time and effort—such as additional accounting work or the need to involve third-party service providers—can lead to financial losses.

Late payment damages always affect the creditor. Because the money arrives late, the creditor often has to do more than originally necessary. The purpose of legal regulations around late payment damages is to compensate for this additional burden.

In legal terms, late payment damages fall under the broader concept of compensation for damages. A claim can only be made if the debtor is in default—meaning they did not fulfill their payment obligation within the agreed time. Only then can the creditor demand reimbursement for the additional costs.

It does not matter whether the delay was intentional. It is enough that the payment was objectively late.

In simple terms: If you pay late, you create extra work—and often extra costs. That’s what late payment damages are about.

When do late payment damages arise?

Late payment damages do not automatically apply just because an invoice is outstanding. The key factor is whether the debtor is actually in default. This only happens when specific conditions are met. Legislators have established clear rules for this.

A debtor is in default if:

The invoice is due,
The payment is not made on time,
And the debtor has been reminded via a dunning letter or given a payment deadline—or a statutory time limit has expired.

Only when all of these conditions are met can the creditor claim late payment damages.

When is the debtor in default?

A debtor enters default when they fail to pay within the agreed time frame. There are two common scenarios:

Fixed payment deadline: If the invoice states a specific due date (e.g., “payable by 01/07/2025”), the debtor is automatically in default once that date passes. A separate reminder is not required.
No fixed deadline: If there’s no exact date, the creditor must first send a reminder. Default begins only after this reminder has been sent and a reasonable payment period has expired.

For business-to-business transactions, there is an additional rule: Default typically begins automatically 30 days after the invoice has been received—even without a reminder.

What types of late payment damages exist?

Late payment damages can take various forms. Depending on the creditor’s effort and costs, different expense types may be considered. The key point: They always refer to costs that arise in addition to the original claim.

Typical types of late payment damages include:

Late payment interest: Statutory interest charged for delayed payments.
Dunning fees: Expenses for preparing and sending reminders, such as postage, paper, or time.
Collection fees: Costs that arise when a debt collection agency is involved.
Legal fees: If a lawyer is retained to pursue the claim, their fees may be included as damages.
Internal administrative costs: This may involve phone calls, extra accounting, or coordination with third parties.

Whether these costs can be reimbursed depends on whether they are necessary, appropriate, and verifiable.

Who is responsible for paying late payment damages?

In general, the debtor is liable for late payment damages. The principle is simple: Anyone who causes financial harm by paying late must compensate for it. This applies regardless of whether the debtor is an individual or a business.

The obligation to pay includes not just the original invoice amount, but also any reasonable additional costs incurred by the creditor as a result of the delay.

However, this only applies if the debtor is actually in default. If not—for example, if the payment period has not yet expired or the reminder was invalid—there is no obligation to cover late payment damages.

How are late payment damages calculated?

The amount of late payment damages depends on the types of costs involved. Some are defined by law, while others require case-by-case justification.

Here’s an overview of key components:

Late payment interest: According to Section 288 of the German Civil Code (BGB), the interest rate is 5 percentage points above the base rate if the debtor is a consumer. In business transactions, it is 9 percentage points. The rate is adjusted every six months and published by the German Bundesbank.
Dunning fees: These must be reasonable and reflect actual effort. A flat fee is generally allowed, but it must not be excessive or arbitrary. In most cases, a factual explanation is helpful.
Collection fees: These are based on the standard attorney fee schedule (RVG) and depend on the amount of the claim. Typically, they include an initial fee plus incidental expenses. You can find more details in our debt collection calculator.
Legal fees: These are also calculated according to the RVG and vary based on the claim amount and scope of services.
Internal costs: These are often difficult to prove. If such costs are to be claimed, clear and transparent documentation is required.

The total late payment damages are the sum of these individual items. What matters most is that the costs are real, necessary, and justifiable.

Where are late payment damages regulated by law?

The key legal basis for late payment damages is found in the German Civil Code (BGB):

Section 280 BGB: Covers general compensation for breaches of obligation. It provides the legal foundation for damage claims by creditors.
Section 286 BGB: Defines when a debtor is officially in default. This is essential for claiming late payment damages.
Section 288 BGB: Regulates late payment interest and distinguishes between consumers and businesses.

Additional guidance comes from the Attorney Remuneration Act (RVG) and from established case law on collection fees. These clarify which cost types may be claimed and to what extent.

These legal rules offer clarity for both creditors and debtors. They ensure that justified claims can be enforced—and that creditors are not left covering the additional costs themselves.