Late Charges

It appears that late fees are not usurious under New Jersey law. The court in Loigman v. Kerm, 250 N.J. Super. 434 (Law Div. 1991) held that New Jersey's usury statute did not apply to a default fee pursuant to a retainer agreement. In addition, the court in Sherman v. Cicibank, N.A., 272 N.J. Super. 435 (1995) held that interest, as defined by the National Bank Act, did not include late fees, and thus did not implicate New Jersey's usury law. New Jersey will enforce late fees in commercial transactions between sophisticated parties as long as the charge is reasonable. See Metlife Capital Financial Corp. v. Washington Avenue Assoc., L.P., 159 N.J. 484 (1999). Factors determining reasonableness may include standard industry practices, comparisons to statutorily determined and allowable late fees in other areas, and the totality of the circumstances. See id. If the purpose of the late fee is to impose a penalty, however, then the late fee will not be enforceable. See Stuchin v. Kasirer, 237 N.J. Super. 604 (App. Div. 1990).

Parties sometimes argue, and courts evaluate late fees as constituting liquidated damages. See discussion below regarding liquidated damages.