Late-paying clients are one of the most common — and financially damaging — problems freelancers face. According to various surveys, more than 70% of freelancers have experienced late payment at some point. Understanding your legal rights under US law can help you recover what you're owed.
Does the US Have Federal Late Payment Laws?
The United States does not have a single federal late payment law that applies to all commercial contracts between private parties. Late payment law in the US is primarily a state matter, and the rules vary significantly depending on where the contract is performed or where the parties are located.
However, the Prompt Payment Act does apply to federal government contractors. If you do work for US federal government agencies, they are required by law to pay within 30 days, or they must pay statutory interest on late amounts.
State-Level Late Payment Laws
Most US states have laws governing interest on overdue debts (known as usury laws or judgment interest statutes). The most relevant laws for freelancers are:
- New York: New York's Freelance Isn't Free Act (effective since 2017, strengthened in 2022) requires written contracts for projects over $800, mandates payment within 30 days of completion, and allows freelancers to sue for double damages plus attorney's fees for violations. The City of New York extended this statewide.
- California: California's general statutory interest rate is 10% per annum on judgments. While there's no specific freelancer law, small claims court is very accessible for amounts up to $12,500.
- Texas: Texas allows 18% annual interest on commercial debts under certain circumstances. The Texas Prompt Payment Act applies to government contractors.
- Illinois: The Illinois Wage Payment and Collection Act protects employees but can sometimes apply to misclassified workers. Independent contractors can pursue claims in small claims court.
New York's Freelance Isn't Free Act
If you freelance in New York State, this law is one of the strongest protections in the country. It requires:
- Written contracts for projects of $800 or more (or $800 cumulative with one client in 120 days)
- The contract must specify the payment amount and date
- Payment must be made by the date in the contract, or within 30 days of completion if no date is specified
- Retaliation against freelancers who assert their rights is prohibited
Penalties for violation include the value of the contract, double damages, injunctive relief, and attorney's fees. This is powerful protection.
What Interest Rate Can You Charge?
If your contract includes a late payment interest clause (and it should!), you can charge whatever rate you've agreed to in writing, provided it doesn't violate your state's usury laws. Common contract rates range from 1.5% to 2% per month (18–24% annually).
If your contract doesn't specify an interest rate, you'll be limited to your state's statutory rate, which is often lower (typically 6–10% annually).
Use our Late Payment Interest Calculator to calculate exactly what you're owed.
Step-by-Step: What to Do When a Client Doesn't Pay
Step 1: Send a Polite Payment Reminder
First, send a friendly email referencing the invoice number, amount, and due date. Many late payments are genuine oversights. Give the client 5–7 days to respond.
Step 2: Send a Formal Demand Letter
If the reminder doesn't work, send a formal written demand letter via email (and certified mail if possible). State the amount owed, the due date, and that you intend to pursue legal remedies if payment is not received within 7–14 days. Reference any late payment interest you are accruing.
Step 3: Suspend Ongoing Work
If you are currently working for the client, stop. Don't deliver additional work or files until outstanding invoices are paid. Your contract should have a clause allowing this.
Step 4: Small Claims Court
For amounts under your state's small claims limit (typically $5,000–$12,500, varying by state), small claims court is fast, inexpensive, and doesn't require a lawyer. File your claim, present your contract and invoice, and the judge will typically rule in your favor if you have documentation.
Step 5: Hire a Collections Attorney
For larger amounts, consider hiring a collections attorney. Many work on contingency (taking a percentage of what's recovered). For amounts over $10,000, this is often the most practical route.
Prevention: The Best Medicine
The most effective protection against late payment is a well-drafted freelance contract with:
- A deposit requirement (minimum 25–50% upfront)
- Clear payment milestones tied to deliverables
- Explicit late payment interest clause
- Right to suspend work for non-payment
- Right to retain all IP until full payment is received
Calculate the Interest Owed on Your Overdue Invoice
Our free calculator shows exactly how much interest you can claim.
Calculate Interest →Frequently Asked Questions
Is there a federal late payment law in the US for freelancers?
There is no single federal late payment law for private contracts. The Prompt Payment Act applies to federal government contractors only. For private clients, your rights depend on your state's laws and what's in your contract.
How much interest can I charge on a late invoice in the US?
If your contract specifies an interest rate, you can charge that rate (subject to state usury limits). Common contract rates are 1.5–2% per month (18–24% annually). Without a contract clause, you're limited to your state's statutory rate, typically 6–10% per year.
What is the Freelance Isn't Free Act?
New York State's Freelance Isn't Free Act (2017, strengthened 2022) requires written contracts for projects over $800, mandates payment within 30 days, and allows freelancers to sue for double damages plus attorney's fees for violations.
How do I take a client to small claims court for unpaid invoices?
File your claim at your local small claims court (limits vary by state, typically $5,000–$12,500). Bring your signed contract, invoices, proof of delivery, and all communications. No lawyer is required. If the client doesn't respond, you can request a default judgment.
How long do I have to sue for unpaid invoices?
The statute of limitations varies by state and contract type. For written contracts, it's typically 3–6 years. For oral contracts, often 2–4 years. Don't delay — act as soon as payment becomes significantly overdue.