What to do if a client does not pay? Procedure and risks

A client who does not pay can put your cash flow and business at risk. In this article we explain the steps you can take when facing non-payment: what to do before claiming, what the Late Payment Law (Law 15/2010) says, payment deadlines and default interest, when consumer arbitration (SMAC) may apply, and what risks to consider.

1. Before claiming: recommended steps

Before starting a formal collection process, it is advisable to try reminders: a friendly email or call and, if there is no response, a formal written demand (recorded delivery or email with read receipt) stating the amount due, the due date and a reasonable period for payment. Check your contract: agreed payment terms affect when late payment is deemed to occur.

2. Late Payment Law (Law 15/2010)

Law 15/2010 regulates the fight against late payment in commercial transactions (between businesses or with the public sector). It sets maximum payment periods (default 30 days unless otherwise agreed, 60 days for the public sector), default interest (if no other rate was agreed, the legal rate plus 8 percentage points) and compensation for recovery costs (minimum €40). If your contract already provides for more favourable terms or interest for you, those clauses apply.

• Payment period: 30 days from receipt of the invoice or proof, unless another period was agreed (which may not exceed 60 days in B2B transactions).
• Default interest: From the day after the due date, without prior demand if the contract or law so provides.
• Compensation: You may claim a fixed amount for recovery costs (minimum €40) in addition to interest.

3. Risks to consider

Claiming non-payment has costs (time, fees if a lawyer is involved, possible court or arbitration costs) and can affect the business relationship with the client. Also consider limitation periods: actions to claim debts generally prescribe after 5 years, but in some cases different periods may apply. If the amount is small, the cost of claiming sometimes outweighs the benefit; if it is large or the client is strategic, it is advisable to act quickly and with legal advice.

4. SMAC: when it applies

SMAC (Consumer Mediation and Arbitration System) is a mechanism to resolve disputes between consumers and users and businesses (B2C). If your claim is as a supplier against a client that is a business (B2B), SMAC is usually not the applicable route: in B2B the usual routes are civil court or arbitration if the contract so provides. If you are a business and your client is another business that does not pay, you will need to rely on the Late Payment Law, court action or arbitration as agreed. If you are unsure whether your case is consumer or B2B, a contracts lawyer can advise you.

Conclusion

When a client does not pay, combine reminders and a formal demand with knowledge of the Late Payment Law (terms, interest, compensation). Weigh the risks and costs of claiming and, if the amount or the relationship justifies it, consult a lawyer to decide whether to go to court, arbitration or mediation. At Satya Legal we can help you review sale or service contracts to include clear payment and default interest clauses and to define the most suitable collection strategy.