When invoices go unpaid, businesses in Germany can charge late fees—but there are limits to how high those amounts go. So, in order to stay on the right side of the law, you must make sure you know exactly which rights and obligations apply when it comes to dunning and chasing overdue payments.

This article explains when you can charge late fees and how much. We’ll also take a look at a few real-world examples—such as recurring or cross-border settlements—to highlight particular areas that need extra attention in collections workflows. At the end, we’ll walk you through the implications of assessing overdue amounts incorrectly and how Stripe can help with your dunning processes.

What’s in this article?

• How much can I charge in late fees?
  
• When can I charge late fees?
  
• Late fees in practice
  
• Implications of errors when charging late fees
  
• How Stripe can help you with your dunning process
  

How much can I charge in late fees?

§ 288 of the German Civil Code (BGB) distinguishes default interest and dunning charges.

Default interest

§ 288.1 of the BGB requires interest on a financial debt for as long as the debtor remains in arrears. This default interest offsets the economic impact of late payment on a company. When an enterprise lacks access to the money an owing party must settle, it loses the chance to put those funds to work—say, to accrue interest or pursue investments. In some cases, the company might also have to pay substantial interest to cover short-term liquidity gaps.

The legislation establishes different percentages for individual versus businesses:

• For transactions conducted with private individuals, statutory default interest is set at five points above the base rate (see § 288.1 of the BGB).
  
• For transactions conducted with businesses, public authorities, and other nonprivate debtors, the rate is significantly higher, at nine points above the base rate (see § 288.2 of the BGB).
  

The Deutsche Bundesbank (German Federal Bank) sets the base figure twice a year in accordance with § 247 of the BGB, and publishes the figure in the Federal Gazette. As of July 1, 2025, the base percentage in the country is 1.27%. At the time of writing, arrears interest sits at 6.27% p.a. for B2C (business-to-consumer) transactions, and 10.27% p.a. for B2B (business-to-business) transactions. The acronym “p.a.” stands for “per annum,” and means that the rates indicated apply to a full year. To work out how much interest to apply for the actual period of default, you need to adjust the annual percentage for the specific number of days that have passed without payment.

Example: Default interest on a B2C transaction

Let’s assume a private individual has a €3,000 bill outstanding since March 1, 2025, and that you send them a reminder on May 25, 2025. Here, the default period is 85 days. There are two steps to calculating this interest:

• Calculate the annual default interest: €3,000 x 6.27% = €188.10
  
• Adjust interest for a period of arrears of 85 days: €188.10 / 365 x 85 = €43.96
  

In this example, the default interest for the 85 days is €43.96.

Dunning charges

In addition to default interest, companies can impose dunning charges to cover material outlays and send notices. They can pass on chargebacks or address-tracing expenses to the debtor as collection fees. By contrast, labor costs do not qualify, since the law treats them as general overheads.

The law does not stipulate exactly how much a creditor is allowed to claim in dunning charges. What’s important is that the charges are proportionate and stay within the real expenditure incurred. Courts treat excessive collection fees as impermissible. The standard fee ranges from €2.50 to €5 per reminder. Higher amounts require proof of higher expenses.

§ 288.5 of the BGB is a special regulation concerning reminders sent to businesses and public-sector clients, under which you could charge a flat rate of €40 as soon as the owing party defaults. This flat fee covers the costs of prosecution, regardless of the amount really owed. If you demand further dunning charges, you have to demonstrate that your actual damages exceed €40.

When can I charge late fees?

Under German law, default is governed by § 286 of the BGB, which provides that a debtor falls into arrears if they fail to pay by the agreed deadline and a follow-up notice has been sent. Companies can start applying default interest and dunning charges from this point onward. The collection fee ties directly to the outlays of the dunning process, rather than to the arrears itself. As a result, businesses apply collection fees solely when they incur costs, e.g., for sending payment reminders.

Special provisions

In some cases, a debtor enters into default without a follow-up notice. Per § 286.2 of the BGB, the law does not require a reminder if settlement is due on a fixed date—e.g., contract wording along the lines of “payable by June 15, 2025.” Once this deadline passes without payment, the owing party is in arrears, regardless of any further notices. The same applies to cases where the law stipulates set payment terms. § 556b of the BGB, for instance, states that rent is due no later than the third working day of a month—tenants who fail to pay by this cutoff default on their rent without being sent a reminder.

Another exemption covers performances that depend on a particular occurrence (see § 286.2.2 of the BGB). Certain events include terminations or the acceptance of work. However, you can only invoke this exemption if you make an apparent reference to it in your contract, e.g., “Payment within 14 days of acceptance.” The deadline given must also always be proportionate to the event.

According to § 286.3 of the BGB, debtors default on settlements no later than 30 days after the due date and receipt of an invoice. For consumers though, this only applies if you explicitly state it on your bill—e.g., with wording such as “Default shall occur if payment is not made within 30 days after the due date and receipt of this invoice.” If you do not include this wording, you must send the owing party a reminder to start arrears.

Do you have to pay late fees?

In principle, yes—provided the fees are reasonable and reflect actual costs. Courts can reduce unreasonably high or unjustifiable charges, or reject them outright. Consequently, it is key that any late fees are always proportionate and transparent.

Late fees in practice

Below are a few concrete examples of how to apply late fees in practice:

Recurring billing

Regular recurring payments, such as subscriptions, fall under the exemption in § 286.2 of the BGB mentioned above. Customers enter arrears without a reminder if the contract sets a specific calendar date for payment. As an illustration, if a client has a subscription to an online fitness course that requires payment on the first of each month, you do not need to reference 14- or 30-day terms explicitly. Here, the customer defaults on settlement on the second of the month. If you subsequently send them a follow-up notice, you can charge them for the fees incurred.

SaaS payments

SaaS (software-as-a-service) companies also frequently use subscription models that typically require monthly, quarterly, or annual payments for access to cloud-based software. In this case, the applicable regulation is the same as for other recurring expenses, regardless of whether the contract stipulates a flat fee or usage-based billing, provided it sets a settlement deadline.

Digital marketplaces

When it comes to digital marketplaces or platforms, the first question is always: who are the contracting parties for sales and payments? In many cases, sellers and buyers act as independent parties, while the platform serves merely as an intermediary. Yet many services also handle both settlement and collection for their sellers whenever invoices go unpaid. In this case, the platform can issue reminders and apply overdue amounts on its own behalf. The services’ terms and conditions usually govern the procedures for doing this.

For one-time purchases, private individuals enter arrears if they exceed the contract payment terms and receive a follow-up notice. Dunning charges must reflect the actual expense in the process. If a reminder goes out solely by email, for instance, collection fees usually do not apply.

Cross-border transactions

For cross-border payments, the key question concerns the legal basis for late fees. Usually, the national law of the creditor’s country applies. The situation gets tricky for German businesses when a debtor sits overseas. It is therefore imperative that businesses with international reach establish clear payment terms in their contracts to prevent disputes over late fees. References to the applicable national regulations help avoid misunderstandings.

Implications of errors when charging late fees

There are a number of unpleasant things that can happen if you charge excessively high late fees, demand them too early, or fall foul of other legal requirements. We’ve summarized the most important ones below:

Invalid claims

If you charge unreasonably high late fees or lack transparency, courts can cut your claim or throw it out. In extreme cases, this could result in an obligation to reimburse any late fees already collected, in full.

Legal disputes

Debtors can sue you for excessive late fees or errors on issued bills and in contracts. Court battles cost time and money, including attorney fees and legal expenses.

Lost earnings

Customers can feel mistreated if you charge exorbitant late fees, and they might end up refusing to pay altogether. You risk invoices continuing to go unpaid, requiring further steps such as summary proceedings for a payment order or lawsuits.

Reputational damage

In addition to the immediate financial and legal repercussions, misassessing late fees can also harm your business’s image. In the age of social media and online reviews, negative experiences spread like wildfire. A worsening image can irritate existing customers and put off potential new ones. If legal wranglings keep occurring over late fees, public scrutiny could follow these practices.

How Stripe can help you with your dunning process

Stripe Billing gives you complete control over how you invoice your customers—from simple recurring billing, to usage-based invoicing, and also special, negotiated contracts. And that’s not all: Billing also allows you to automate your dunning processes. You can react flexibly to late payments by sending automated notices and dunning letters. Plus, any charges permitted by law are collected and communicated to customers. This automation saves countless admin hours and increases the likelihood that clients settle outstanding bills.

Then there’s Stripe Payments, an efficient settlement tool that complements collection workflows, giving you access to more than 125 payment methods and more than 135 currencies—maximizing customer choice, and making international settlements a breeze. Payments also automatically calculates default interest and dunning charges on past-due bills—particularly useful for subscription and SaaS businesses looking to reduce manual labor and improve their cash flow massively. It’ll also help you ensure you’re always fully compliant with the BGB regulations, including § 288.