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Ohio Court Limits Permissible Interest Rates on Invoices

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.

It is not uncommon for businesses that provide goods or services to their customers on an invoiced basis to include language in their invoices indicating the interest rate that will be charged on any unpaid balance.  For example, a business might state on their invoice that the charges will bear interest at the rate of 2% per month after thirty days. 

However, on March 26, 2008, the Ohio Supreme Court issued a unanimous opinion that declared that such arrangements are unenforceable if they impose an interest rate that is higher than the rate imposed by statute, unless the business and its customer have otherwise entered into a written contract specifically agreeing to a higher interest rate.  The case is Minister Farmers Coop. Exchange Co., Inc. v. Meyer, 2008-Ohio-1259 (2008).  In the case, a business sued two separate customers on invoices that included substantial amounts for unpaid interest.  The business’ invoices to these customers included language such as: “Net due last day of the month. 2% finance charge per month after 30 days.”

When the business sued the customers, the customers argued that they could not be forced to pay an interest rate higher than the standard rate for contracts as imposed by Ohio Revised Code § 1343.03(A).  However, both the trial court and the court of appeals rejected the customers’ argument, holding that the business had a right to impose an interest rate on its open accounts that was openly stated on its invoices and not objected to by the customers.

The customers then appealed to the Ohio Supreme Court, which overruled and reversed the lower courts in its unanimous decision.  In its decision, the Supreme Court relied on the language of Section 1343.03(A), which provides that “when money becomes due and payable upon . . . any book account, . . . the creditor is entitled to interest at the rate per annum determined pursuant to section 5703.47 of the Revised Code, unless a written contract provides a different rate of interest in relation to the money that becomes due and payable, in which case the creditor is entitled to interest at the rate provided in that contract.”

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