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The Prompt Payment Act Answer Book by William G. Arnold

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Chapter 12

Late Payment Interest Penalties and Additional Penalties

When payments are made after the due date, or when discounts are improperly taken after the discount date, interest penalties accrue and are due to the vendor. This chapter discusses the rules for calculating and paying Prompt Payment interest penalties.

165. Why is it called an interest penalty?

The word “penalty” was carefully chosen when the legislation was passed to denote that an agency is being penalized for its failure to make timely payment. The presumption is that 30 days is enough time to pay a bill. The House Government Operations Committee explained the word choice as follows:

“By using the word ‘penalties’ to characterize interest payments, the Committee is emphasizing ...

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