If You Charge Compensation for Collecting Overdue Debts then You Must be Rational

The long-awaited judgment in the case of BHL v Leumi ABL Limited has been delivered in the Mercantile Court. The High Court found that a lender must be rational when exercising its contractual discretion to charge collection fees under a receivables finance agreement. Whilst the agreement allowed for fees of up to 15%, the court said that the maximum chargeable for the lender to remain compliant with its duty was found, in this case, to be 4%. This decision will have an impact on the charging of collection fees and any ongoing disputes, and could also prompt changes to the drafting of such clauses.