Unethical?

So a business customer pays late and we charge late payment penalties. It happens. In fact we have a policy to credit the first instance in the interests of good will, but it makes "paying on time" more important.

But today I have someone getting all stroppy, but in a new way. I may have to update my list of excuses on www.paylate.co.uk.

He started with a rant over the dates - the invoice was for service 1st Dec to 31st Dec but on payment terms of 7 working days (which we extended to allow for a DD on or after 25th). But that makes it advance payment and so he says it is unlawful for us to charge the penalties.

He then goes on to say he will be publishing this so that others can see we are acting unlawfully and can try and reclaim any penalties we have charged!

This all looks like some attempt to intimidate us. As it happens, my accounts team credited the charge anyway as it was the first time, but he is still ranting and saying he is going to publish about our unlawful activity.

So I squashed what he was saying totally. The legislation is quite clear, if we are charging in advance, e.g. services 1st to 31st Dec due on 25th Dec, the the relevant date is when we have completed providing the service, and penalties and interest start from the following day, so 1st Jan. It is all very clear, and surprisingly fair - statutory penalties only apply if paying after agreed term and after the service are actually supplied. The catch is that he paid on 5th Jan!

So, he has one possible excuse in the bag, and changes his rant to that - instead of claiming we broke the rules in the legislation (as we clearly didn't) he is saying that because he pays by DD, we have agreed to collect the money, and we could have as we notified him on the 29th. Looking at it, it looks like it may have been possible to get a DD in sooner - but the banking system needs two banking days, and there are rules on not giving the agreed notice (in our case 5 working days) so in practice it was 5 days and hence 5th Jan. The thing is we make it clear in our terms we are offering to try one collection only within terms, and if that fails it is the customers responsibility to ensure payment is made within terms. The customer even states that we told him on 29th and he could have made a fast payment if we had sent a request for payment - well the invoice sent on the 1st Dec was a request for payment, D'Uh.

Just to clarify - the terms were 7 working days from invoice, which we extended to his preferred date of 25th, and extended to allow for 25th and 26th being bank holidays, and then allowed the time to the end of the month as was billing in advance, so about 3 levels of "grace period" over the agreed terms, all of which were missed.

It is also worth clarifying the DD thing - we only offer to try and collect once. In practice, if someone is not insisting on DD being 25th (or later) we collect on due date, or for people on end of month we collect enough working days before to try and make a second collection. So in most cases that would work. In this case, being December and insisting on 25th collection, we did not have practical time to get a second DD done, but the customer did have time to send a fast payment on there separate days and confirmed they were notified of the DD bounce, but chose not to send payment.

Edit: To clarify further, our response to his initial rant was a credit, but he went on - he said that as we had not responded to his "legal analysis" he would publish anyway, so he asked for my response, which I gave and quashed his argument, and then he went on the "unethical" argument. This is a massive sore loser!

Anyway, long story short, what really bugs me now is that he says "this is not corporate behaviour that meets the ethical standards that we require of our suppliers".

To me that is so hypocritical and just takes the piss... What did they do that is perhaps "unethical"?

• Apparently they don't have enough money to pay the £23.90 on the agreed and notified date (this is a limited company, and makes me question their creditworthiness somewhat!)
• Don't send payment when notified of the failure
• Try and suggest that we acted unlawfully and quote sections of legislations to try and legal/baffle us.
• Suggest that this unlawful behaviour will be published to get others to reclaim penalties
• Then, when proved wrong, start suggesting we failed by not collecting a second DD (something we never said we would)

What did we do?

• Provide service, as agreed
• Make a DD attempt, as agreed, on agreed date with agreed notice
• Advise them of the payment failure in time for them to pay and not get a penalty
• Charge a penalty, as agreed in the terms, and carefully following the legislation
• Refund the penalty, no questions asked, as a good will gesture

Maybe I simply don't understand "ethics". All I ask for any supplier or customer in a business to business relationship is to do what was agreed - nothing more.

In practice, being such an edge case, we'd have credited this even if it was not the first failure. It is rare to have a late payment penalty for a DD paying customer and requires a complicated set of circumstances and bank holidays and a bounced payment, but not something we did wrong.

Update: Lots of discussion here and on irc, and one thing I can see where we could make one small change that would have helped in this case. Basically this is an edge case where a second DD would not be soon enough. The notice saying the DD failed and when we would collect again gave the wrong impression that "nothing needs to be done". So the change I am planning to work on is that we should never send a "Your DD failed, another is being done on date X" if that date would be too late but paying now by fast payment would be OK. We should be sending "Your DD failed, and we don't have time to do another DD, so please ensure payment by fast payment before date X". Obviously if nothing happens and a penalty is issued and we have over due payments we then do normal DD notice then to collect the balance due. Such notices should be rare as we do normally have time for the second DD attempt.

Update: We have checked, and the timescale of 5 working days for a repeat collection, which in this case did not allow enough time to avoid penalties, is based on BACS recommendations. Thankfully the rules permit two working days and our system can accommodate this, so we have made changes to use 2 working days when 5 would go over the end of the month. Not quite as generic a fix as I would like but something to tackle this edge case, even though we did not guarantee to make a second collection in the terms.