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Answer: In case of absence of an agreement where a contractual penalty might be agreed between the parties, then upon delay of the payment the sum may accrue interest set by law. According to Section 1765 of the Civil Law, the interest rate shall be precisely stipulated in the document or transaction. If this has not been done, as well as in cases where the law requires calculation of lawful interest, that is, at six per cent per year.

According to Section 1763 of the Civil Law augmentation of interest shall cease when the amount of interest still outstanding has reached the amount of the capital sum. Therefore the debt may accrue interest set by law, which is 6% per annum, and the debt augmentation shall continue until the moment it reaches twice the sum, i.e. LVL 2000,-.

All court costs will be added to the sum of the debt in case of recovering of the sum through the court, as well as fees incurred by the creditor for the work of the bailiff. In the event the creditor retains a lawyer the relevant fees will also be recovered from the debtor, but in amount not exceeding 5%.

In turn, if an agreement has been entered into prescribing a contractual penalty, then such penalty may accrue on a debt sum without limitation. However, this issue shall be settled in accordance with Consumer Rights Protection law. According to Section 6 of the Consumer Rights Protection law, contractual terms shall be deemed unfair if they impose a disproportionately large contractual penalty or other compensation for non-performance of the contractual obligations upon a consumer who has not performed the contractual obligations.

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