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Is it true that we cannot charge any finance charges on a municipality’s credit card account until 60 day grace period has passed? – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

Is it true that we cannot charge any finance charges on a municipality’s credit card account until 60 day grace period has passed?

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We do not believe that that the section of the Local Government Prompt Payment Act cited by the municipality would apply to a credit card account, for two reasons.

  • First of all, the Local Government Prompt Payment Act applies only to contracts with vendors or contractors for goods or services, usually in the construction context, and would not apply to a line of credit under a credit card agreement. If your credit card agreement requires the municipality to pay any amounts due within 30 days, then the municipality must comply with that agreement.
  • Second, that section of the act applies only when the unit of local government “fails to approve or disapprove that bill.” Superior Structures Co. v. City of Sesser, 292 Ill.App.3d 848, 851 (5th Dist. 1997). If there are no provisions in your contract with the municipality providing that the municipality must approve or disapprove bills, then the 60 day “grace period” would not apply.

 If the municipality prefers a longer payment period of 60 days, it will have to either enter into a new contract with the bank, with consideration in the pricing for the extra payment time, or find a different issuer.