Info sheets


Interest Charges

(Effective October 1, 2008)

MEP uses interest charges to encourage timely payment of maintenance. All overdue principal balances will be charged interest. To avoid paying interest, debtors should make all payments in full and on time as required by the court order, agreement or payment arrangement.

Under what circumstances will MEP charge interest?

Interest will be charged on files registered with MEP when:

  1. maintenance payments are not received in full and on time
  2. other expenses and costs as stated in the court order or agreement are not received in full and on time
  3. payments on an outstanding balance are not received in full and on time
  4. MEP is directed to do so by court order

if…

a maintenance payment is late
(received after the due date ordered by the court)

then…

interest will apply to the principal balance for the number of days the payment is late

if…

any part of a payment is late
(even if payment is $1 short)

then…

interest will apply to the principal balance for the number of days the payment is late

if…

the entire balance on the file is paid late

then…

interest will apply to the principal balance for the number of days the payment is late

Under what circumstances will MEP not charge interest?

Interest will not be charged on:

  • payments received in full and on time
  • penalties, service fees or interest charges applied to the file
  • arrears (support payments not made when due under the maintenance order or when money is owed on an account) owing before registration or re-registration with MEP (unless the court orders interest be charged on amounts owing before registration with MEP)
  • files for which creditors choose not to have interest charged

How will MEP calculate interest rates?

MEP charges simple interest. This means that interest is charged on the amount of maintenance owed (or principal), but not on the interest itself (which would be compound interest). Interest rates are set yearly by the Alberta Judgment Interest Act (JIA). The JIA interest rate until December 31, 2008 is 4.25%. The JIA interest rate as of January 1, 2009 is 2.75%.

MEP’s formula for calculating simple interest is:

Principal x JIA Interest Rate x Number of days in the month
365 days in a year (366 in a leap year)

If the court order sets a different rate of interest, MEP will charge the amount in the court order.

Interest charges will be added monthly to a file once a month for the previous month’s interest.

Will MEP charge interest if a payment arrangement is in place?

Unless otherwise directed by a court order, MEP will not charge interest on the overdue principal balance as long as a debtor makes the arranged payment in full and on time each month. If the full amount is not received on time, interest will be charged on the entire file balance and not just the defaulted amount for that month.

For example, in November 2008, a debtor has a principal balance of $3,000 and has a payment arrangement to pay $300 per month. If the $300 payment is late by ten (10) days, $3.48 interest will be charged on $3,000 for the ten (10) days.

How will MEP distribute interest collected?

Eighty percent (80%) of interest collected will be paid to creditors. Twenty percent (20%) will be kept by the Director of Maintenance Enforcement to cover additional collection costs. This also applies to court ordered interest rates.

Can a creditor choose not to have interest charged?

Creditors may choose not to have interest charged on their behalf. Please see the Information Sheet Waiving Interest.