I don't think late fees work at all.
Think about it logically, if you bought a service like Netflix that renews monthly, and you failed to renew it, would you be more likely to renew it if you were charged more?
I certainly wouldn't, in the age of automated billing there's little reason to fail payment, unlesss the client no longer wants the service.
That's why it's good to have a simple cancellation procedure, through clients Area and other channels like chat (assuming Account identity is secure).
And some other people suggest debt collection agency's if they don't renew, but at the need of the day, unless it's a dedicated server etc, and it was expensive to provide, there's no point in debt collection agency's as enforcement will likely cost more than the client ever paid, or the service costs.
In the offline world, or anywhere outside the hosting industry, I've not seen anywhere charge late fees.
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