Not only does the charge seem excessive but it sounds punitive. You can compare the similarities with the recent bank charges case.
A court would generally not accept such a high penalty. In addition, in court the maximum you normally are allowed to claim for interest is a statutory rate (I don't know what it is currently but it was around 8% (compound) last time I checked 6 months ago or so). A company could charge for administration of a bad debt but only a reasonable amount (IMO 20% is not). They would also not be allowed to pass it to a debt collection agency automatically, and if a dispute exists the debt would have to remain with the company for resolution.
More importantly, Wingco has shown that the contract terms don't include any such terms in any case. And if they did it would IMO be unenforceable because it would be a new term, one that wasn't included in their original Ts&Cs (the last time I checked was in Feb 07 and no notice has been given of any changes to them AFAIK) although admittedly I haven't followed PN news for a few months now.