Can Collection Agencies Charge Interest And Fees?
The small answer – yes, in most cases, but collection agencies are usually regulated differently from original creditors. In the previous video we spoke about the major decisions made by US Supreme Court and Congress in 1978 and 1980, allowing national lenders to offer their services in all states practically without limit on the interest they can charge. These laws are not applicable to collection agencies. The laws which ARE applicable are FDCPA (The Honest Debt Collection Practices Act), and local states’ usury laws and ucc laws (UCC = Uniform Commercial Code). The FDCPA, Section 808(1) prohibits adding interests or fees unless the amount is expressly authorized by either the state law or by the original contract with the lender. Usually the original contract has these provisions. Page www.101creditrepair.com has links to the applicable laws (federal and by state). If you read the laws, you will see that the allowed rate depends on the State, on the type and the amount of debt, whether here was a judgment, and other parameters. If the rate is too high, the court may find it unlawful, and in some states (for example, New York) can even void the original debt. Another question – whether the collector will really charge the interest and fees. If the collector represents original creditor – they will probably charge the maximum – to helium balloon the amount so that they can charge it off and receive maximum insurance / tax benefit. If the collector is not representing the …
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