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| When Interest Is Charged On A Collection Debt |
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According to the Federal Trade Commission (FTC), the right to tack on interest
and/or penalty charges to the principle amount of a debt that is being handled
by a collection agency depends on the conditions of the original agreement between
you and your creditor, and also on your state law regarding the issue. Under the
"Unfair Practices" section of the Fair Debt Collection Practices Act (FDCPA), the
following is listed as a violation of the act:
"The collection of any amount (including any interest, fee, charge, or expense
incidental to the principal obligation) unless such amount is expressly authorized
by the agreement creating the debt or permitted by law."
In other words, if, in the original terms of the debt agreement, it was spelled
out that you, the debtor, would be responsible for any and all fees necessary to
collect the debt, then you are more than likely going to be held responsible for
the interest on the debt. Because of this, your creditors are not likely to accept
an offering of the principle amount no matter how many times you try giving it to
them-and meanwhile, the interest is growing. Your creditor and its collection
agency may see it in their best interest to wait and get the whole amount due them.
If no such terms were in your original agreement, you may be off the hook for the
interest and fees-or you may not. The last words of the FDCPA statement, "or
permitted by law," pertain to your state law. This means that even if there was
no previous agreement about the debtor paying collection fees in your original
agreement, you still may have to pay the fees depending on your state's laws on
collection fees. You should contact your state's Division of Consumer Affairs to
find out what terms apply to your situation.
For more information on the FDCPA, contact the Federal Trade Commission via the
internet at
http://www.ftc.gov/statutes/fdcpa/fdcpact.htm.
Copyright © 2000, CreditMatters.com
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