topic Re: CA charging interest? in General Credit Topics

CA charging interest?

Anonymous — Mon, 27 Apr 2009 18:25:07 GMT

Hi Everyone!

Can a CA legally charge interest?

Thanks!

Re: CA charging interest?

Anonymous — Mon, 27 Apr 2009 22:21:32 GMT

Some states have a limit that they might be able to charge.

Re: CA charging interest?

Anonymous — Tue, 28 Apr 2009 13:39:34 GMT

It will depend upon the original account terms and your states usury laws. If the original account had terms that allowed for charging interest and late fees, and your state laws do not limit or prohibit it in some way, then yes, the unpaid balance can accrue interest, late fees and sometimes "collection costs."

Re: CA charging interest?

Anonymous — Tue, 28 Apr 2009 16:49:42 GMT

Thanks for the replies, guys!

Let me see if I understand this then - If a collection agency buys a defaulted loan, etc, interest and fees and such can be charged indefinitely if state law doesn't have a cap on it?

Re: CA charging interest?

Anonymous — Tue, 28 Apr 2009 17:40:18 GMT

@Anonymous wrote:
Thanks for the replies, guys!
Let me see if I understand this then - If a collection agency buys a defaulted loan, etc, interest and fees and such can be charged indefinitely if state law doesn't have a cap on it?

Yes, IF state law allows interest charges on collection accounts (past the original creditor's interest charges) AND if it's allowed in the original agreement.

Rule of thumb, though, is that CAs can't charge extraneous interest -- in most states, only the original creditor can IF allowed in the original agreement.

ETA: Usually, credit agreements allow for collection costs while the original creditor holds the account. Once the account is sold, that allowance is usually rendered invalid.

Like if Credit Cards R Us says "if we have to contract a collection agency to get our money, you're going to pay those costs." They don't usually have a clause that says "If we sell the debt to Junk Debts R Us, you have to pay THEM costs associated with collecting payment."

However, some states *do* allow collection charges and interest. Most don't, though.

Message Edited by Wonderin on 04-28-2009 12:40 PM

Re: CA charging interest?

Anonymous — Tue, 28 Apr 2009 17:43:40 GMT

Here's an excerpt from the Fair Debt Collection Practices Act that might help make it a bit less confusing:

Section 808. Unfair practices [15 USC 1692f]

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(1) 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.