Here’s a real-life instance of something that we hear frequently from our customers:
“I have a debt I’m trying to pay. My credit report shows a balance of $190. However, when I tried to contact my company about paying it off, they now say I owe $755.06. What is the best way to get the company to pay the amount that’s not showing in my credit reports?”
If the debt is paid off and transferred to a debt collection agency, the amount won’t change. In fact, quite number of people deliberately let their accounts go to collections hoping that they’ll be able to be able to settle the entire thing with lessthan the amount due. It’s a bit of a shock to find out that in some circumstances, debt collectors have the right to add fees to your debt even after they’ve bought the debt.
How do you determine what you actually owe the debt collector
Although it’s possible that the debt collector was legally entitled to add charges to your debt, don’t trust their word on it. First thing you have to determine is the specifics of where the debt originated from, what the amount was at first and how it was able to get to the amount it is today.
The Fair Debt Collection Practices Act (FDCPA) obliges every debt collector provide an official document confirming the debt they’re trying to recover. This means that they have to give you all this information within five days of the their first contact.
If you’re not convinced that you’re debt accurate, you may send an unsigned dispute to the agency that collects the debt. All collection activity should cease until they have responded to your dispute.
After they’ve given you an explanation of all the charges and fees that led to your debt increase, post-charge-off, the ball is now at your feet. That brings us to the following question: are these charges for interest and fees legal?
Yes they are.
Collection agency fees – which is legal?
Collectors of debt are able to charge interest in excess of the amount stipulated in the original contract. It’s usually listed in the form of “penalty percentage” within credit card agreements and can go over 30 percent, contingent upon your creditor.
The majority of states will limit what amount of interest that a debt collector is allowed to charge, but these limits are only applicable to accounts that don’t specify the maximum interest rate (like medical loan).
If the debt collector has confirmed the debt and confirmed that the higher costs are valid, the next option is to work out a repayment strategy or inquire about the possibility of eliminating any additional charges to pay a total one-time payment for the debt. It is important to keep in mind that debt collectors buy old debts at pennies on the dollar. When the amount of debt is worth $190 the debt collector likely bought it for 60 % of that. If the debt was transferred multiple times, this collector will likely made even less. They might say no however, most likely they’ll take the amount they can, and then be finished with your debt.
