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Can a Collection Agency Charge Interest on a Debt?

Chloe Meltzer | October 19, 2022

Debt collectors ^

Summary: Is a collection agency coming after you for a past due balance? Think they're adding charges they shouldn't? Find out if it's okay for a collection agency to charge interest on your debt.

If you are suffering from financial troubles and are unable to pay your debt, eventually a debt collector may end up calling you. This might be from your original creditor, but typically it will be a collection agency that has purchased your debt on behalf of a creditor.

If a debt collector is attempting to collect on a debt that you owe, then you might notice the amount you previously owed had gone up. This may be because of added interest. This is legal, but a collection agency is only allowed to charge interest on a debt that you owe according to what is the original creditor agreement.

This means that if any fee or interest was not authorized by the original agreement or by law, it is not allowed. In some states, there is a state law that might allow the interest to be charged and costs to be added. This is why it is essential to look at your original credit agreement. In some cases, state law may limit the amount of interest charged.

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Your rights as a consumer

As a consumer with debt, you need to know that you have rights. There are a few reasons why you might feel stressed about debt, whether it is contentious, you believe it does not belong to you, or if it is extremely high. This can be stressful, but if you know your rights, then you will be able to handle your debt a bit more easily.

For example, although a debt collector does have a right to collect on a debt that they owe, they still need to abide by the Fair Debt Collection Practices Act (FDCPA). These are laws that govern how debt collectors are allowed to operate, act, and speak to you.

You can use the statute of limitations

One thing that debt collectors do not want you to know is that your debt is subject to the statute of limitations. This is a law that specifies how long you can be sued for debt and brought to court. Each state has its own time frame, which is typically around four to six years. It is also important to know that if you make a payment on the account, it will start this period over again. If you get a call regarding an old debt, be sure to check the statute of limitations in your state.

You are not responsible for zombie debts

Collection accounts are often resold more than once. This means that you might receive a call from a debt collector that is outside of the statute of limitations or one that you do not even owe. This is illegal if you no longer owe a debt, but they still might attempt to get you to pay. Be sure to get all the details before admitting you owed a debt, otherwise it might restart the time frame on that debt.

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You can ask for proof of the debt

The FDCPA requires a debt collector to send a statement that explains all the specifics of the debt, within five days of contacting you. This is important because this will help you determine if you owe the debt. You can also always ask for the debt collector to prove that you do owe the debt. If you do request more information about your debt, you can ask for information such as the amount of money you owe, the name of the original creditor, and what actions you should take if you want to contest the debt.

You can ask a debt collector to stop calling you

According to the FDCPA, a debt collector must stop contacting you if you request that they do so. This is typically done in the form of a letter. Although you will still need to pay for your debt if you owe it, it can stop the constant phone calls. If a debt collector is constantly calling you, it might already violate the FDCPA. Under these laws, the debt collector cannot call too many times per day, and only between the hours of 8 am and 9 pm. Otherwise, they are directly violating your rights.

If you are looking to avoid your debt going to collections in the first place, you need to make sure that you do not fall behind on your payments. Despite this, if you do, be sure to keep an eye on your mail, and anything you receive from debt collectors. They are allowed to require you to pay interest, but only what is allowed by law, and in your original contract.

What is SoloSuit?

SoloSuit makes it easy to respond to a debt collection lawsuit.

How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

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"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James

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