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Author: Sergei Lemberg
Can You Sue a Collection Agency for Adding Interest or Fees?
![Illegal Collection Interest Fees]()
General Rule: Yes. It is illegal to add unauthorized interest or fees under the Fair Debt Collection Practices Act (FDCPA).
When a creditor sends a debt to a collection agency, they will agree on how they will get paid. Sometimes the creditor will pay a collection agency a fee. In other situations, a debt collector will get a percentage of what they collect.
However, that does not stop some collection agencies from trying their own methods for securing payments. In some cases, a collection agency will attempt to include unauthorized interest and fees to your debt. When this happens, you have protection under the Fair Debt Collection Practices Act (FDCPA).
The FDCPA prohibits wrongful debt collection practices. In this article you will learn the FDCPA’s restrictions on adding interest and fees. If this happens to you, you will learn what action you can take to stop them and get back any unauthorized payments.
What Are These Fees?
It is illegal for a collection agency to engage in any type of deceptive debt collection practice. In fact, the FDCPA has specific requirements on what collection agencies can charge. They can only charge interest and fees that the original agreement explicitly states. For example, the original agreement will likely specify a specific interest rate and when they can charge penalties.
If a collection agency adds any charges inconsistent with the original agreement, they violate the FDCPA. That being said, just because you see new charges does not mean it’s a violation. Your agreement with the creditor may allow for charges resulting from debt collection.
There are two things you can do to make sure you do not pay more than what you owe. First, understand what charges the original agreement authorized. Second, keep track of any payments made and the amount remaining that you owe.
Other Illegal Debt Collection Practices
Adding interest and fees is one way a debt collector will deceptively try to collect additional money from you. However, this is not their only tactic. Debt collectors also violate the FDCPA when they try the following:
- Changing the Principal Amount. This is a more direct way of charging you extra. A collection agency will change the total amount you owe, hoping you do not notice the difference.
- Collecting on Time-Barred Debts. Sometimes a company will buy old, even time-barred debt. They will then try to collect on a debt that is not legally enforceable. In some states, if they can convince you to pay a small amount, the statute of limitations restarts.
Even if the amount is valid, watch out for other harassing and deceptive collection practices to coerce a payment.
Filing a Lawsuit
If a collection agency is charging unauthorized interest and fees, they have clearly violated the FDCPA. As long as the illegal charges happened within the past year, you can file a lawsuit under this federal law. When you do, a court can provide the following:
- Injunctive Relief. If a collection agency continues to add fees and interest, a court can order them to stop.
- Statutory Damages. If you win your case, a court will award mandatory statutory damages. Under the FDCPA, this amount can be as high as $1,000.
- Real Damages. If you suffer any loss a court can award additional damages. This includes any payments of unauthorized interest and fees.
- Court Costs. If a collection agency is guilty, the FDCPA shifts all of your court costs to them.
There are additional options to consider before filing a lawsuit. You can also try the following:
- Write to the Collection Agency. Inform the debt collector in writing of the illegal fees and demand their removal. Send the letter by certified mail and keep a copy for your records.
- Request Assistance from the Federal Government. The Federal Trade Commission (FTC) oversees the FDCPA. Submit a complaint to them identifying the illegal charges. You can also report the illegal behavior to the Consumer Financial Protection Bureau (CFPB).
- Debt Settlement. Now may be the time to get the collection agency to agree to a steep discount on your debt. They may be open to this option if you have evidence of their illegal charges.
Conclusion
You have a responsibility to pay what you owe and only what you owe. When a collection agency takes over a debt they have a responsibility to charge you only what you agreed to with the original creditor.
If a collection agency adds illegal charges to your debt, take action immediately. Consider filing a lawsuit or one of the other options provided in this article. If you have questions or need assistance, you should consider contacting an FDCPA attorney today.
About the author:
Sergei Lemberg is a consumer rights attorney, practicing since 2006, whose practice focuses on consumer law, class actions and personal injury litigation. He is known for a United States Supreme Court case (Facebook v. Duguid) defending consumers from autodialers under the Telephone Consumer Protection Act of 1991 to send unsolicited text messages. He is also the author of Defanging Debt Collectors, a book that teaches consumers how to battle debt collectors and win.
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