Understanding Can Debt Collectors Charge Interest and Costs

Debt collectors can charge interest and costs on outstanding debts, but there are limits to how much they can charge.

In the United States, debt collectors are allowed to charge interest and fees as long as they follow the Fair Debt Collection Practices Act (FDCPA).

The FDCPA limits the amount of interest and fees a debt collector can charge, but these limits can vary depending on the type of debt and the state in which you live.

Debt collectors can charge interest on debts that are past due, but they must provide you with a written statement explaining the amount of interest and fees charged.

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The debt collection process can be overwhelming, but understanding how interest works can help you navigate it better.

Your creditor will present an itemization of what you owe to the court, which includes your balance plus pre-judgment and post-judgment interest.

Pre-judgment interest is the amount that has accrued since your account defaulted, but before the court judgment. It's awarded at the amount agreed to in your contract or up to 8% if there's no prior agreement.

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If you don't have a contract, you can expect to pay up to 8% in pre-judgment interest.

Post-judgment interest is an additional amount added to your judgment debt until it's satisfied. This can substantially increase the amount you owe.

In some cases, you may be charged 10% interest on top of your debt until you pay it off, which can triple the overall amount you pay to the creditor.

Here's a breakdown of the interest rates you might face:

Debt collectors can charge interest, which can add up quickly, and even more so if you're not paying attention.

Pre-judgment interest is charged before a court judgment is made, and can be up to 8% of the debt if there's no prior agreement.

Post-judgment interest is an additional charge that keeps getting added to the debt until it's satisfied, and can be as high as 10% in some cases.

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This means that if you're not paying your debt, it can easily triple in size due to interest and fees.

Here's a breakdown of the types of fees you may be charged:

Some debt collectors are internal, working directly for the company that originally loaned the money. These in-house collectors often try to collect debts in the early stages of default.

Internal collectors usually only turn to outside collection agencies if the debt isn't collected within a certain amount of time, often six months. The original lender may then sell their uncollected debt to other companies.

Internal collectors aren't bound by the same rules as outside collection agencies, but this can change if the debt is sold to another company.

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Debt collection fees can add up quickly, making it even harder to pay off your debt. You'll be required to pay additional fees and costs associated with the lawsuit, including court costs, sheriff/marshal fees and costs, and attorney fees.

These fees can be substantial, and in Connecticut, court costs are incurred every time a lawsuit is filed. You can check the Connecticut Judicial Branch website for a breakdown of all court costs.

Marshal fees and costs can also be significant, with collectors taking an additional 15% from you every time they execute on a bank levy or wage garnishment. This means that even small debts can become impossible to resolve.

Collection attorney fees will be granted by the court when a judgment is entered against you, and as the debtor, you'll be required to repay all attorney fees incurred by the creditor. These fees can be very substantial, especially in relation to smaller debts.

Here's a breakdown of the types of debt collection fees you might incur:

It's worth noting that most collection lawsuits aren't defended, which means that interest, fees and costs can go entirely unchallenged in Court, resulting in large, unnecessary Judgment amounts subject to enforcement by Wage Garnishment, Attachments, or Judgment Liens.

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The amount you owe to a debt collector can be a mystery, but it doesn't have to be. The Fair Debt Collection Practices Act requires debt collectors to provide written validation of the debt within five days of making first contact.

You need to get to the bottom of where the debt came from, how much it was originally, and how it got to be the amount it is now. This information is crucial in determining the accuracy of the debt amount.

Debt collectors can add fees to your debt, but you shouldn't just take their word for it. You have the right to dispute the debt amount if you think it's incorrect.

The collection agency must respond to your dispute and provide a document outlining all the fees and interest charges that caused your debt to swell. This document can be a game-changer in understanding your debt situation.

Once you receive this document, you'll know exactly how your debt has grown over time. This knowledge is essential in making informed decisions about your debt.

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