How to Understand Collection Agencies' charges
Hello, this is Lev Selecter, founder of 101creditrepair.com, and our today’s topic is whether or not collection agencies can charge high interest and fees, and the short answer is that in most cases, yes they can charge you interest and fees. And let’s elaborate a little bit. On the previous video I spoke about original lenders, credit card companies, and how they charge very high interest and fees, and we spoke about the decision of US supreme court of 1978 and also about the law passed in 1980 called Depository Institutions Deregulation and Monetary Control Act, which explicitly allowed big national banks to charge high interest overriding the local and usurer laws. Usurer means interest, and this usurer laws in different states are different, but generally what they do, they limit the maximum interest that the companies can charge. So this law of 1980 overrided these limitations. And also about UCC laws, Uniform Commercial Code laws, now, but what happens when you become late with your payment, let’s say on a credit card account, the credit card company will charge you high interest and fees for about 6 months. They will try to charge you as much as they can, ballooning their amount. Why they are doing this is because after 6 months they will charge off the account and they will receive money from the insurance company, so they will not lose the money, they will receive money from the insurance company. On top of that, they will make even more money, because they will show this account as a lost on their tax statement. And another thing they will do, they will sell this account to a third party collector. So, they’re out of the picture, they made some money on you, and now you’re dealing with a third party collector. So we’re talking about this situation, the collector is not a nationally chartered bank and they’re regulated differently. First of all, there is a law called fair debt collection practices act and in section 808 part one, it exclusively states that collector can charge interests and fees if their original contract with original lender has provision for that. Or if the law, the local law in the state allows for that. Now, usually the original contract says those provisions so the collectors can charge you interest and fees. Now the question is whether they can charge you the interest and fees as high as provided in the original contract? Now this is a gray area, and if you want answers well you either should talk to a local attorney who specializes in those issues. Or, as a first step, you can visit our website, 101creditrepair.com, and we’ll have resources sections where we have links to different laws including links to local laws by state, under usurer laws and UCC laws. Now, so let’s say the collector has the right to charge you interest and fees, now the question is, will the collector actually do that? Now it depends what they know about you, if they think that you have a lot of money and they can collect money from you. If you have property, if you have job, then they will try to charge you as much as they can and then may be eventually sue you for the full amount. Now, if they don’t think that they can pay, if you don’t have property, if you struggling, what will happen, they will try to settle with you for a small amount. Because remember, they bought this debt for 3, 4 cents in a dollar. So, even if you pay them a very small fraction of the original debt, the collection agencies still makes money. But if they cannot collect even that, what they will probably do, well depending on the size of the debt. They may completely abandon this debt or they may resell it to another collector and then the story will repeat itself. Okay, this is it for this video, and for more information, I recommend that you visit our website, 101creditrepair.com, where we have more videos like that, a lot of articles, resource section, and a very good guide on how to improve your credit score. Thank you for listening.