Interest on Debts (when no judgment
exists)
Section 808(1) prohibits debt collectors from collecting
any amount unless the amount is expressly authorized by the agreement creating
the debt or is permitted by law. For purposes of this section, "amount"
includes not only the debt, but also any incidental charges, such as collection
[53 Fed. Reg. 50108] charges, interest, service charges, late fees, and bad
check handling charges.
808(2) Legality of charges. A debt collector may attempt to
collect a fee or charge in addition to the debt if either:
(a) the charge is expressly provided for in the contract
creating the debt and the charge is not prohibited by state law, or
(b) the contract is silent but the charge is otherwise
expressly permitted by state law.
Conversely, a debt collector may not
collect an additional amount if either:
(a) state law expressly prohibits collection of the amount
or
(b) the contract does not provide for collection of the
amount and state law is silent.
808(3). If state law permits collection of reasonable fees,
the reasonableness (and consequential legality) of these fees is determined by
state law.
808(4). A debt collector may establish an "agreement" without
a written contract. For example, he may collect a service charge on a
dishonored check based on a posted sign on the merchant's premises allowing
such a charge, if he can demonstrate that the consumer knew of the charge.
Interest on Debt (when a judgment
exists)
States have their own rules for adding interest to
judgments. Sometimes called statutory charges, because the amount of interest
is set by law. Typically, interest begins to accrue from the date the judgment
is rendered until the judgment is paid in full. Use this Garnishment Laws and
Procedures link to learn what about your State's interest rate on
judgments. After locating your state's garnishment procedures, look at the
"Interest Rate at which Judgments Accrue " section located just after the
procedures.
Interest on overdue taxes, child support and student
loans.
The interest on overdue federal taxes and defaulted student
loans is set by federal law. Interest on overdue child support is set by state
law. See theIRS FAQ for information on overdue taxes. Use this
FAQ link to
learn more about interest on defaulted student loans. Use this child support calculator link to learn more about child
support interest.
Legal Fees:
Legal fees refer to charges
for an attorney's services and may also include court costs such as filing
fees. Creditors typically add the legal costs of collecting a debt to the
account balance. There is a distinct difference between lawyers that are debt
collectors and lawyers that are representing a creditor. An attorney or law
firm whose efforts to collect consumer debts on behalf of its clients regularly
include activities traditionally associated with debt collection, such as
sending demand letters (dunning notices) or making collection telephone calls
to the consumer, are debt collectors and subject to the FDCPA and must follow
the rules outlined above.
On the other hand, an attorney whose practice is limited to
legal activities (e.g., the filing and prosecution of lawsuits to reduce debts
to judgment) are generally exempt from the FDCPA but may still be liable under
state collection laws.