Can a Collection Agency Charge Interest on a Debt?

Debt collectors often add interest to the amount you owe. You might wonder if this practice is legal. The answer depends on your original agreement with the creditor.

Collection agencies can charge interest, but only under specific conditions. They must follow strict rules about when and how much interest they can add.

Our partner Solo helps you fight back when collectors overcharge. You can protect yourself from unfair practices and challenge unlawful interest charges.

Collection Agencies Can Charge Interest on Your Debt

Debt collectors must follow clear rules about charging interest. The Consumer Financial Protection Bureau states that collectors can only charge interest if two conditions are met.

First, your original loan or credit agreement must allow interest charges. Second, state laws must permit these fees.

If your original agreement says nothing about interest or fees, collectors cannot charge more than you originally owed. They can only add court costs if a lawsuit is filed.

How Much Interest Can Collection Agencies Charge?

Collection agencies can only charge what your original agreement specified. A credit card with 5% interest means collectors can charge 5%, nothing more.

Can collection agencies charge more than you owe? Yes, but only your original debt plus the interest rate from your contract.

State laws vary on maximum interest rates and fees. Check your state’s laws to understand what collectors can legally charge you.

Can Collection Agencies Charge Interest on Medical Bills?

Medical bills rarely include interest charges. If a collector claims you owe medical debt plus interest, they’re likely breaking the law.

The exception involves medical loans from companies like AccessOne, MedCredit Financial Services, or CareCredit. These predatory lenders charge interest rates as high as 27%.

Hospitals cannot charge interest unless you sign an agreement that specifically includes it. Read all payment plans carefully before signing anything.

Medical debt combined with health concerns creates overwhelming stress. You don’t have to face this burden alone.

Your Rights as a Consumer

You have powerful rights when dealing with debt collectors. The Fair Debt Collection Practices Act (FDCPA) protects you from abusive collection tactics.

Knowing these rights gives you peace of mind. You can handle debt collection calls with confidence.

The FDCPA establishes strict rules for collector behavior:

• Collectors cannot call before 8 a.m. or after 9 p.m.
• Collectors cannot use vulgar, obscene, or threatening language.
• Collectors cannot discuss your debt with friends or family.
• Collectors cannot call you at work.
• Collectors cannot pretend to be law enforcement.
• Collectors cannot threaten legal action they won’t take.

These protections help you fight back against unfair practices. Use them to your advantage.

You Can Use the Statute of Limitations

Debt collectors hope you don’t know about the statute of limitations. This law limits how long you can be sued for debt.

Each state sets its own time frame, typically four to six years. Making a payment restarts this period completely.

Check your state’s statute of limitations before responding to old debt. You might not legally owe anything at all.

You Are Not Responsible for Zombie Debts

Collection accounts get resold multiple times. You might receive calls about debts outside the statute of limitations.

Collectors try to get you to acknowledge old debts. Avoid admitting you owe anything before verifying the details.

Acknowledging zombie debt can restart the collection time frame. Protect yourself by staying silent until you verify the facts.

You Can Ask for Proof of the Debt

The FDCPA requires collectors to send a statement within five days of contacting you. This statement must explain all debt specifics.

You can demand proof through a Debt Validation Letter. Collectors must prove the exact amount, interest charges, and original creditor’s name.

Debt validation forces collectors to justify their claims. Many cannot provide proper documentation.

You Can Ask a Debt Collector to Stop Calling You

Debt collectors must stop contacting you if you request it in writing. You still owe the debt, but the constant calls will stop.

Excessive calls already violate the FDCPA. Collectors can only call between 8 a.m. and 9 p.m., and not too frequently.

Keep records of all collection calls. Document violations to strengthen your defense.

How to Respond to a Debt Collection Lawsuit

Being sued by a collector doesn’t mean you’ve lost. You still have powerful options to defend yourself.

The first step is responding to the lawsuit with an Answer. Our partner Solo makes this process straightforward and effective.

Follow these three steps to respond:

Step 1: Answer Each Claim Against You

You’ll receive a Summons and Complaint listing all claims. Your Answer must respond to each claim individually.

You can admit, deny, or deny due to lack of knowledge. Most attorneys recommend denying as many claims as possible.

Strong denials create a powerful defense. Collectors must prove every claim they make.

Step 2: Assert Your Affirmative Defenses

Affirmative defenses explain why you shouldn’t be charged. The statute of limitations is the most common defense.

Other defenses include improper documentation, wrong debt amount, or identity theft. Choose defenses that match your situation.

Affirmative defenses shift the burden of proof to collectors. They must overcome your legal arguments.

Step 3: File Your Answer with the Court

File your completed Answer with the court clerk. Send a copy to the opposing attorney.

Use USPS certified mail with return receipt requested. Keep all receipts and tracking information.

Proper filing protects your rights. Missing deadlines can result in automatic judgments against you.

Example: Marco Fights Back

Marco faced a lawsuit claiming he owed $1,000 plus interest and court costs. He used our partner Solo to respond effectively.

Marco’s original credit card agreement didn’t allow added interest. He clearly stated this fact in his Answer.

The collection agency dismissed the case with prejudice. Marco’s defense saved him from paying unlawful interest charges.

Take Action Against Debt Collectors Today

You have the power to fight back against unfair debt collection practices. Knowledge of your rights is your strongest weapon.

Collectors count on you not knowing the law. They hope you’ll pay more than you legally owe.

Don’t let collectors take advantage of you. Respond to lawsuits, validate debts, and challenge unlawful interest charges.

You can resolve debt collection issues and protect your financial future. The right tools make all the difference.