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Credit Card Applications » News » Other » Debt Collection Laws

Debt Collection Laws

February 12, 2009 | Updated on February 12, 2009
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The content is accurate at the time of publication and is subject to change.

Debt Collection Fees on Your Credit Card Debt

Not everyone owing a credit card debt or any other loan debt has encountered the importunity of debt collection agencies. But those who have suffered not only from the collectors' abuse and threats but also from the odd extra fees charged on top of the outstanding original debt.

A typical scenario is you pay the whole debt to the creditor but a few days later you receive a call from the debt collection agency saying you still owe money. The amount may vary and may include not only a one-time charge but also interest accrued to the balances due.

It hurts, especially if the legal collection of fees is not mentioned in the agreement or not allowed by the state law. Mind it as you apply for a credit card online. If there is one of these two provisos, be sure the law is violated and the debt collection fees are just a fraud.

As a lawful credit cardholder who signed the contract with the bank and agreed to its terms and conditions, you should know and protect your rights. You are not obliged to pay any additional fees imposed by the collection agency only because they demand these fees. For details on debt collection provisions and limitations, refer to the debt collection law - Fair Debt Collection Practices Act. Effective since 1977, the act has protected consumers from abusive collection practices, threats, harassment and illegal charges related to the debt collection.

In a few words, a debt collection agency is prohibited from collecting any amount, including not only the debt itself but also any collection charges, service and check handling charges, if the law does not allow it. Also, any extra fees or interest are not allowed unless the cardholder agreement stipulates their legality.

In states where the law permits the collection of additional fees, interest rate and other charges associated with debt collection, these fees are set as reasonable and determined by the law. So, you should inquire about the "reasonable" amount to make sure the law is not violated and you do not pay what you don't owe.

In most cases your credit card contract will include the provision of reasonable collection fees if your account is delinquent and sent to the collection agency. The collection action may also include interest, late fees and other charges applied to the outstanding balance.

Even if you are legally liable for the reasonable debt collection fees, there are a number of cases when you should dispute and refuse to pay them.

For example you did not have a delinquent debt but your bank sent it to the collection agency. Immediately settle it with your creditor. If you really paid the debt in full you can prove it. Remember that it is reported to credit bureaus, damaging your credit score.

Or, you paid the full debt to the bank but the collectors are still calling you. If your debt has been sold by the bank to the collector, the bank no longer has any rights to your account. The payment shouldn't have been accepted by the bank. Again, dispute it with the collector and refer them to your bank. It's between them only.

Take every step to ensure against illegal debt collection fees. They are the last thing you want struggling to pay on your bad credit card debt.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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