Question: A creditor turned my unpaid bill over to a collection agency. The agency does not send monthly statements. They are wanting to charge $30 a month in a finance charges. Can they charge a finance charge / late fee without sending me a statement each month?
Answer: The finance charge is the dollar amount you pay to use credit which normally depends on the outstanding balance on a credit account and the annual percentage rate.
When a credit card company computes a finance charge each month, they apply the APR to the outstanding balance on your account. Finance charges go up and down based on your balance and interest rate.
You do not have a credit account with the collection agency therefore they should not be charging you a monthly finance charge nor should they send you a standard credit account monthly statement. Typically a collection agency is entitled to collect interest and fees if the debtor agreed to such terms under the original contract with the creditor and if your State’s statutes allow for such.
I believe the finance charge is more than likely beyond the terms of the original contract and the collection agency is probably not authorized to collect an amount beyond the costs that are actually attributable to its collection efforts.
The Fair Debt Collection Practices Act, Section 808 “Unfair Practices” says:
“A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation unless such amount is expressly authorized by law.”
Not every demand from a collection agency is legally enforceable and you are not legally obligated to pay what they are demanding. Under the FDCPA, a debt collector can only seek payment for an amount permitted by law or by the contract.
The original credit contract should tell you how much interest your contract called for upon default of the contract and your State laws will tell you how much a debt collector can charge for interest and fees.
It is not your responsibility to prove you do not owe the $30 finance charge; it is the responsibility of the collection agency to prove you owe the amount they are charging. You can send a debt validation letter, certified return receipt to the collection agency asking for a complete accounting of the amount they claim you owe and dispute the debt in its entirety. Also you can ask they provide the original contract, with your signature, showing you agreed to pay a collection agency finance charges.
It is also a good idea to make a complaint with the Federal Trade Commission along with your State’s Attorney General letting them know the collection agency is adding a $30 a month finance charge to a collection account. Good luck to you.