Can a Collection Agency Charge More Than the Original Debt?

If your debt has been sold by your creditor to a collection agency, you might be wondering whether a collection agency can charge more than the original debt that you owe? We will answer this question in more detail below.

Can a Collection Agency Charge More Than Original Debt?

Yes, a collection agency can charge more than the original debt that you owe them, however, the collection agency can only charge you fees and interest that were set forth in the original agreement between you and your lender or creditor. They cannot charge you more fees than initially agreed upon between you and your lender.

This is so because there are State and Federal Laws in place, such as the FDCPA (Fair Debt Collection Practices Act) that dictate that a collection agency can only charge you interest and fees listed in the terms of the original agreement between you and your lender. So, if a debt collector has charge you fees that are not listed in your original agreement, you should contact the collection agency to understand exactly what fees and interest they’re charging you. If they are charging you more than what was initially agreed upon, you should be aware that you have the option of contacting your State’s Attorney General to inform them that the collection agency is violating the law by charging you unlawful fees.

For example, if you agreed to pay a $50 late fee for every month that you’re late on making your credit card payment, a collection agency that purchases the debt cannot charge you more than that fee. If they are, you can file a complaint against them with your State’s Attorney General office and they may be able to provide you with the legal options that you have against your debt collector.

When Does a Collection Agency Get Involved?

Typically if you default on a debt, such as credit card debt, auto loan, or any other type of debt, your creditor may sell the debt to a collection agency for less than what you owe. The collection agency then proceeds to attempt to collect the debt from you. When collecting the debt, many collection agencies charge additional fees and interest on the amount that’s due. Some people have reported a doubling of the amount that they owe.

As mentioned previously, you should keep in mind that debt collectors are only able to collect money you agreed to pay under the terms of your agreement, so if your agreement states that you’re liable for interest and fees, there is nothing stopping debt collectors from collecting such interest and fees. However, some debt collectors go above what they can charge you, so it’s important that you’re aware of what they can charge you.

Can a Collection Agency Charge You Interest?

Debt collectors can only charge you interest that you agreed upon with in your original agreement, meaning they cannot charge you more than what was initially agreed upon. So, if your contract included a low interest rate, a collection agency cannot charge you more than that interest rate. The same applies to late fees. If your agreement did not include a late fee, you cannot be charged a late fee. This prevents collection agencies from being punitive, charging you fees and interest simply because you failed to answer their phone calls. For example, if you have an unpaid medical bill where you did not agree to be charged late fees or interest in the event that you did not pay, the collection agency cannot charge you more than the dollar amount of the bill.

Can More Than One Collection Agency Report the Same Debt?

When you debt is sold to a collection agency, your debt can be sold to a collection agency. When your debt is sold to a collection agency, both the original creditor and the collection agency can report the unpaid debt on your credit report. The original lender will report that the account has been paid late and/or charged off, and the collection agency can add a collections account to your credit report, significantly lowering your credit score.

That said, can more than one collection agency report the same debt?

Oftentimes a collection agency may attempt to collect the unpaid debt for a certain amount of time, after that, the collection agency may sell the debt to a different collection agency, and this is totally normal and permitted.

However, if a collection agency sells a debt to another collection agency, you can end up with two collections accounts for the same debt. If this happens to you because your debt was sold from one debt collector to another, you should dispute the collection account that was previously report to have it removed from your credit report. The reason for your dispute should be labeled as the debt collector no longer has collection authority on the account. Provide any evidence that you may have and the debt should be removed from your credit report by the credit reporting bureau.

However, you should first contact the previous debt collector and explain your situation to them. If they agree to remove the collection account, then good you’re done. However, some will refuse to remove it, and so you will have to dispute it with the credit reporting bureau reporting the collection account.

After you file the dispute, the debt collection agency will have to validate the debt and show that it’s an active debt. Of course, since it sold the debt and transferred it to a different collection agency, it will not be able to do so, and the credit reporting bureau will remove the collection account from your credit report. In the event that the credit reporting bureau refuses to remove it from your credit report, you have the option of contacting the Consumer Financial Protection Bureau and explaining your situation to them.

The Bottom Line – Collection Agency Charging More Than Original Debt

At this point, you should know that although a collection agency or debt collector can charge you more than the amount of money you owed, they are limited to charging the interest and fees in your original agreement if such terms were included. If no interest and late fees were included, they cannot charge you such fees. If you have any general questions or comments, please feel free to leave them in the comments section below.