Can a Collection Agency Collect More Than the Charge Off for a Credit Bill?

Several federal laws control the activities of collection agencies in seeking payment for debts. Laws prevent collection companies from harassing debtors and also set restrictions on the hours during which collection calls can be placed. However, collection agencies do have the right to collect more than the charge-off amount. Laws may vary by state and collection agency, but there are limitations.

Bad Check Fees

The fees for bad checks vary by state, but there are some common laws. For example, many states have laws that allow collection agencies to collect double or triple the amount of the check. Many times this is after the check has bounced one to three times. There are often minimums and maximums to these amounts; many states have a $100 minimum, so if triple of the amount of the check is less than $100, the amount collected will go up to $100. There are also maximums imposed in many states; for example, California has a $1,500 maximum of per check.

Other Collection Account Fees

Collection agencies can also collect on credit cards and other loans like car, student and home loans. In these cases, the collection laws are spelled out in the credit card agreement or loan documents for a car or mortgage. Again, these differ by company and state, but it is possible to have signed an agreement that if you fall behind on your payments, the entire amount is due immediately. It is important to read the fine print to see what the penalties for being sent to collections may be.

Attorney Fees

Many contracts have an attorney clause that allow the collection agency to collect attorney fees. Again, this is often in the fine print, but it will usually state that if all collection efforts are exhausted and it is necessary to go to court, then the debtor must pay reasonable attorney fees. These attorney fees are regulated by state and county. There are guidelines and limitations on the fees charged by attorneys.

Interest on Bad Debt

Lastly, interest may accrue on bad debt. Even if there wasn't interest in the original loan or credit card, there is often a clause that allows a company to charge interest if payments aren't made on time. Interest rates on collection accounts are also regulated by the government. They are determined by the type of account and the state in which the account originated. These interest rates are listed in the original documents, although, again, it may be in the fine print. It is always important to carefully read documentation to understand what fees may occur if an account is sent to collections.