Fees on debts sold to collection agency

They can tack on what they want. That way they can settle for more to avoid going to court. collection agencies look at the bottom line. If they bought your debt of 1100.00 and tacked on 300 if they settle for 800 they have made a huge profit. Send a debt validation letter and ask how they came up with that figure. If they validate the debt make them a settlement offer. A tax debt however may be penalties applied to the debt by the taxation division and the collector may have simply been hired and is going by the guidelines of the dept. according to their contract. You may still have a chance to settle but it may be more difficult and not as flexible.
The troll should stop wasting company time on the computer or he will get fired and have to deal with the CAs himself. What goes around comes around troll guy!

Is there a limit as far as percentages, that they can tack on for fees?

The fdcpa prohibits charges that are above your contract and restricted by state laws. In other words if you debt allows for interest charges the collector can collect those charges but cannot tack on any additional charges if your state laws prohibit this. This is a tough one to interpret. I am looking for a second opinion on this!

This appears to be a tuition account for a state school. If you look in the school handbook, you will see that by attending the school you agree to all policies which include all collection cost and court and legal fees. Since your school is a state school, they are deemed non profit and will not take a loss, so you pay all the costs of collections. Collection costs for tuition accounts can be as high as 59%.

Also, tuition accounts are NEVER sold to a CA, only assigned under a contract.

I called up the school to see if it was possible to circumvent the CA to pay the amount, but they told me I have to go through the CA.

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When you said they are still reporting the full amount. Are you referring to your credit report. They have to report the correct amount currently owed. It all falls under FCRA. They can't misrepresent the tradeline in what is owed and what it is.

They can only tack on fees as allowed by contract or state law, as a previous responder stated.

Otherwise, they are "junk fees" that you don't have to pay.

Most states allow for up to 6% interest on debts, unless the contract states otherwise. However you would need to check your states statutes regarding consumer law to determine if your state allows collection agencies to even apply interest.

--Otherwise, they are "junk fees" that you don't have to pay. --

No they are fees that account for the time we have to spend getting professional debtors to meet their obligations. Be a man and pay your bills.

The only fees you have to pay are what are enforced in the contract or the % interest rate that is allowed by state law, unless state law allows additional collection fees or that the fees are given provision in the contract. The best thing to do is to first review your contract and review your state law regarding consumer law. That will give you the information that you need.

Tuition accounts generally do not charge interest. OP is being charged for the cost of collection.

Also keep in mind the OP stated that this has been submitted to the Utah State Tax Commission. This debt is for a public school which in turn equals state debt. They can charge the borrower whatever it costs them (the school) to collect the debt.

Doh, I wasn't thinking about the fact that it was a ED debt. Your right Soaplady.

I called the collection agency up today and they are saying that I am being charged 18% annually for this account. My state tax return was withheld each year for the last 3 years (soon to be 4). How can I differentiate between "junk fees" and legitimate rates?

The amount they are taking is now $100 dollars less, according to them, than what was originally owed, based on their fees accrued over the years.

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