Can collectors add surcharges (interest, fees, charges)?

This folder examines the definition of "debt" under the FDCPA. Whether a "debt" is the subject matter will determine whether the FDCPA applies. Case law and the definition under the FDCPA differentiate consumer debt from business-related debt.
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David A. Szwak
Posts: 1974
Joined: Thu Jul 13, 2006 11:19 pm

Can collectors add surcharges (interest, fees, charges)?

Post by David A. Szwak »

Can debt collectors add surcharges (interest, fees, charges or expenses) to the original debt?

Section 808(1) prohibits collecting any amount unless the amount is expressly authorized by the agreement creating the debt or is permitted by law.

1. Kinds of amounts covered. For purposes of this section, "amount" includes not only the debt, but also any incidental charges, such as collection [53 Fed. Reg. 50108] charges, interest, service charges, late fees, and bad check handling charges.

2. Legality of charges. A debt collector may attempt to collect a fee or charge in addition to the debt if either:

(a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or

(b) the contract is silent but the charge is otherwise expressly permitted by state law.

Conversely, a debt collector may not collect an additional amount if either:

(a) state law expressly prohibits collection of the amount or

(b) the contract does not provide for collection of the amount and state law is silent.

3. Legality of fee under state law. If state law permits collection of reasonable fees, the reasonableness (and consequential legality) of these fees is determined by state law.

4. Agreement not in writing. A debt collector may establish an "agreement" without a written contract. For example, he may collect a service charge on a dishonored check based on a posted sign on the merchant's premises allowing such a charge, if he can demonstrate that the consumer knew of the charge.
David Szwak
Chairman, Consumer Protection Section, Louisiana State Bar Association
Bodenheimer, Jones & Szwak
509 Market Street, 7th Floor
Mid South Tower
Shreveport, Louisiana 71101
318-221-6444
Fax 318-221-6555
David A. Szwak
Posts: 1974
Joined: Thu Jul 13, 2006 11:19 pm

Post by David A. Szwak »

Section 808(1) prohibits debt collectors from collecting any amount unless the amount is expressly authorized by the agreement creating the debt or is permitted by law.

For purposes of this section, "amount" includes not only the debt, but also any incidental charges, such as collection [53 Fed. Reg. 50108] charges, interest, service charges, late fees, and bad check handling charges.

808(2) Legality of charges. A debt collector may attempt to collect a fee or charge in addition to the debt if either:

(a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or

(b) the contract is silent but the charge is otherwise expressly permitted by state law.

Conversely, a debt collector may not collect an additional amount if either:

(a) state law expressly prohibits collection of the amount or

(b) the contract does not provide for collection of the amount and state law is silent.

808(3). If state law permits collection of reasonable fees, the reasonableness (and consequential legality) of these fees is determined by state law.

808(4). A debt collector may establish an "agreement" without a written contract. For example, he may collect a service charge on a dishonored check based on a posted sign on the merchant's premises allowing such a charge, if he can demonstrate that the consumer knew of the charge.
David Szwak
Chairman, Consumer Protection Section, Louisiana State Bar Association
Bodenheimer, Jones & Szwak
509 Market Street, 7th Floor
Mid South Tower
Shreveport, Louisiana 71101
318-221-6444
Fax 318-221-6555
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