Can A Collection Agency Charge Interest?

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Mark Cappel

UpdatedAug 2, 2024

Can a collection agency continue to charge interest on a charged off account?

Can a 3rd party collection agency continue to charge interest on a charged off account?

Yes, a third party collection agent can continue to charge interest on a charged off account. At the write-off point, the creditor will transfer the debt to a late-accounts department, or has the option to sell the debt to a collection agent. The collection agent will buy the debt at a discount. However, the collection agent has the right to collect the entire balance due plus interest. Writing-off a debt, or charging off, does not mean the debtor is no longer responsible for the debt, or that collection efforts cease.

I encourage you to read an article I wrote which discusses collections advice and information in detail.

I hope this information helps you Find. Learn & Save.

Best,

Bill

www.bills.com/

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Did you know?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in Mississippi, 17% have student loan debt. Of those holding student loan debt, 11% are in default. Auto/retail loan delinquency rate is 8%.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.

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4 Comments

JJason, Aug, 2012

I had a garnishment that was levied against me, and paid in full to the court in February. The court didn't send the funds to the collection agent until August. After receiving the check from the courthouse, the agency told me that I still have a balance of about $150 due to interest that's accumulated since the garnishment was filed. Can they legally do this? They told me that it's not their fault that it took the court 6 months to send them a check, and that I'm responsible for the interest that's accrued in the meantime. Do I have any way of fighting this? It's frustrating to me, to say the least.

BBill, Aug, 2012

From what I have heard, this is more common than one would think. Unfortunately, my research shows that you are responsible for the interest, despite the fact that the court held on to the payment. Even though the late payment is not your fault, it also isn't the fault of the judgment-holder.

It is unfair and brutal that you take the hit for the court's inaction, but this is the world we live in.

LLilly, Feb, 2011

Is there a maximum APR a collections agency may charge on a CA account?

BBill, Feb, 2011

In California, the maximum rate for a collection account is 12%. The maximum rate a judgment-creditor can charge is 10%.