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Can Collection Agencies Charge Interest?


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I was attending college for a while but had to take a few semesters off. I was working as a waitress at the time and was not able to pay my school bill. After a few months the bill was sent to a Collections agency, actually they claim to be a law firm. Anyhow, now I have a MUCH better job and am able to pay my bill and would like to start school again. But here's the thing, after receiving the letter from the firm stating they would now be handling my bill I gave them a call to set up a payment plan. The balance on the letter said 910.34 (the letter was dated 3/6) but when I speak to the representitive (on 3/11)they tell me my balance is now 973.77. I'm like how is that possible, she says that once my bill comes to their office they charge interest for everyday the bill is not paid in full. I ask how much interest she says 9%. This just doesn't seem right to me. I've dealt with collection agency's before but never have I been charged interest on a balance. I immediately got online to look up whether or not I'm being dooped but can not seem to get a straight answer from anywhere. I've called the FTC, 311, my state attorney general's office but no one is telling me if this is ok or not. Anyone have any ideas? Just to clarify it is not a student loan that I owe, it is money that I owe directly to the school. Any help would be great! I'm not going to just hand over my money to these ppl with out knowing my rights!

and just to clarify:

Its not a student loan. It's money I owe directly to the school. Also the school wasn't charging any interest when it was managing the account. The balance was the same from the time I was first billed up until the time it was sent to the collections agency. And I haven't made any payments to the collections agency as of yet. I'm holding off until I can get some more information.

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Whether you can be charged interest depends on a couple of things.

1) Does your agreement with the original creditor (the school) provide for interest charges on unpaid balances?

*If the answer is "yes," then an assignee who purchased the entire bundle of rights under the account, and not just the receivables on the account, may charge interest under the original terms or the agreement.

*If the answer is "no," then under no circumstances can the assignee charge interest. They must purchase that right, and if it never existed, they could not have purchased it.

2) If you are dealing with a debt collector who does not own the account, but is only attempting to collect on behalf of the school, your answer is "no." They cannot charge the extra fees. Only the school can charge the fees.

Contact the school directly. Find out who owns the debt; don't be afraid to request a copy of the financial agreement you made with the school. If the school still owns the debt, you have a right to deal directly with the school and not the debt collector if you choose. If the school no longer owns the debt, non-payment shouldn't keep you from enrolling again. If the school still wants to be fussy about it, there are only about 20,000 colleges in the United States. Pick another one.

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I’ve had to deal with this issue with my daughters and kids of friends. Me and an attorney friend……we love to make life miserable for JDC and predatory lenders..

urge these actions and for you to know this:

Defaulted student loan won’t stop you from going to college. It may make it tough to sign out another student loan. Depending upon which state, a student can get a year’s deferment just by writing a letter.

YOU DON”T WANT TO DEAL WITH A COLLECTOR! Horror stories of collectors taking student’s money and NOT paying the lending institution, and then tacking on 40% to 50% on top of the student loan principle.

Send the collector a C and D with a copy to the lending institution. Contact the lending institution and start dealing. A student can get most of the fees and penalties removed and pay directly. Usually after six-months of paying a student will be able to take out other student loans.

Good luck! ……your situation is so typical. College teaches a person resource management. This is all part of the program.

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