Interest Charges

[dizzyliz]

Okay, so if any of you have been following my posts, you will know that I have a CA Collecting for a JDB. (one that has not been validated yet). They told me over the phone that the amt. owed was $1,557... but the statement says it's $1,881. When I last talked with them they told me the extra amount was Interest Charges. That's over $300 in interest. So I decided to do an information search online to find out Calif. law regarding interest, This is what I found...

... - "A collection agency can add interest to your bill, however, the terms and rates depend on the circumstances of your particular account. The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) must be expressly authorized by the agreement creating the debt or as permitted by law... You are also entitled to an explanation from the collection agency as to how much they are charging you and why. You should ask them by letter to explain to you in writing." - ...

Does this mean that they can only collect interest charges if the contract from the OC states that they can? Or does this mean that they are allowed to collect interest?

[debtorshusband]

They can only charge interest as allowed by the original agreement.

This is why, when you send a DV letter, you want to ask for an accounting of how they arrived at the amount claimed. And in this case, a copy of the agreement which spells out what they're allowed to charge.

DH

[Florida_Bronco]

I'd like to see if there is any case law allowing a JDB to charge interest. Personally I could see it being argued that the above law only applies to collection agencies assigned to the account by the original creditor.

My personal feeling is that once a debt is charged off and sold to a JDB then the original contract is null and void and only that balance can be pursued, but I'd have to check to see if the law jives with my personal feeling.

[nascar]

My personal feeling is that once a debt is charged off and sold to a JDB then the original contract is null and void and only that balance can be pursued, but I'd have to check to see if the law jives with my personal feeling.

I agree with you on this, and there is some caselaw out there that leans toward the idea that an assignee of a receivable is entitled only to the receivable and not to other rights included in the original contract.

But you have to admit, there's a lot out there that goes against that as well.

Here's one of my arguments against it; You know a clause in a contract preventing assignments is generally unenforceable. Original creditors are pretty much free to assign to whomever they choose. However, that assignment cannot substantially impair the rights of the other party - in this case, that would be the debtor. What I mean by that is that the assignee has to be able to offer performance equal to that of the assignee. I'll use the old house painter example:

Joe hires Jim to paint his house. Jim is a professional house painter. Joes agrees to pay Jim $1000.00. Jim assigns the contract to his buddy, Fred, who is an unemployed alchoholic. Fred has never held a paintbrush in his life. Is Joe still obligated to Fred? The answer is no. Joe bargained for a service that only Jim could provide. Joe's assignment to Fred is not valid.

If thats true, then consider this;

Consumer enters into contract with credit card company because credit card company agrees to advance money on his behalf for purchases of goods and services in exchange for payment plus interest at a later date. Not only that, but credit card company offers all kinds of other extras like shopping discount, flyer miles, credit monitoring, online account access and other things. Consumer falls behind on payments and credit card company suspends consumer's account under the terms and conditions. Now, if consumer paid credit card company and brought account current, could credit card company reinstate consumer's rights under the agreement? Sure, it could.

What if credit card company assigned the account to JDB? How does that affect consumer's rights under the contract? JDB cannot reinstate consumer's credit privileges even after he pays. In fact, JDB can't perform any of the original creditors functions under the contract except to receive payment. The assignment materially affected consumers rights under the original contract, just as Joe's assignment to Fred affected Jim's rights.

There's caselaw out there that directly conflicts with what I've just said but I still think there's a valid argument in there somewhere - not against an assignment per se, but against exactly what is assigned and assignable. I have to go to work now ...