Jump to content

How much Interest can be added?


Swatch
 Share

Recommended Posts

I was just wondering how much interest can be applied to the principal amount on a debt? The reason I am asking is because I received a letter from a Van Ru Credit Corporation with the principal amount being $4600 and the interest amount of $2400 adding up to around 7000.

Link to comment
Share on other sites

If they can produce the original contract then it depends on what the contract says. The maximum amount also depends on the contract and state law. The question still goes back to "if" they can provide the original contract. The odds of Van Ru producing the contract is very unlikely. 

 

Van Ru normally acts as a CA for a JDB. They add these crazy amounts because it scares people. It may not be legal, but it makes them tons of profit.

 

This is how the "game" works: 

 

Original debt  = $2,000 which the JDB probably paid around $50.00 for.

 

Amount claimed = $4,000  which is the original amount plus $2,000 interest.

 

First Letter = We will settle with you now and give you a 25% discount!!!! They make a $2,950. profit minus a little administrative cost.

 

Second Letter = We will settle with you now and give you a 50% discount!!!!!! They still make a $1,950. profit minus a little administrative cost.

 

The reason they get away with this is because it works so well. They give these "deep discounts" to people and many give in. Odds are its not legal, but very few challenge them on it.

 

More than likely this is an FDCPA violation. 

The collector cannot misrepresent the amount you owe. [15 USC 1692e] § 807(2)(a)

The collector can't add on any extra fees that your original credit or loan agreement doesn't allow. [15 USC 1692f] § 808(1)

 

It may not be enough to win a case, but add a couple of other violations and you have a case against them. Van Ru is notorious for leaving messages that violate the FDCPA also. Keep all messages recorded in a safe place and keep any letters they send you. Even if you don't pursue a case against them the evidence alone is enough to make them go away.

  • Like 2
Link to comment
Share on other sites

Another question is when did they start adding the interest. Even if they have the contract and the rate is legal the method may not be. Many of these companies go back and calculate interest from the time the OC charged off the account. In other words they charged interest before they even "purchased" the debt. This is known as post charge off interest and Asset Acceptance recently got caught doing this in Michigan. 

 

McDonald-v-Asset-Acceptance

 

http://www.foxbusiness.com/personal-finance/2013/10/16/how-much-can-collectors-legally-boost-charged-off-debts/

Link to comment
Share on other sites

@ArtVandelay

 

There's a federal case out of IL that's interesting.  Simkus v. Cavalry Portfolio.  Cavalry charged interest from the date of charge off, and Simkus that they couldn't do so because Bank of America had not charged interest the account was charged off.

 

The court ruled that because B of A had waived the right to charge interest after charge-off, Cavalry was not allowed to do so either.  They could only add interest after the date of their purchase of the account.

 

http://scholar.google.com/scholar_case?case=2198172138428082436&q=%22SIMKUS+v.+CAVALRY+PORTFOLIO%22&hl=en&as_sdt=6,41

  • Like 2
Link to comment
Share on other sites

There's a federal case out of IL that's interesting.  Simkus v. Cavalry Portfolio.  Cavalry charged interest from the date of charge off, and Simkus that they couldn't do so because Bank of America had not charged interest the account was charged off.

 

The court ruled that because B of A had waived the right to charge interest after charge-off, Cavalry was not allowed to do so either.  They could only add interest after the date of their purchase of the account.

 

@BV80  Thanks! I didn't know about this one. 

 

The funny thing is that Van Ru acts as a CA for Calvary on regular basis. Calvary is known for charging crazy amounts of interest and fees. I had one where they charged me over 100% in less than three years. 

 

This is great news for the OP also since IN and IL are both in the Seventh Federal District! 

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.. For more information, please see our Privacy Policy and Terms of Use.