Can a collection agency charge daily interest?

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Can a collection agency charge daily interest?

So I received the typical, “We will pursue you if you don’t pay” letters. I settled for certain a payment plan but they told me 6% daily interest. I haven’t made my first payment yet. My overall balance ($2,627) could increase $2,000 in one month. Is this possible? I wanted to settle out of court because I’m sure the judge would take the hammer to a person. The collection agency is in MN and I live in NE.

Asked on September 20, 2011 under Bankruptcy Law, Nebraska

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Have they sent you the settlement papers yet?  It sounds like it is a bit of a scam.  Although you think that a Judge will hammer you, I think that you are wrong here.  In this day and age the courts are quite understanding of the economy and the difficult positions that people are in.  They welcome that there are those that wish to settle the matters before them and pay their debt rather than file for bankruptcy and extinguish the debt.  And they can be your biggest advocate to an outrageous settlement such as 6% interest daily, which is, I am sure against public policy.  I would forward a copy of the settlement agreement to the state attorney general's office consumer complaint division.  And your being in a different state does not matter. You will be sued where you live.  So here is what I would do.  I would call them and ket them know that you spoke with someone who stated that the agreement they wish you to sign is unconscionable and against public policy.  That you wish to settle the debt for a sum certain and with out interest accruing  And that if they refuse you will take your chance before a judge or "explore other options to extinguish the debt" as you qualify for federal programs to do so.  Then see what they say.  Good luck.


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