How much in interest can a collection agencyreceive on charged-off credit card?

UPDATED: Jan 12, 2011

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How much in interest can a collection agencyreceive on charged-off credit card?

I had a credit card with a limit of $300. I did not charge anything in over a year. With late fees and over limit fees, the balance due on my 09/08 statement was $449.98. My credit report says that it was charged off in 09/08 but the amount listed is $812. How can there be such a huge difference? Shouldn’t the statement and charge off be the same? A collection agency has the amount as $1,102.69. It is not separated to show fees and interest. UT says the prejudgment interest 10% is that for all collection accounts? What they can charge for interest per year?

Asked on January 12, 2011 under Bankruptcy Law, Utah


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

If an account was charged off, then the company that charged if off cannot collect anything--including interest--on it; however, a company, such as a collection agency, that buys the account may do so, either per the terms of the account agreement or per statutory pre-judgment interest. A 10% rate is actually fairly low for a credit card in default--rates can reach 20% or even more--so a 10% rate would not be a problem. What could be a problem is if there was innaccurate record keeping or deliberate malfeasance. you are right in that the amount charged off should be the balance on the card at that moment--and then an additional interest accruing after that (such as by a collections agency which bought the account) should  be based on the amount as of then. You have a right to only pay the correct amount, and you have a right to have the creditor prove what you owe, including by providing a correct breakdown of how the charges are determined.

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