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Can a Collection Agency Add Fees on the Debt?

Chloe Meltzer | December 02, 2022

Chloe-Meltzer
Legal Expert
Chloe Meltzer, MA

Chloe Meltzer is an experienced content writer specializing in legal content creation. She holds a degree in English Literature from Arizona State University, complemented by a Master’s in Marketing from California Polytechnic State University-San Luis Obispo.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Win in court against debt collectors.

Summary: Do you have a collection agency after you for an old debt? Worried they're adding additional fees to your balance? Find out what debt collectors can and can't charge to your account.

When a creditor sells your debt to a collection agency, it means that the collection agency now owns the debt. That agency has many rights but also needs to abide by different rules.

Debt collection agencies are legally allowed to add additional interest and fees to your overall balance. This eventually leads to the total amount being more than what you owed to the original creditor.

There are federal and state laws that govern how collections are handled. One of the federal laws is the Fair Debt Collections Practices Act (FDCPA). This law regulates many things, with one of them being the fees a collection agency can charge. Knowing these laws and how they affect you can help you to prevent being taken advantage of.

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Understanding the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is a federal law that governs how debt collectors may try to get you to pay a debt. Specifically, the FDCPA regulates the following:

  • Debt collectors are not allowed to lie or use deceptive tactics
  • May not call you at any hour of the day (only between 8 am and 9 pm)
  • You may ask a debt collector to stop contacting you, and they must comply.

The FDCPA applies to third-party debt collectors, but not original credit card companies. Each state also has its own protections as well. In some cases, the same laws that govern the FDCPA may also apply to original creditors depending on state laws.

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Can a collection agency add fees on the debt?

Under the FDCPA, if a debt collector is attempting to collect on your debt, they need to do so according to the original contract you signed. This contract refers to the one you signed with your original creditor. Even though this debt was most likely purchased from the original creditor (or someone else who had purchased it from the original creditor), the terms are passed down through the chain of ownership.

It is important to know this because a debt collector cannot add fees to your debt without permission from the courts. This means that you will need to have a judgment placed upon you before any fees are added.

How to avoid a judgment

To avoid fees being added to your debt, you should avoid a judgment. This can be done with a few actions. First off, you want to ensure that you respond to the debt. If you respond to the debt, then you will go through the process of being able to fight your debt. If you do not respond properly within the allotted period, then a judgment will be placed against you.

The debt collector will then be able to seek to collect fees on your debt. In some cases, this includes costs for collection efforts, such as phone calls, mailings, and even legal expenses. Despite this, they will only be added on after a judgment is issued by the courts.

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Interest fees may be added to outstanding debt

There is one main exception in regards to collecting fees on your debt, and this is interest. There is always an interest rate that is clearly stated in your original contract. Interest rates are defined and should be straightforward.

Any time you are dealing with a debt lawsuit, you should keep full copies of your written contractual agreements. This will ensure that you have proof of the fees that can legally be added, including your interest rate. Should there be any questions regarding terms of payments, you will have this to back yourself up. It could prove helpful in court.

Filing a lawsuit against a debt collector

Although expenses related to the lawsuit like court filing fees and service fees can be added to your total if a judgment is placed against you, you may have options. Legal fees associated with the lawsuit can only be added if you have been sued, and if a judgment is placed against you If a judgment has not been placed against you, then you may be able to file a countersuit.

For example, you may sue a debt collector who has violated the FDCPA. In this case, you may recover any damages because of this violation, but you may also be awarded up to $1000. It is also common that the debt collector will drop their original debt collection suit against you in hopes that you will settle the case or drop it altogether.

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