Question: I have an outstanding debt of $750 with a college which is currently handled by a collection agency. The agency is telling me my debt is now $1,000. Is it legal for the debt collector to add collection fees and refuse to settle for my original amount?
Answer: What debt collectors can and can’t do sometimes depends on the laws of your own state, as well as the types of debts in question. For example, debt collectors can’t legally do anything to you (such as sue you in court or get a judgment against you) once the statute of limitations has expired on a credit card debt.
But with student loans, there is no statue of limitations, so bill collectors can pursue you forever over those debts. I assume your debt fits into the latter category, since you said your $750 bill was with a college.
Federal law prohibits debt collectors from charging you any thing above the amount you actually owe, unless that’s permitted by the laws of your own state or the terms of your original agreement with your creditor.
You said you signed no such contract with your creditor. Double-check the fine print of any agreement or paperwork you have.
There are often clauses that give creditors or bill collectors the right to impose additional “collection” costs on borrowers.
The federal Fair Debt Collection Practices Act is the national law that governs bill collectors. This law is enforced by the Federal Trade Commission, so if you have any complaints about a debt collector, reach out to the FTC (http://www.ftc.gov).
Also, although there is no federal requirement that collection agents be licensed or registered, many states to require this.
Check the laws in your state and see if they require debt collection agencies to be licensed or bonded. A good place to start is this document from the PrivacyRights.org.
If your state isn’t on the list, contact your state Attorney General via the National Association of Attorneys General (http://www.naag.org).
Ask for the collection agency to show you in writing that it’s licensed and put everything else in writing too, as opposed to just calling you on the phone and demanding payment.
