October 13, 2015
What is the maximum interest and fees a buyer of old credit card debt can charge?
Dear Consumer Ed: I have some outstanding credit card debt from seven years ago. I was recently contacted by a debt collector, who is not the actual creditor, attempting to collect this debt. They want me to pay fees and interest that have nothing to do with the original debt. Can you tell me what is the maximum percentage of interest and collection charges that a buyer of old credit card debt can charge the debtor in the state of Georgia? Consumer Ed says: It’s critical that you consult the original credit card agreement to see what (if any) additional fees, interest or other expenses would be collectible. If the original agreement (or the agreement between the originator and a collector) permits such costs, a debtor may be required to pay reasonable costs associated with collecting the debt, such as court costs and credit report fees; however, debtors are entitled to an explanation from the debt collector as to what is being charged and why. If you’re the debtor, you should make a written request to the debt collector to provide such an explanation in writing; the collector is obligated to comply. If the credit card agreement does not say anything concerning collection costs and interest rates, Georgia law allows pre-judgment interest to be collected at a rate of seven percent. Post-judgment interest can be collected at “a rate equal to the prime rate as published by the Board of Governors of the Federal Reserve System, as published in Statistical Release H. 15 or any publication that may supersede it, on the day the judgment is entered, plus 3 percent.” It’s also important that you understand the limits on what’s known as “old debt” (i.e., time-barred debt). In Georgia, the statute of limitations on credit card debt is six years. After six years of no payments, the debt is considered time-barred. Keep in mind that debt being time-barred doesn’t mean it can’t be collected, only that the debtor can’t be sued on it. Purchasers of debt that is “old” (i.e., time-barred or already in default) can be considered “debt collectors” who fall under the purview of the Fair Debt Collection Practices Act (“FDCPA”). The FDCPA prohibits debt collectors from using any unfair or unconscionable means to collect or attempt to collect any debt. That includes the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt, or permitted by law. If you are certain the statute of limitations has expired, you can use that fact as justification that you do not have to pay the debt. But, be careful not to restart the statute of limitations. You can take many actions with an account, perhaps even inadvertently, that will trigger a restart of the statute of limitations. For example, making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account are all actions that can restart the statute of limitations on an account. And, when the clock restarts, it restarts at zero, no matter how much time had elapsed before the triggering activity. Also note that old debt is not a credit card balance that you may have racked up years ago but are still making minimum monthly payments on. In this case, you will not be considered to have defaulted on the debt. In addition, be aware that some debt collectors knowingly file lawsuits to collect on expired debts. Many people who are sued on a debt they know is very old simply don’t answer the lawsuit, because they believe the statute of limitations has run. THIS IS A BIG MISTAKE. The statute of limitations is an affirmative defense that must be pled in answer to such a suit. Therefore, if you are sued and do not answer the lawsuit, the debt collector will be able to get a judgment by default against you – even though, had you gone into court and asserted that the debt was time-barred, the case would have been thrown out! If you are sued on any debt, never ignore the lawsuit. If you have further questions about this subject, you should visit the Federal Trade Commission’s website at www.consumer.ftc.gov/articles/0149-debt-collection, and the website of the Georgia Attorney General’s Consumer Protection Division at www.consumer.ga.gov/consumer-topics/debt-collectors.