Question:
Was hoping someone would have some good news for me... here's the situation:
Owed tuition to a PA college: $3472, due 12/13/96. Expected student loan
fell through, so it took awhile to come up with the payment.
Sent payment in full 4/1/97 (~110 days late). School returned check saying that
the account had been turned over to a collection agency and that the amount due
had been increased by 33% so they needed a check for $4989.
This seems extreme to me... even the IRS doesn't charge penalties that high (~10% a
month!). Are there no limits on what the collection agency's fee's can be? There
have been no certified letters, legal fees, etc...
I know that credit cards and banks have legal limits on what can be charged in
interest, is it not the same for these agencys?
Anyone have any comments? Good or bad? Am I stuck owing the extra $1200?
Answer:
I don't know about the legal aspects, but I can offer you some practical
advice.
Most (all that I've ever seen) collection assignments include provisions
that the collector, as asignee of the debt, has sole authority to accept
settlements on the debt. That means they're the final authority--even though
they'll generally always tell you that they have to "run it by their client"
(the University).
Also, realize that this is most likely a contingency situation whereby the
collection agency gets a percentage (30-40% typically) of whatever is
collected or settled upon. So, in order for them to make any money, they
must collect money from you.
Most agencies I've ever negotiated with, protestations to the contrary
notwithstanding, would royally jump at the chance to get immediate payment
in full of the principal balance. They'll jump up and down, tell you they'll
sue and ruin your credit, etc., but if you stand your ground, they'll
eventually call and tell you that you have a deal. In fact, you could
probably even get away with a settlement of 50 cents on the dollar if you've
got the nerve for it.
