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Business Debt/Late / Finance Charges

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Expert: - 9/8/2009


Question
In dealing with a debt of a "Yellow Page" publisher that has been turned over to a collection agency, I am trying to find out (I am the debtor), whether Finance Charges labeled "Late Charges" need to, like consumer debt, in business-to-business statements (from their business to ours) need to have published in/on the statements the Rate of Interest (since the Late Charges have increased as the amount owing has increased, no statement of Interest Rate has ever been printed in their statements)?


Answer
Hi Dave-

I am not an attorney, nor am I a debt collector, but I do know that you are blending the two categories and the regulations treat each differently.  Late charges are not the same as Interest Rates and the same rules do not apply.  

Having said that, there are regulations surrounding collections law, which might (or might not) be in violation depending upon the amount of the charges.  For example:

* Phony Collection Fees and Interest
The FDCPA or Fair Debt Collections Practices Act prohibits a debt collector from charging you interest, and fees or charges that you did not agree to pay in the original credit agreement. They can’t simply make up fees that you didn't agree to pay and then charge you for them.
They cannot collect ANY charges (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.

Another area that you might want to consider is the applicability of the laws of the governing state.  By this I mean your original contract was governed under the laws of state X (check the contract).  If they sold your debt to an agency you can force the agency to follow the same state laws as they attempt to collect.  There might or might not be any difference, and the difference might or might not be in your favor - but they should be held to the same standards because you do not have a contract with the collection agency.   

Much of what you are asking will be specific to the contract you signed and the state in which you live and I do not have any of those details, nor am I in a position to provide any legal advice.  I do hope that I have given you some direction and answered at least part of the question.

Best of luck,
Michael

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Michael Fay

Expertise

My focus and specialty is in credit, so that the risk of the debt itself is minimized. This means understanding it, predicting it, and helping to correct it. Having worked in contracts & credit, I have also worked with all of the related documents such as Guarantees (personal and corporate), and Security Agreements (aka UCC’s or “liens” – but I caution you in using those interchangeably).

Experience

I have a broad background with more than 15 years in the credit industry. Ten years with Dun and Bradstreet, first as a field reporter creating reports, then in customer service, finally I served as the credit manager designing risk models for many national and international customers through D&B’s Outsourcing function. Five years with another publicly traded firm where I created the credit department and then served as credit manager for North America. At both companies we used both business and consumer data. You probably know that both business and personal credit have scores; what you might not know is how many different types of scores there are. I am familiar with and have used many different scores in each. Also be aware that each credit type (business & personal) is unique with different processes and different time frames. I have served on the board of directors for companies in many states and still serve in some capacity in a few. I contribute to credit publications and work with the non-profit arm of the SBA called SCORE.

Organizations
ACA International * NACM * Credit Risk Managers * SCORE (SBA)- Counselors to America’s Small Business * Payment Card Industry Network * PaymentSource.com * D&B Alumni * Psi Chi, National Honor Society for Psychologists

Education/Credentials
BIS in Business and Psychology, University of Minnesota * MBA is still in progress (on-line)

Awards and Honors
State of Colorado - State finals in Accounting and Advanced Accounting. * D&B Leadership Winner (3 times) * D&B Leadership Finalist (3 times) *

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