Expert: Regan Shinski - 1/14/2010

Question
QUESTION: My account was with an original creditor that forwarded it to a collections agency. I never paid anything, saw the original creditor again (I didn't know the account was in collections), and now have a new bill that hasn't been paid by my insurance company. The original creditor is combining the new balance w/the old balance, and is now taking me to small claims court. They are charging me withdrawal fees that the collections agency charged the creditor for withdrawing the account from them since they are now going to court. Legally, can they do this? Must I pay this fee as well as the court filing fees, and my balance? I have to respond within 10 days. Thank you.

ANSWER: Hi Carla:

I believe this likely could become a matter of interpretation for the court.  I would dispute or fight it.  They are probably listing it as "reasonable" collection expenses - much like you have to pay interest, court costs or finance charges in some cases.  State laws could play a part in this, so I cannot answer with 100% certainty.  Another issue is if you had a contract or written agreement.  There may be a clause in the papers you signed that addresses collection costs.

At the very least it should be an amount that should easily come off in a settlement negotiation.

If you get a judgement, and you believe your insurance company should have paid, you can sue your insurance company for damages.

Good luck,
Regan


---------- FOLLOW-UP ----------

QUESTION: In the papers I signed before my procedures, it just says that I am responsible for charges not covered by my insurance company.  In the collection letter that I was sent afterward, it does state that I am "subject to collection fees in addition to my current balance".  Would not knowing that this is their policy preclude me from having to pay these fees.  I live in the state of NJ.

Thank you for your speedy response.

Answer
I don't live in NJ or really know all their laws.  Based only on the collection agency's letter, it sounds like collection fees are allowed to be added to your balance.  I would not rely on this alone though.  Collection agencies have been known to be wrong.  Additionally, these charges typically have to be reasonable and are subject to usery laws.  Most states do allow collection fees.

I am reluctant to say "yes you are responsible" or "no you are not" because in lawsuits they are often decided or assigned by a judge.  For example, it's likely they can charge reasonable collection fees but they likely can't charge this fee if the collection agency didn't do any work, charge it multiple times or other ways to just rack up the bill.

This is likely more an issue of state law, not their policy.  So the issue of you not knowing would not prevent you from paying these amounts if it is deemed so.

Good luck