Collecting Interest on Charged-Off Debt Requires Careful Consideration

This article previously appeared on the Ontario Systems Blog and is republished here with permission (and with additional information from insideARM at the bottom).

Believe it or not, many creditors will not collect interest on a charged-off debt even if they have the right to do so – The compliance mandates are simply that muddy. Where do we go for guidance to decide whether interest may be charged in a situation where the creditor stopped collecting interest after charging off the debt? There’s no real single source of the truth – Certain judges have held that only a jury can decide on the issue. Predictions are difficult, to put it mildly.

Consumer lawyers scrutinize the Fair Debt Collection Practices Act (FDCPA) with great intensity. They write books about the FDCPA, they share pleadings, they mine the statute for ambiguity and they do so for one reason: They want to sue you. As Debra Ciskey, Chief Compliance Officer of Wakefield and Associates observes in her excellent article on interest disclosure cases, “While 2016 was the year of the bar code cases on collection letters, 2017 can be characterized as the year of interest accrual disclosure cases.” The trend has not abated.

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