Can My Credit Card Company Continue to Bill Late Fees? - Andre
Posted April 17, 2013
WRAL Reader Question
I had a credit card established as a college freshman in 2005 closed in 2010.
Parent was paying bill was laid off and unable to pay. Made on-time monthly payments until layoff then closed account.
The credit card company continued to bill late fees and interest fees on a closed account. I am trying to purchase a home and this is on my credit report. Credit card had $5300 limit after last payment balance was $5100. Now receiving notice balance is $6500.00!
Is it legal for a credit card company to continue billing late fees (varying dollar amounts from $25-$39 each month) and interest fees (also varying amounts) Example one month $39 late fee plus $224 interest and $2.74 admin fee! All on a closed account.
What a credit card company can and can't do it almost always clearly spelled out in the terms and conditions agreed to when the account is open. Credit card companies do a lot of things I'm not a fan of but what they do a really good job at is laying out all the details in the fine print.
The credit card terms usually include a late fee, over limit fee, a higher interest rate if you default and of course unpaid interest on delinquent accounts.
Just because an account is closed it does not stop any of those fees from happening and being added to the balance. The way to stop those fees is by paying the balance off, settling the debt, or filing bankruptcy to discharge it.
Since the debt is so old now it has most likely been sold to a debt buyer. The debt buyer may be willing to settle the debt for less than the full balance due. I'd start with a lump sum payment of 25 percent of the balance and negotiate up from there. You'll probably end up around 45 percent of the balance due.
Keep in mind that settling the debt will result in the debt that was forgiven being reported as a bad debt on your credit report and reported to the IRS on a 1099-C form. If you are not insolvent you will have to pay income tax on the forgiven debt.
If you suspect the balance demanded now is not accurate you can always ask the creditor to valide the debt. Read How to Dispute a Debt and Ask the Collector to Validate the Debt.
Keep in mind though, while this may help you to get some clarity on how the balance was calculated and if the current owner can prove they own the debt, it can also accelerate any action they may take against you once they've done all the homework.
I have no idea what the "admin fee" is but to figure it out we'd either need to see the card terms and conditions or validate the debt and ask for an explanation of the fee.
WRAL Get Out of Debt Guy
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