Consumer Law, Warranties Finance charges

[muffy]

Dear Mr. Professor,

Is it ever legal to charge finance charges (interest) on late charges?

thanks for your time.
Muffy

 

[Michael Wechsler]

Are you stating that the late fee is included in the amount you owe and then there is a finance charge that applies to the entire balance? The finance charge should only apply to the balance that was due as of the last statement that was carried forth for the number of days on your statement. E.g., if your outstanding balance was $500 at the beginning of the month, at the end of the month it would be $500 times the finance charge amount. The late fee is tacked on. The first thing you should do is check the agreement you made to see if it is inconsistent.

 

[muffy]

finanance charges

Mr. Professor,

Thank you for your response... I do, however, have an update...what if when signing this contract, no was NO mention of finance charges being applied? Can someone just start applying interest/finance charges on late payments without a signature acknowledging and agreeing to this?

As always, thank you for your time.

Muffy

 

[Michael Wechsler]

If a loan was made to you and it has not been repaid by the due date, it may be possible to charge a reasonable rate of interest. However, if a loan was made to you without any interest rate stated, then they cannot simply charge you interest on the time in which you had the money. Additionally, if there was no late fee agreed between the parties then it may be doubtful that a late fee can be charged.

However... if you are discussing a credit card that you have and are stating that you never recieved the information -- be very careful about this. I would doubt that no information was provided prior to your use of the card. I won't deny that I am not quite satisfied with the level of consumer protection offered by federal law, but regardless, it still doesn't mean you would be off the hook in this context.

It sounds like there are many facts about this transaction which we are unaware.

 

[muffy]

it's not a loan or a credit card...it's

hello again

It's actually a boarding agreement for a horse.... I would have signed the contract about 12 years ago, with no mention in the agreement of finance/interest charges, and the stable owner has started applying these to outstanding balances and it seems to me he takes the outstanding balance, adds the late charge of $20 and then charges interest..... heck I don't even know what the interest rate is...

is this legal?

thanks again in advance

Muffy

 

[Michael Wechsler]

I do not believe that the late fees are justifiable without any prior mention. If the creditor got the idea by looking at his credit card statements then this was a bad idea. If you are seeking to make payment on the outstanding amount, you may wish to negotiate the settlement amount and both agree to call it quits. 12 years is a long time for an outstanding debt. I can understand why the creditor isn't happy.

 

[muffy]

perhaps I didn't explain that correctly

the balance has NOT been outstanding for 12 years

it has just been recently that he's been charging this interest charges when a balance does become late..... without prior disclosure.

 

[Michael Wechsler]

Oh... good. Glad it isn't that overdue! That said, there is no law I know that allows you to charge a late fee without agreeing to such in the agreement. Regarding a rate of interest (frequently I see in contracts 1.5% per month) it might come out to pennies, depending upon the amount.

 

[muffy]

again...thank you.....

so to clarify, it is illegal to charge a finance charge if it is not disclosed and signed as an agreeement....correct?


Muffy