Radio Program

Collections II

The High Cost of Collections

Introduction

In Matthew Chapter 5 of the New Testament we read:

25. Agree with thine adversary quickly, whilest thou art in the way with him; lest at any time the adversary deliver thee to the judge, and the judge deliver thee to the officer, and thou be case into prison.

42. And if any man will sue thee at the law, and take away thy coat, let him have it; and if he sue thee again, let him have thy cloak also.

While our legal system is much kinder today, some of these same principles apply. It is always better to resolve a dispute early.

Pre-Collection Costs

Pre-collection costs are generally lower because you are dealing with the original party.

Except for institutional creditors(like credit card companies and hospitals) they are often willing to make deals.

Lower payments, reduce late fees, or change payment dates.

Credit card companies will generally not make deals unless you are 3 months behind

You can often settle for the original debt, or in the case of lump sum payments - substantial discounts (often 40 and 70 %).

Post-Collection Costs

Once your case goes to collection, the amount of debt you will be required to pay increases dramatically. There are a number of difference sources of these increases. This is because others are now involved in the process.

Collection Fees

If your contract with the Creditor or a statue allows collection costs,

A collection agency will add as much as 33% (or more) to the debt

Student Loan collectors will add between 25 and 30% to the debt

A $21, 000 student loan can become a $28,000 student loan

Your interest rate will also increase

Check your contracts carefully, because you may not owe charges that may be assessed against you.

Court Costs

If you are sued and the creditor wins, you will be required to reimburse him or her for the out of pocket expenses associated with your Court Case.

These can include:

Filing Fees (Currently a $155.00 filing fee in District Court Cases

Process Fees (The cost of having you served with Legal Papers, usually $25.00 or more)

Witness Fees

Deposition Fees

Transcript Fees

Jury Fees

Copy Fees, and even

Postage

After Judgment is entered you may be assessed:

Garnishment Fees

Execution Fees

Motion Fees, and

Warrant Fees ($100 to 200)

Statutory Fees

You may also be liable for Statutory Fees.

These can include:

$100 for failure to send a notice regarding a former tenants deposit

Numerous Bad Check Charges (UCA 7-15- )

$20.00 immediately

$40.00 after 15 days

After 30 days

$40.00, plus

$50.00 or 3x the Check, up to Amount of Check + $250.00

$50.00 Attorneys Fees

If Sued

All Costs including Attorney Fees

Interest

Penalty of $100 or 3x Check, up to Check + $500.00

Attorneys Fees

Next you may be liable for the Actual Attorneys Fees under your Contract or by Statute.

One example is the Bad Check Statute we just discussed

Assume at least $150.00/hour x 14 hours minimum if litigated ($2100.00)

If you don't fight the case, Attorneys Fees ( if allowed) are determined by a Court Chart (4-505.01, Rule of Judicial Administration) if the check is under $5,000.00. If over $5,000 then the attorney must submit a detailed affidavit of time spent.

See Chart for Examples.

Interest

Interest is usually established by Contract.

The interest may increase if you go into default.

In Utah there are No Usury Laws (limitations on the amount of interest that can be charged).

I often see consumer loans higher than 400%. (Over a year you would pay 5x the original loan. If you borrowed a $1,00 for 1 year you must repay $5,000.)

If there is no contract, the interest rate is established by statute. Right now I believe it is around 7.2%.

If the interest is very high you can ask the Judge to reduce it

(Void as against public policy.)