Credit Card Surcharges

May 28, 2013 17:36 by Consumer Ed

Dear Consumer Ed:

How much of a surcharge are merchants allowed to charge you for paying with a credit card?

ConsumerEd says:

Surcharges for credit card payments became legal in January of 2013 following a class-action settlement between merchants, Visa, MasterCard, and a number of major banks.  Now, merchants may charge from 2-4% (but not more) of the underlying credit card purchase if you make your purchase using either a Visa or MasterCard credit card.  This surcharge is meant to cover the cost that merchants pay to the credit card companies in order to have the ability to process payments made with those credit cards.

However, merchants who add this fee onto their customers’ bills must post a sign in their front window notifying them of this.  Additionally, the merchants must disclose the exact amount of the surcharge at the point of sale and on their receipts.  A caution:  For online purchases, merchants are only required to disclose this surcharge on the first page where the potential customer is prompted to enter in his/her credit card information.

These surcharges may only be imposed on Visa and MasterCard purchases; such fees may not (at least not yet) be assessed for an American Express or Discover Card purchase.  Finally, a merchant can never impose a surcharge for a purchase made on a debit card.

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Can a collection agency add fees on to a debt?

March 7, 2013 22:55 by Consumer Ed

Dear Consumer Ed:

I'm in grad school and had some medical care that I was told was covered by my insurance. The insurance company wouldn't pay and now the doctors say that it's been turned over to a collection agency and there's an additional 38% fee. That's another $400. Is that legal?      

Consumer Ed says: 

If a bill goes unpaid, it is common for the original party to sell the debt to a third-party collection agency after a reasonable period of time.  Your doctors are legally permitted to turn over your debt to a collection agency without giving you any notice.  Turning debts over to collection agencies enables the original party to focus on their business instead of chasing their delinquent clients or customers. 

What might be illegal is the 38% fee that the agency added onto your debt.  Debt collectors can add reasonable charges to your debt, but only if you agreed to pay collection costs in your original contract with your doctors.  To determine whether these fees are reasonable, you will need to know why you are being charged the additional 38% fee.  You are entitled to an explanation of this fee from the collection agency.  Some examples of reasonable charges are for attorney fees, court costs and legal fees as allowed by state law.

Debt collection is regulated by the Federal Fair Debt Collection Practices Act (FDCPA).  If the collection agency is trying to collect unreasonable fees or fees to which you never agreed, they are in violation of that Act.  In that case, you have the right to sue them through a private attorney in state or federal court within one year from the date of the violation.  If you win, you may recover damages in the amount of any losses you suffered as a result of the violation, plus an additional amount of up to $1,000.00.  You may also be able to recover court costs and attorney fees.  However, please remember, even if the debt collector violates the FDCPA, that does not erase the legitimate debt that you owe.

If the collection agency has violated the FDCPA, you may also file a complaint with the Governor’s Office of Consumer Protection (OCP), provided that the debt collector is not an attorney licensed in this State.  You can contact OCP at www.consumer.ga.gov  or by calling 404-651-8600 or 1-800-869-1123 (toll-free in Georgia, outside of the metro Atlanta calling area).  You should also file a complaint with the FTC.  You can contact the FTC at www.ftc.gov or by calling 877-FTC-HELP.  If the debt collector is an attorney, you should contact the State Bar of Georgia at www.gabar.org or by calling 404-527-8700.

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Will co-signing a loan for my daughter affect my credit?

February 22, 2013 18:18 by Consumer Ed

Dear Consumer Ed:

My daughter wants me to co-sign a loan for a car. If she is late on a payment, will this affect my credit, as well as hers?

Consumer Ed says:

Yes, when you co-sign on a loan, of any kind, both you and the borrower put your credit scores at risk.  If your daughter is late or misses a payment, this fact will be reflected on your credit reports and may negatively affect your credit ratings.  Any late or missed payment will affect your daughter’s creditworthiness as well.
   
There are a number of other responsibilities and risks that you might want to consider before you agree to this co-sign arrangement.  First, you need to understand that cosigning a loan is the same as guaranteeing a debt.  This means that if your daughter does not pay her own debt, you will then have to make the payments for her.  Second, in most states, including Georgia, if the borrower misses a payment, the lender can immediately collect from you as the cosigner.  Therefore, you should carefully evaluate your own finances and only co-sign on the loan if you can afford to pay off the loan plus any potential late fees or collection costs associated with the account.  
   
It is very common for parents to cosign on a child’s loan.  Assuming your daughter pays at least the minimum due every month, this arrangement will help her establish or re-establish good credit.  As her parent, you are better equipped to evaluate whether your daughter is financially responsible and if the terms of the loan are an economically feasible undertaking for her. 

If you decide to cosign on her loan, you should then take appropriate steps to protect yourself and your credit as much as possible.  One way to do this is to try to limit the terms of your obligation.  For example, you can request a contract that states, “The cosigner will be responsible only for the principal balance on this loan at the time of default.”  The lender is not required to consent to your request, but may if asked. You could also ask the lender to agree, in writing, to notify you in the event you daughter ever misses a payment, prior to effecting collection.  Early notification will help you prevent any potential problem from escalating to the point where you would be asked to repay all at once the entire amount owed.  Finally, get copies of all of the important documents involved in the transaction from either the lender or the borrower—the loan contract, Truth-in-Lending Disclosure Statement, and warranty.

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