October 29, 2014 Newsletter

The Fine Line of Interest Charges

Ryne Kajewski, Account Representative

From small practices to large offices with multiple locations, the question that comes up most often when it pertains to financial policies is interest charges. Almost daily, we are asked about why we can or cannot collect on interest charges. Once you look into the letter of the law, you can understand why. It’s a fine line and it can be confusing.

The Wisconsin Department of Financial Institutions states: To obtain a charge for late payment, the customer should be given a notice or sign an agreement at the time a contractual relationship is established that payment is due by a specific date and that there is a penalty or late payment charge if payment is not received by that date. The customer does not have the right to defer payment after the due date, but agrees to pay a charge for late payment. To be considered a late charge, the merchant must treat the account as past due if payment is not made and not allow the customer to add more charges to the already past due account. The maximum rate is 1% per month or 12% per year. A typical agreement concerning a late payment charge would be a statement on the sales slip or service agreement stating: “Payment is due within 30 days of sale. A 1% per month (12% per year) late payment fee will be assessed on any unpaid balance remaining after 30 days.”

The question I am asked about most often is what constitutes as “given a notice.” In many cases, merchants will send invoices and make phone calls for a couple of months, tacking on interest along the way. Merchants often will put verbiage on the invoice, have a sign on their front desk or notify the consumer in some way that interest will be added. So, the merchant “gave a notice” to the consumer and interest charges can be added…right?

For that answer, we need to look at how the courts have ruled. In most cases, the rulings have been guided by 15 U.S. Code 162f(1). The code states that the following is a violation of the section: “The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

The simplest answer to the question is interest charges can only be added for collections if and when there is written consent before the date of service. The verbiage on the agreement should spell out exactly what charges will be added and when. For more information regarding adding interest, please feel free to contact our office.

Delinquencies May Be On The Rise Due to Consumers Record Credit Card Debt Build Up

Consumers in the U.S. acquired $28.5 billion in credit card debt in the second quarter of this year, which is the largest second quarter debt buildup since the Great Recession, according to recent data from CardHub’s 2014 Credit Card Debt Study.

The study predicts that consumers will end 2014 with $54.79 billion more credit card debt than we started with. This means consumers will be unable to sustain their credit card minimums and delinquencies will drastically increase with no means to pay their current debt with their credit card.

In-House Educational Presentations

This past month, Jeff Shavlik spoke to Astar Capital Management in Milwaukee on the latest in rental collections. His presentations not only give tips and tricks but also educates attendees on the latest collection laws and regulations within an industry.

If you have a group that would be interested in having Jeff present at one of your meetings, contact our office today.

Upcoming Appearances

Wisconsin Medical Society’s 15th Annual Symposium
October 19-21 at the Kalahari Resort – Wisconsin Dells

WHEDA Conference 2014
November 6 at the Monona Terrace Community and Convention Center- Madison