What is considered a reasonable collection fee?

In New York, the law regarding collection fees is outlined in the General Obligations Law. It states that a reasonable collection fee is considered any fee that is equal to or less than 25% of the total amount due, including overdue balances and interest. The total collection fee must not exceed the balance due, including the principal amount and any interest charges. This amount is considered a reasonable fee for collection activities, such as filing a lawsuit, obtaining a judgement, submitting a payment plan or other legal actions necessary for the collection of a debt. Collection fees can vary depending on the type of debt and the level of collection activity necessary. For example, a collection fee for a credit card debt may be slightly higher than a collection fee for a medical debt, as credit card debt often involves more complex collection activity. Additionally, the collection fee cannot exceed a certain percentage regardless of the type of debt or collection activity. In New York, it is illegal for debt collectors to require consumers to pay more than 25% of the amount due as a collection fee. If a debt collector attempts to charge an unreasonable fee or any fee in excess of 25%, the consumer has the right to challenge the fee. Consumers should be vigilant to ensure that they are not charged any unreasonable or excessive fees by debt collectors.

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What is considered a reasonable collection fee?

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