What penalties or interest can creditors charge when settling debt?

In Florida, when a debt is settled, creditors may impose penalties or interest. Creditors have the right to charge whatever penalty or interest rate they deem appropriate for the debt settlement. However, the amount of penalty or interest rate cannot be unreasonable or unfair and must comply with Florida’s debt collection laws. Creditors may not typically charge a penalty or interest rate on debts that have been outstanding for less than 60 days. They may, however, charge a fee or penalty for any of the following: late payments, returned checks, or any other reasonable charges. Creditors may also charge a late fee of up to 5% of the total amount due or a “reasonable collection cost” not to exceed $20. When the debt has been outstanding for more than 60 days, creditors may charge an interest rate or penalty that exceeds the amount allowed under the Fair Debt Collection Practices Act. The amount of interest or penalty cannot exceed the greater of 1.5% of the outstanding balance or $100. When debt is settled, creditors may also charge late fees of up to 5% of the total amount due or a “reasonable collection cost” not to exceed $20. Additionally, creditors have the right to report the debt as “settled” on the consumer’s credit report. This can affect the consumer’s credit standing for up to seven years. Debt settlement can be a useful tool for managing debt, but it is important for consumers to be aware of the potential penalties or interest rates that creditors can charge. Consumers should consult with a financial advisor or attorney to understand their rights and obligations before entering into a debt settlement agreement.

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What penalties or interest can creditors charge when settling debt?

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