What penalties or interest can creditors charge when settling debt?

In Tennessee, creditors have the right to charge certain penalties and interest when settling debt. These charges will vary depending on the type of debt and the creditor involved. Generally, creditors can charge interest on unpaid balances and can also add late fees. Additionally, creditors can charge collection fees for taking legal action against the debtor. The Federal Trade Commission (FTC) regulates how creditors can charge interest and fees. The FTC has set a maximum interest rate of 15% that can be charged, although in many states this rate is lower. If the debt is secured with collateral, such as a home or vehicle, creditors may be able to charge a higher interest rate. Penalties for late payments are also limited by the FTC. Creditors typically cannot charge more than 5% of a payment that is not more than two days late, and the maximum penalty they can charge is the amount of the payment itself. It is important to understand these rules before settling debt. Both parties need to be aware of the terms of the agreement and how much money may be paid. If the debtor should be able to pay the debt in full and does not, it is important to remember that the creditor may be able to take legal action. This may include causing damage to your credit score, filing a lawsuit, and garnishing wages.

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What penalties or interest can creditors charge when settling debt?

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