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Collection Fees and Interest in Commercial Collections

Saturday, December 1st, 2018 | Florida Debt Collection | Comments Off on Collection Fees and Interest in Commercial Collections

Collection Fees and Interest in Commercial Collections

Collection Fees and Interest in Commercial Collections

The Cash Flow Group’s goal is to try to recover your money without going to court. Yet, sometimes litigation is necessary. Clients often wonder if they can add our collection fees to the collected amount. These costs can add in specific situations.

Collection Fees and Costs

A contract between the parties that states collection fees are due in the event of late payment. After this, collection fees apply. Keep in mind that having this provision on your invoices may not be enough. Many states need you to have a document signed by your customer. This document needs to be indicating they agree to this specific provision. The Credit Application is the generally the best document in which to place this term.

Attorney Fees

Attorney fees apply if there is an attorney fee provision in a contract. There are some cases where the attorney fees are not in the contract. The judge has some discretion on whether to add those fees or not.
In many jurisdictions, the are basing the attorney fee award on a schedule. The award is not based on the contingency rate. First, you need to collect 100% of principal, interest and court costs. That is even if attorney fees are being awarded and added to the judgement. A percentage of litigation cases result in a voluntary payment for reduced a mounts. Because of this, it is rare to collect 100% of the original judgment amount. The amount includes interest and court costs in settled cases.
Thus, we often do not collect attorney fees even if they are being awarded.
Some contingency attorneys we work with structure their quotes. In these quotes, they get to keep 100% of any attorney fees. These fees are being awarded and collected. This is after all principal, interest and court costs are now recovered. Their logic is this extra incentive to collect the attorney fee award. They keep the award in full. It gives them incentive to get the interest and court costs on top of principal. This way they can then pursue this ‘bonus’ for themselves. Clients have control over two things. Whether to accept voluntary settlements or to pursue court ordered judgment collection efforts. But, this extra incentive for attorneys can help our clients.
These are a lot of factors to consider. As a result, keep this in mind when using a contingency attorney. Never expect any recovery of attorney fees when considering whether to sue or not.

Judgment Interest and Court Costs

Collection costs are not generally included in a judgment. But, a judge will generally include several things. These are pre-judgment interest, post – judgment interest, and initial court costs.
When is pre-judgement calculated? It is calculating from the original due date to the date the judgment is being issued. Either the interest rate stated on invoices or in a contract. If there is no mention of interest on the invoices or in the contract, then a judge may use the statutory rate. The statutory rate is different for each state, but is often between 6% and 10%. The judge may determine that the creditor is not entitled to pre-judgment interest. This is if there was no mention of interest in the agreement between the parties.
Post-judgment interest generally depends on the same criteria. It also accrues from the date of the judgment until paid. Sometimes the interest rate on invoices or in contracts are high or above the usury limit. The judge may now allow it or may limit interest to a lower rate.
Pre-Litigation: Collecting Interest and Collection Fees You may wonder why we rarely collect interest or collection fees even when they are in the contract. The bottom line is that if a debtor offers to pay the principal balance in full on a voluntary basis, but only if our client waives interest and collection fees, we have never had a client reject this offer and instead litigate. Litigation has up-front costs, can take months to years, has a higher contingency rate, and an uncertain outcome. The right business decision is to take the voluntary payment of principal only, instead of pursuing more amounts through the courts.

Collection Agencies

Other collection agencies may tell you that they get interest and collection fees on a regular basis. If they are collecting credit card debt, where these fees are the creditor’s business model and the consumer knows that up front, the debtor expects to pay interest and will. But on standard B2B claims, all collection agencies run into the same issue of a business negotiating to not to have to pay fees.
It’s frustrating to have spent months trying to collect money and to know that you are entitled to interest and fees that you may not be able to collect.
If you need help with a Collection Fee please contact The Cash Flow Group.


The Cash Flow Group, Inc

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