questions & answers

Question: Is there an interest percentage cap on the collectible debt? Is the debt collector allowed to negotiate the interest portion of the debt if client is able to pay? Is the debt held by a debt collection agency good forever?

Answer:

The Credit Card Accountability, Responsibility and Disclosure Act of 2009, or CARD Act, set new safe harbor limits on penalty fees for account violations, such as delinquency, at no more than $25 for a first offense and up to $35 for a repeat offense within six billing cycles.

The law didn't set a cap on penalty interest rates. In fact, the median penalty rate charged on credit cards issued by banks is 29.99 percent, up 1 percentage point from the previous year, according to a July 2010 study from the Pew Health Group.

The CARD Act requires issuers to review rate increases that occurred after Jan. 1, 2009, every six months and reduce the person's interest rate if appropriate. A specific amount of reduction isn't required. The law treats penalty rate hikes triggered by a 60-day delinquency differently. If the cardholder makes the next six minimum payments on time following the rate hike, the issuer must terminate the increase.

Aside from your limited rights under the law, you can ask your card issuer for a lower interest rate. Be aware that this request may prompt a review of your account and credit history.