The Atlanta-based federal appeals court has ruled that creditors cannot tack on a collection fee based on a percentage of a debt without warning consumers up front.
Thursday’s ruling by a panel of the U.S. Court of Appeals for the Eleventh Circuit follows the Eighth Circuit’s 2000 pro-debtor interpretation of a federal debt collection law. The ruling does not prohibit imposing on debtors a collection charge tied to a percentage of the debt, but it requires creditors to let consumers know at the time a debt is incurred that such an add-on is a possibility.
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