A creditor can charge a late fee if you do not make your loan payment on time. However, it is illegal under the Rule for a creditor to charge you late fees or payments simply because you have not yet paid a late fee you owe. This practice is called "pyramiding late fees." Under the Rule, this means that if you do not include the late fee you owe with your next regular payment, it is illegal for a creditor to subtract the late fee from your payment and then charge you a second late fee because the current payment is insufficient. For example, your loan contract may state that your monthly payments are $100 and that you will be assessed a $10 late fee if you pay after the grace period. If you make your $100 loan payment after that time and you do not include the $10 late fee with your next $100 payment, a creditor cannot first deduct the missing $10 late fee from the $100 payment, claim you have now paid $90, and then charge you an additional late fee. But, if you skip one month's payment entirely, the creditor can charge late fees on all subsequent payments until you bring your account up to date.
RSS
A creditor can charge a late fee if you do not make your loan payment on time. However, it is illegal under the Rule for a creditor to charge you late fees or payments simply because you have not yet paid a late fee you owe. This practice is called "pyramiding late fees." Under the Rule, this means that if you do not include the late fee you owe with your next regular payment, it is illegal for a creditor to subtract the late fee from your payment and then charge you a second late fee because the current payment is insufficient. For example, your loan contract may state that your monthly payments are $100 and that you will be assessed a $10 late fee if you pay after the grace period. If you make your $100 loan payment after that time and you do not include the $10 late fee with your next $100 payment, a creditor cannot first deduct the missing $10 late fee from the $100 payment, claim you have now paid $90, and then charge you an additional late fee. But, if you skip one month's payment entirely, the creditor can charge late fees on all subsequent payments until you bring your account up to date.