Can Lender Hold Late Fees & Charge Interest?

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Question:

A customer I know has been running past due about 30 days... They recently paid current owing a 1/2 payment for May and Junes full payment. But, somehow had over $400.00 in late fees, when the late fee per month is only around $47.00 per their promissory note and payment stub? Can a lender hold late fee's like that and charge interest on them? With only owing May and June there should have been only 2 late fees?

Answer:

Not sure what your question really might be. Whether you can add late charges to the balance and what order you have to apply the payments received is a matter of State law and your loan contract. Assessing late charges for failure to only pay the late charges however is pyramiding late charges, which is not legal.