Is a 40% fee increase in balance common for credit agencies?

[Cabronicus]

What is the name of your state? Michigan

After completing my fourth year at a small private school in Michigan, I still had outstanding tuition payments of approximately $5,500. After receiving regular statements from the school with interest applied each month, I got a letter stating that I was to be reported to a credit agency if I didn't communicate with the school before November 22nd, 2004. Through my own foolish lack of action, I didn't even read the letter until early December, 2004, and missed my chance to forgoe the credit agency report.

After recieving my first phone call from the credit agency rep., I was notified that there had been an increase in my outstanding balance by 40% by the school upon being reported to the credit agency. Given the interest charges and the added 40%, my balance ballooned to just under $10K.

I even requested a settlement, with a minimal reduction in the balance by 20%. I'm assuming that credit agencies don't take nearly 40% of a balance forwarded to them, so the school would still probably make more than my initial balance, but I could be wrong. Of course, the agent called me back to tell me that a settlement was rejected by the school.

My question is this: is this type of 'surcharge' standard, and do I have any capablity to fight it since the letter that I received from the school made no mention of this additional 40%, but only that I would be reported to a credit agency?

I am an honest person, and fully intend to make good on my outstanding balance as soon as possible, but the 40% addition is making that much more difficult.

Any ideas/recommendations/advice would be greatly appreciated. I have a feeling that I'm up the creek without a paddle.

Thanks.