Fee stacking
Fee stacking is the practice of layering several separate charges — closing, document filing, underwriting, servicing and wire fees — on top of the advertised rate, so the real cost of an advance is materially higher than the rate implies.
No single fee looks large. The problem is cumulative: a closing fee at funding, a filing fee on each advance, and a servicing charge every month the case stays open can together add more than people expect on a file that runs two years.
It is also why two funders quoting a similar rate can differ by hundreds of dollars in what you actually repay.
The defense is simple and it works: ask for the total dollar payoff in writing at six, twelve, eighteen and twenty-four months, with every fee itemized. A company that will not itemize has answered the question.
Related terms
- Closing fee — A closing fee is a charge some legal funding companies apply when an advance is funded, sometimes as a flat sum and sometimes as a percentage of the amount advanced.
- Compounding — Compounding is when charges are calculated on a balance that already includes previous charges, so the amount owed grows on itself over time.
- Cap — A cap is a hard ceiling on the total amount repayable on an advance, expressed as a multiple of the amount advanced — beyond which the balance stops growing regardless of how long the case runs.
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