Debt Collectors Charge Attorneys Fees - When is it legal?
Posted: Monday, November 5, 2012
Many consumers are facing lawsuits from debt collectors. The collection courts are filled with consumers being sued by creditors and companies that have bought the debt. Many times, these lawsuits ask for attorney fees to be paid as part of the lawsuit. This leads consumers to ask us: Can we be held responsible for the attorney fees of the collector on top of the debt?
The Fair Debt Collection Practices Act provides the starting point of an answer - and the protection a consumer needs as well. Under the FDCPA, it is improper for any collector (and this includes attorneys collecting a debt) to charge any money beyond the principal of the debt UNLESS (1) it is permitted by law, or (2) it is permitted by the underlying agreement.
Attorney Fees Permitted by Law: The "American Rule" is a common adage in law that provides that each party to a lawsuit has to pay their own way and their own attorneys unless a particular statute provides that attorneys fees are to be paid by the losing party. The FDCPA itself is one of those statutes - that provides that the Defendant will have to pay the Plaintiff's fees in the event of a Plaintiff victory. However, in the common breach of contract case (which is what a collection suit is) in most states there is no law providing for the payment of fees. As such, in an overwhelming majority of cases, the collector cannot collect his fees from the debtor in a lawsuit because of a law.
Attorney Fees Permitted by the Underlying Agreement: If at the time the consumer enters into the agreement with the creditor, the agreement itself provides that the consumer will have to pay attorneys fees if the creditor is forced to pursue the debt in collections, then the collector will be allowed to. Thus, it is most important to keep the agreement you have with the creditor in case they attempt to sue and collect fees. If there is nothing on the agreement that states that the creditor can collect fees, then the lawyer has no right to ask for them. Moreover, to attempt to collect such fees would violate the FDCPA as it is a violation to misrepresent the amount that is owed or to collect money incidental to the agreement.
However, the inquiry does not necessarily end there. A careful reading of the agreement is in order. Many times the agreement will say that fees can be collected in the event a lawsuit is filed. Often times, a lawyer is given the debt to collect, but they only write letters or make phone calls - no lawsuit is filed. Yet, in those letters, they seek to collect attorneys fees. If the contract itself says that fees can be collected in the event of a lawsuit, then a lawyer cannot collect fees just because they were hired. They can collect fees only if they file the lawsuit. As such, the attempt to collect fees for simply writing letters may run afoul of the FDCPA.
When you're being pursued by debt collectors, you have rights, and we're here to help. SmithMarco, P.C. has been protecting consumer rights since 2005. If you feel that you're rights have been violated, please contact us for a free case review.