Stating Attorney Fees in Petition – Probably FDCPA Violation

It used to be common for debt collectors to name a specific amount of attorney’s fees in their Petition when suing on a debt. In other words, there will be an amount stated (specified) as reasonable attorney’s fees and sought as part of the debt in the “wherefore” clause of the Petition. The question is, does this violate the Fair Debt Collection Practices Act (FDCPA)? The answer seems to be “yes” if the petition sues for a specific amount for attorney’s fees. If the company represents that you agreed to any specific amount of fees it is probably a violation of the FDCPA if the contract on which they’re suing provides for “reasonable attorney’s fees.”

That’s because you theoretically agreed to “reasonable” fees (as eventually determined by the court) rather than some liquidated amount.

As a result of some of the “blowback” in the form of counterclaims, many lawsuits never ask for attorney’s fees at all. But if yours does, and they ask for a specific amount, it could violate the FDCPA. Of note is how stringently the courts sometimes read the FDCPA in favor of consumers.

Common in Contracts

Many credit agreements include a section allowing the creditor to collect its “reasonable attorney’s fees” in the event of a default, and on the face of it this is perfectly reasonable. If a consumer fails to make payments, someone is going to have to pay an attorney – the reasonable fees section puts that burden on the person allegedly causing the problems. Like most laws, it’s tough on people without much money, but if someone has to pay (and someone always has to pay the lawyers), then it makes sense that the person breaking the agreement should do it. Or at least that is one reasonable type of agreement.

How it Shows up in the Petition

The way this often plays out, though, is that, after default and sale of the debt (obviously, the right to collect is what is being sold) to a debt collector, the debt collector will often bring suit for a specific amount. The petition will allege the right to attorney’s fees and then, in the “wherefore clause” will state something like this:

Wherefore, plaintiff requests $1,000 as the principle sum owed, plus interest at a rate of 29% from January 3, 2007 ($775 as of the date of filing), plus $450 reasonable attorney fees, plus costs and interest dating from the date of judgment.

I am using round numbers to suggest an attorney’s fee of 25% of the amount sought, and that is not an unusual amount sought as attorney’s fees.

The debt collector will often back up this request for fees with an affidavit stating that the amount named was “its attorney’s fees expended” or simply that the amount is for “fees as provided by contract,” or the like.

Violation of the FDCPA

This language violates the FDCPA because it wrongly suggests that the consumer agreed to a specific amount as an attorney’s fee – and that almost never happens (in the case we’re looking at, the right was to “reasonable attorney’s fees”). Where the right is to “reasonable attorney’s fees,” a debt collector violates the FDCPA by liquidating that amount (turning it into a specific dollar amount) and seeking that amount as if that was what had been agreed. The case you will want to use and to know if you have this situation is Stolicker v. Muller, Case No. cv-00733-RHB Document 61, Filed 09/09/2005, Bell, J, U.S.D.C. W.MI)(granting summary judgment to the consumers in a class action lawsuit on this issue). Note that the court found that seeking attorney’s fees in this way – by including a liquidated amount in the wherefore clause “altered the contract she signed with [the original creditor]… and violated the FDCPA. It specifically violated Section 1692e(2)(A),(B) (a false representation of the character or amount of a debt or the false representation of the …compensation which may be lawfully received); 1692e(10) (using a false representation to collect or attempt to collect a debt) and 1692f(1) (collecting any amount unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”

2 replies
  1. Russell Carnes
    Russell Carnes says:

    I had a collection company contact me asking for an outrageous amount of money for a credit card debt. Initially I thought there isn’t anything I can do. I looked at the notice and seen that a credit card opened in 2015 for a line of credit of $300. The amount be sought was for $4300 and change. The charge off date of the account was 2016. Within a year, whomever they were referring to, racked up a large amount in a short time. I thought it would be interest and fees and yes there are some. That was not the main reason however. How this person had a $300 credit card and never had an increase but now owed $4300 is unimaginable. Regardless my name was on this and someone filed and I assumed they would get a judgement. I started to research and found out that I can file a Production requests. So I did and since that day I received a letter/bill from the company that filed against me. It showed the large amount of money owed and asked if I could pay half. Since they filed against me and then we’re still trying to reach me with an offer, is that legal? No more letters have come and no more court documents have showed up on my case. Is this normal? More importantly they have not responded to my request for production. Should I file for a dismissal now? Thanks.

    Reply
    • Ken Gibert
      Ken Gibert says:

      I can’t give you legal advice, and I’m not entirely sure what you have actually done so far – you don’t say you filed an answer, for example, and you only mention production requests. If you are sure this is a case of identity theft, you might mention it to the lawyer for the other side. If that doesn’t cause them to drop the suit, I’d suggest you join us and let us guide you through the process a little more systematically. To answer your first question, just because they have filed suit doesn’t mean they can’t suggest a settlement. In fact, that’s pretty normal procedure. To answer your second question, probably not, but it’s more complicated than that.

      Reply

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