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Debt collection- attorney fees

SYLLABUS: Trial court erred in dismissing claim against law firm under Fair Debt Collection Practices Act because firm, in listing plaintiff’s account balance, failed to explain that it was seeking attorney fees.


The 7th U.S. Circuit of Appeals has reversed a ruling by U.S. District Judge Michael M. Mihm of the Central District of Illinois.

In March 2002, plaintiff Jodi Fields incurred $ 122 in charges at Kruger Animal Hospital in Bloomington. Despite signing an agreement promising to pay the bill, the plaintiff apparently had not paid any of the debt by November 2002. Kruger hired the Wilber Law Firm to collect the debt.

On Nov. 6, a collection letter signed by defendant Donald Wilber was sent to the plaintiff. It stated that the account balance was “$ 388.” The account balance reflected the original $ 122, plus interest and service charges assessed pursuant to the contract signed by the plaintiff and $ 250 in attorney fees. Three more letters followed, each letter including a slightly higher balance.

In March 2003, the plaintiff filed an action in federal court, alleging that the defendants violated the Fair Debt Collection Practices Act. The plaintiff alleged that the collection letters failed to accurately state the amount of the debt, were misleading and unfairly tried to collect unauthorized fees.

The trial judge dismissed the plaintiff’s suit for failure to state a claim and held that $ 250 in attorney fees was reasonable.

The appeals court said that when a debtor has contractually agreed to pay attorney fees and collection costs, a debt collector may, without a court’s permission, state those fees and costs and include that amount in the dunning letter. Doing so does not violate the statute, the court said.

However, the appeals court said, even if the attorney fees are authorized by contract and even if the fees are reasonable, debt collectors must still clearly and fairly communicate information about the amount of the debt to debtors. This includes how the total amount due was determined if the demand for payment includes added expenses such as attorney fees or collection costs, the court said.

In this case, the appeals court said, the plaintiff’s allegations were sufficient to state a claim under the debt-collection law and a dismissal was inappropriate “because the letters could conceivably mislead an unsophisticated consumer.”

In the original collection letter, the court said, the defendants listed an account balance that exceeded the principal obligation by $ 266. The defendants’ fees were more than double the original obligation of $ 122, and the defendants failed to explain that they were seeking attorney fees of $ 150, the court said.

“An unsophisticated consumer could reasonably wonder why her bill was now $ 388, even assuming she had saved the original contract that specified she could be charged for attorney fees. It would be difficult for such a consumer to understand how a relatively modest fee for services rendered had tripled in size,” the appeals court said.

The appeals court said that “by leaving the door” open for the assumption that the plaintiff incurred nearly $ 400 in charges, the defendants’ collection letter was misleading because it gave a false impression of the character of the debt.

“It is unfair to consumers under the statute to hide the true character of the debt, thereby impairing their ability to knowledgeably assess the validity of the debt,” the court said.

The court also found that the defendants did not satisfy the statute by failing to include a telephone number in the collection letter.

Jodi Fields v. Wilber Law Firm P.C., et al., No. 03-4108. Judge Michael S. Kanne wrote the court’s opinion with Chief Judge Joel M. Flaum and Judge Daniel A. Manion concurring. Released Sept. 2, 2004.