The unfair debt collection practices of numerous agencies has been challenged in several courts with great success in recent years‚ underscoring the fact that debtors do have rights that must be respected and upheld.
The recent case of Bradley‚ et al. v. Franklin Collection Service‚ Inc is a perfect example. Here‚ the U.S. Court of Appeals for the Eleventh Circuit affirmed the reversal of an earlier claim for summary judgment in favor of a debt collection agency on the grounds that the agency had violated the Fair Debt Collection Practices Act.
Our Los Angeles consumer debt attorneys understand that the case started‚ as so many others do‚ with the failure to pay medical bills.
Two individuals in the case incurred medical debts to a urology clinic in Alabama. When the two failed to pay these debts‚ the medical center referred the claims to a debt collection firm called Franklin Collection Service Inc. As part of this referral‚ the urology clinic tacked on a 30 percent collection charge to both accounts.
Because of this additional charge‚ the two men filed a complaint against Franklin‚ asserting that this was not only a violation of state law‚ but also of the federal FDCPA. Both parties requested a summary judgment.
In response‚ the district court dismissed all the debtors’ claims and filed a judgment in favor of the collections firms. The appellate court ended up reversing this ruling.
Prior to receiving treatment‚ both men had signed an agreement with the health care provider indicating that in the event of non-payment‚ they would agree to pay the costs of collection‚ plus attorney’s fees.
The FDCPA expressly forbids the “unfair or unconscionable” collection of any amount‚ specifically including interests‚ fees‚ charges or expenses in addition to the principal unless that amount is formally authorized by the agreement that creates the debt or is allowable under the law. The debtors in this case argued that the collection fees violated the law because they were in effected liquidated damages‚ as opposed to the actual cost of collection.
The federal appellate court agreed.
The court cited the 2000 ruling in Kojetin v. CU Recovery‚ Inc. by the Eighth Circuit‚ in which the court found that a debt collection company was afoul of the law in its administration of a charge based on a percentage of the entire balance‚ rather than what it actually cost to collect the outstanding bill.
It was true that both men had signed agreements that stipulated they would pay all relevant costs of collection. However‚ that agreement did not require that they pay the collection firm’s percentage-based fee when the amount of that fee didn’t match up to the actual cost incurred to collect.
In fact‚ the fee was assessed even before any collection efforts got underway‚ and the collection firm failed to offer up any evidence showing that the fee bore any correlation to the actual cost of collection.
The court was careful to say that this didn’t mean that the patient and medical service firm couldn’t have formulated an agreement that would have allowed for a percentage-based fee. But that wasn’t what happened here. Indeed‚ other courts have found percentage-based fees can be appropriate if both contracting parties are in agreement about it.
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