Collector – May 2019 - 33

Number M

Crunching
Can you add fees to a
delinquent debt? Look to
client contracts and the
courts for guidance.
By Dennis J. Barton III

COLLECTOR 05.19

any creditors want collectors to seek
collection fees to offset a portion of
their recoveries that agencies retain
as payment for their services. The
law allows for those fees, but only
when certain requirements are met.
A collection agency can only charge
a consumer a collection fee in one
of two instances: when a written contract
between the creditor and consumer expressly
states the consumer is liable for collection
fees, or when a statute or ordinance expressly
permits creditors to charge collection fees.
Traditionally, an agency would attempt
to collect these fees if the language of the
underlying contract between the creditor
and consumer allowed for "collection costs,"
which was the common phrasing for such
a fee. That language, however, is no longer
enforceable and is a violation of the Fair
Debt Collection Practices Act and many
state consumer law statutes. The creditor can
be liable under some of these state statutes
by its own acts or vicariously liable for the
actions of a collection agency if the creditor
requested the fee to be collected.
When a collection fee arises from a
contract, the language of the contract
must be precise for the collection fee to
be enforceable. In Kojetin v. C U Recovery,
Inc., 212 F.3d 1318 (8th Cir. 2000), the most
influential case on this issue, the court held
collection fees are only enforceable when
the contract uses the phrase "collection fees"
rather than "collection costs."
Collection fees are generally a percentage
of the outstanding balance. For example, if
the collection fee is 25 percent of a $1,000
debt, the collection fee is $250. In order to
collect a percentage fee, the Kojetin opinion
stated the contract must use the term
"collection fees."
In addition, the court explained the most
enforceable contracts inform consumers the
collection fee is a percentage of the amount
owed and state the percentage. For example:
"In the event a collection agency is hired to
collect any outstanding amount, you agree to
pay a collection fee in the amount of 33 1/3%
of the outstanding balance."

33



Collector – May 2019

Table of Contents for the Digital Edition of Collector – May 2019

Upfront
Industry News
Best Practices
FYI
Collection Tips
The Robot Revolution
ACA International’s 2019 Convention & Expo
Number Crunching
Calendar
Honor Roll
Education Spotlight
Regulators Should Be In The Business Of Helping The Regulated Comply
ACA SearchPoint
Ad Index
Membership
Last Word
Collector – May 2019 - Cover1
Collector – May 2019 - Cover2
Collector – May 2019 - 1
Collector – May 2019 - 2
Collector – May 2019 - 3
Collector – May 2019 - Upfront
Collector – May 2019 - 5
Collector – May 2019 - Industry News
Collector – May 2019 - 7
Collector – May 2019 - 8
Collector – May 2019 - 9
Collector – May 2019 - 10
Collector – May 2019 - 11
Collector – May 2019 - Best Practices
Collector – May 2019 - 13
Collector – May 2019 - FYI
Collector – May 2019 - 15
Collector – May 2019 - Collection Tips
Collector – May 2019 - 17
Collector – May 2019 - The Robot Revolution
Collector – May 2019 - 19
Collector – May 2019 - 20
Collector – May 2019 - 21
Collector – May 2019 - ACA International’s 2019 Convention & Expo
Collector – May 2019 - 23
Collector – May 2019 - 24
Collector – May 2019 - 25
Collector – May 2019 - 26
Collector – May 2019 - 27
Collector – May 2019 - 28
Collector – May 2019 - 29
Collector – May 2019 - 30
Collector – May 2019 - 31
Collector – May 2019 - 32
Collector – May 2019 - Number Crunching
Collector – May 2019 - 34
Collector – May 2019 - 35
Collector – May 2019 - Calendar
Collector – May 2019 - Honor Roll
Collector – May 2019 - Education Spotlight
Collector – May 2019 - 39
Collector – May 2019 - 40
Collector – May 2019 - 41
Collector – May 2019 - 42
Collector – May 2019 - 43
Collector – May 2019 - 44
Collector – May 2019 - 45
Collector – May 2019 - 46
Collector – May 2019 - 47
Collector – May 2019 - 48
Collector – May 2019 - Regulators Should Be In The Business Of Helping The Regulated Comply
Collector – May 2019 - 50
Collector – May 2019 - 51
Collector – May 2019 - ACA SearchPoint
Collector – May 2019 - Ad Index
Collector – May 2019 - Membership
Collector – May 2019 - 55
Collector – May 2019 - Last Word
Collector – May 2019 - Cover3
Collector – May 2019 - Cover4
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