Collector – May 2019 - 34

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Learn More?
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ACA International members
can check out the ACA
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"Adding Fees to Debts," by
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org/searchpoint and using
the tag "Adding Fees."

34

The Kojetin court explained that using the
term "collection costs" implied to the least
sophisticated consumer that they would only
be responsible for the actual out-of-pocket
expenses (i.e., costs) associated with the
attempt to collect. That may include the cost
of the letter, envelope and stamp to send
the letter, plus the nominal wages paid to
employees during the time they prepared
and sent the letter.
Not only is the "cost" amount much less
than the percentage amount, it creates an
arduous duty on the part of the collector
to itemize every expense associated with
the collection effort. It also creates an
undue burden on a collector if that amount
is challenged, and it often is by skilled
consumer attorneys. The work involved in
determining the "cost" of collection efforts
makes seeking that amount impractical.
In Richard v. Oak Tree Group, Inc., 614
F.Supp.2d 814 (W.D. Mich. 2008), the court
applied Kojetin to an agreement that used
the phrase "collection fees" but did not
explain the amount of the fee was a specific
percentage of the outstanding balance. The
letter also did not disclose to the consumer
that the percentage would apply. That
court found that using the correct phrase
of "collection fee" was still misleading to
consumers and an unfair practice if the
consumer is not made aware that the fee is

a percentage of the outstanding balance and
the amount of the percentage.
In contrast, the court in Zelner v. ATG
Credit, 17 C 8007, 2019 WL 556737 (N.D. Ill.
Feb. 12, 2019) held a collection fee provision
without a reference to a percentage was
enforceable. The danger in using this case
as a guidepost is that neither that court nor
the parties addressed the issue of whether
a specific percentage should be identified.
Instead, the court's holding focused on the
language "collection fee" rather than "collection
costs" with no analysis of whether collection
fee provisions must disclose the amount of the
fee is a percentage of the outstanding balance
and the specific percentage used.
Given how pervasive collection fees are all
around the country, there is a surprising lack
of case law on the issue. Kojetin was the first
circuit court to address this issue. Since then,
the 7th Circuit and 11th Circuit adopted the
standards in Kojetin. See Seeger v. AFNI, Inc.,
548 F.3d 1107, 1110, 1113 (7th Cir. 2008);
see Bradley v. Franklin Collection Service,
Inc., 739 F.3d 606 (11th Cir. 2014). No other
jurisdiction in the country has a different
standard, even if it has not expressly adopted
the one in Kojetin.
Creditors and collectors should not
be creative with contractual language.
In Munoz v. Pipestone Financial, LLC,
513 F.Supp.2d 1076 (2007), the contract
between the creditor and consumer
allowed for "reasonable collection
fees." The collector, pursuant to the
instruction of the creditor, attempted
to collect a fee that was a percentage
of the outstanding balance. The court
held that was a violation of the FDCPA
because the language of the agreement
called for "reasonable" collection fees,
and "reasonable" implies a court would
have determined what is reasonable and
then awarded that amount rather than a
percentage of the outstanding balance.
The sample language recommended above
specifically calls the fee at issue a collection fee
and specifically states it is a percentage of the
outstanding balance and what percentage is
sought to be collected. The Munoz court would
find this language enforceable under the law.

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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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