Collector – May 2019 - 35

"Given how pervasive collection fees are all
around the country, there is a surprising lack
of case law on the issue."
In Boatley v. Diem Corp., No. Civ.
03-0762-PHX-SMM, 2004 WL 5315892
(D. Ariz. March 24, 2004), the court held
that a contract calling for collection fees to
be awarded to the "prevailing party" meant
that those fees could only be collected after
a court entered an order or judgment, which
then created a "prevailing party."
As for the amount of the collection fee,
no set amount or standard exists as to what
percentage the contract can charge. In my
practice, I advise no more than 33 1/3 percent
because judges seem to balk at percentages
higher than that for attorney's fees.
Boatley is a case that gives us some
guidance in that respect. Although its overall
language was flawed because it used the term
"prevailing party," the agreement allowed for
fees of 50 percent. (Note: The defendant in
Boatley also violated the FDCPA by charging
the "correct" contractual percentage but
against a principal amount that was higher
than what the evidence showed was owed.)
The defendant collector in Boatley only
charged a fee of 35-40 percent, which the
court found proper because the contract
allowed for a higher percentage. The
outcome of the case did not depend upon
the amount of the percentage and whether
it was lawful, so the court did not reach a
decision on that issue.
The Boatley court also went out of its way,
though, to say that it did not need to address
the question of whether 50 percent was
unconscionable. That is a strong indication
that if the court found it necessary to decide
upon the issue of whether 50 percent was
a legally enforceable percentage, the court
may have found 50 percent to be invalid and
unconscionable (i.e., seen by the court to be
unenforceable because it is so unreasonable
and against the public interest).
That possibility should be taken as a
warning to all creditors and collectors. The
ambiguity on this topic combined with
my experience that few judges will award

COLLECTOR 05.19

a collection fee of that amount is why I
recommend no more than 33 1/3 percent.
Lastly, creditors and collectors must
be mindful of state and local ordinances
that may apply to collection fees. For
example, Missouri law prohibits charging
a collection fee in connection with a
consumer loan of $1,000 or less:
"No person, firm or corporation shall
receive or impose any fee or charge,
other than one expressly provided for
by statute, for arranging credit in the
amount of one thousand dollars or less
the proceeds of which are intended to
be used by the borrower primarily for
personal, family or household purposes.
Any contract evidencing such excess
fee or charge and any note evidencing
credit so arranged is void. Any person,
firm or corporation who receives or
imposes a fee or charge prohibited
by this section is guilty of a class B
misdemeanor." -Mo. Ann. Stat. Section
408.096 (emphasis added).
Independent of how enforceable your
collection fee language is in Missouri, it
cannot be included in loan agreements
when the original principal amount is
$1,000 or less. Other states have similar
or more restrictive language of which you
must be aware.
Creditors can use collection fees to offset
some or all of the collection charges associated
with the recovery of outstanding balances.
Like with many issues, the ability to legally
collect these fees starts with the particular
language used in a statute, ordinance, or, most
commonly, a contract between the creditor
and the consumer. With some diligent focus
on the phrasing of the collection fee provision,
creditors and agencies can collect these fees
while minimizing legal exposure.
Dennis J. Barton III is managing attorney
for The Barton Law Group LLC. He can be
reached at Dbarton@bartonlawllc.com.

KEYNOTES

1

Creditors can use
collection fees to offset
some or all of the collection
charges associated with
the recovery of outstanding
balances.

2

A collection agency
can only charge a
consumer a collection fee
if the contract allows it or
a statute expressly permits
creditors to charge it.

3

Kojetin v. C U Recovery,
Inc. was the first circuit
court to address this
issue in 2000. No other
jurisdiction in the country
has a different standard,
even if it has not expressly
adopted the one in Kojetin.
35



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
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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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