Can collection companies charge collection costs to delinquent homeowners? Is deferring collection costs FDCPA compliant?
Last month, the United States Sixth Circuit Court of Appeals affirmed a decision— assessing collection fees to debtors if authorized in an agreement is FDCPA compliant.
A homeowner sued Equity Experts during April 2017, arguing authorization was not expressed to assess collection fees directly to them, an FDCPA violation. During collection efforts, Equity Experts sought the fees for collection services from the homeowner.
The appeal turns on whether the agreement creating the debt – the association’s declaration – expressly authorizes the collection of these fees.
The Opinion of the Court
The association’s by-laws expressly authorize the collection of the association’s costs. The association’s declaration states that “each such assessment, together, with interest, costs, and reasonable attorney’s fees shall be a charge on the land, shall be continuing lien upon the property, and shall also be the personal obligation of the property owner.”
A plain reading of costs from the association’s declaration under statutory law allows the assessment of collection costs to the homeowner.
The reading of costs the homeowners’ pushed for would mean the association could only collect on charges after they had been assessed to the association. This would mean Equity Experts would send the association a bill for the cost of collections, the association would then send those costs to be collected from the homeowner by Equity Experts, entering a seemingly never-ending cycle of collections.
“In short,” Circuit Court Judge Roberts writes, “the declaration expressly authorizes the association to collect its costs. Equity Experts’ fees make up the association’s costs. Thus, the declaration expressly authorizes the collection of Equity Experts’ fees.”
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