Recovery of Debt Collection Fees in California and Other States
24 Pages Posted: 12 Sep 2011 Last revised: 16 Oct 2015
Date Written: September 11, 2009
Abstract
Creditors often refer delinquent accounts to debt collection agencies. Frequently the debt collector will attempt to collect a fee in addition to the amount owed. Under the federal Fair Debt Collection Practices Act (FDCPA) debt collectors are prohibited from collecting any amount that the consumer does not owe, but creditors will sometimes include a contract provision stating that the consumer agrees to pay a collection fee if the principal debt is not paid on time. The question arises whether such contracted-for collection fees are enforceable. This issue has been particularly interesting in the State of California, where such fees may be viewed as unlawful liquidated damages provisions. In other states, the issue has often not been addressed directly, so the matter is uncertain. This paper focuses primarily on the recovery of fees in California, but a brief overview of the law in other states is discussed as well.
Keywords: debt collection, collection fees, liquidated damages, Bondanza, creditor, FDCPA, debt collector
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