Debt collector wins motion to dismiss; court finds collection fee found in creditor’s contract is valid. Editor’s note: This article is available for members only.
3/23/2021 12:00
By Betsy Clarke – Compliance Analyst
Ahmed v. Richland Holdings Inc., No. 2:19-cv-1925 JCM DJA, 2021 WL 769642 (D. Nev. Feb. 26, 2021)
Background: In this case, the consumers signed a furniture purchase agreement containing a collection fee set at specific flat rate of 50%, in addition to attorneys’ fees and costs. A debt collector sued the consumers in state court to recover alleged debt and the consumers filed Fair Debt Collection Practices Act claim in federal court.
Issue: The FDCPA provision at 15 U.S.C. Section 1692f(1) provides “a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt,” such as the “collection of any amount unless such amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” The consumers alleged the fee was an unconscionable liquidated damages fee.
Outcome: The court rejected the consumers’ claims, finding (1) plaintiffs expressly agreed to pay a collection fee assessed by a collection agency and (2) collection fees are accepted and standard practices in the accounts receivable management industry. Accordingly, the court granted the collector’s motion to dismiss in full and with prejudice.
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