The FDCPA prohibits a debt collector from collecting any amount unless it is expressly authorized by the agreement creating the debt or is permitted by law. 15 U.S.C. Sec. 1692f. Even if attorney’s fees are authorized by a contract, a debt collector must still clearly and fairly communicate how the total amount due was calculated. Fields v. Wilber Law Firm, P.C., 383 F.3d 562 (7th Cir. 2004).
In Veach v. Sheeks, 316 F.3d 690 (7th Cir. 2003), the court ruled that it was a violation for a debt collector to include statutory treble damages in its notice of rights. In rendering that decision the court reasoned that the purpose of the requirement to notify the debtor of the amount of the debt is to communciate what the current obligation is not what the worst case scenario might be. Since the debtor could not be held liable for treble damages, court costs or attorney’s fees until there has been a judgment by the court they cannot be included as part of the remaining principal balance of the debt.
In subsequent cases the Seventh Circuit distinguished Veach, in which the attorney’s fee obligation was statutory, from cases in which the obligation was based on a written contract. In Fields v. Wilbur Law Firm, P.C., 383 F.3d 562 (7th Cir. 2004), the stated debt was based on a written, signed contract, and the debt collector was attempting to collect an undisputed debt, an undisputed amount in interest, and attorney’s fees disputed for its reasonableness only. The fields court ruled that, “when a debtor has contractually agreed to pay attorney’s fees and collection costs, a debt collector may, without the court’s permission, state those fees and costs and include that amount in the dunning letter.” However, the court ruled against the debt collector, because it did not segregate the attorney’s fees sought to be collected from the principal amount of the debt, which, the court concluded, could reasonably confuse the consumer about the nature and amount of debt sought to be collected.
In Singer v. Pierce & Associates, P.C., 383 F.3d 596 (7th Cir. 2004), the court ruled that the debt collector including $2574.00 in attorney’s fees in a payoff letter requested by the consumer, when the court ruled in a subsequently vacated order that reasonable attorney’s fees were $1100.00, was not a violation because the collection of reasonable attorney’s fees was authorized by contract. The Singer court compared its facts to those in Fields and indicated that unlike in Fields, the debt collector in its case had segregated the amount of attorney’s fees sought to be collected from the principal balance due avoiding confusion to the consumer about the nature and amount of the debt sought to be collected.
Regarding the amount of fees claimed, the court in Fields states, “to collect attorney’s fees from Fields, Wilbur necessarily had to specify an amount that it intended to charge for its services. Fields, of course, could negotiate this payment or contest the reasonableness of the fees through a lawsuit.” But, the court concludes, stating the amount sought without the court’s permission does not violate the FDCPA.
Under the above cases a debt collector may include attorney’s fees and costs in its notice of the amount of the debt, when the right to fees is based on a written contract signed by the debtor and the fees are stated separately from the principal amount of the debt due. The consumer has the right to negotiate or contest the amount claimed, but the inclusion of the amount claimed, even if in excess of what the court may deem reasonable, does not violate the FDCPA.
The court has not ruled on whether including attorney’s fees is required. The language of the court’s opinions is generally permissive, indicating that a debt collector may include attorney’s fees in its statement of the amount due. However, the only time the court directly addresses this issue is in dicta in Fields where it says, “indeed, refusing to quantify an amount that the debt collector is trying to collect could be construed as falsely stating the amount of debt.” In support of this proposition the court sites Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000). The facts of that case did not specifically focus on attorney’s fees, but concerned a notice of an amount of debt that required the debtor to call a toll-free number to find out the total amount of the debt sought to be collected.