As earlier indicated, there have been no DD’s since last Monday, September
13, due to my trip to China.
Daily Development for Tuesday, September 21, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri firstname.lastname@example.org
FAIR DEBT COLLECTION; ATTORNEY’S FEES: Even though a court has issued a foreclosure order setting attorney’s fees at $1100, the mortgagee is not bound by the $1100 figure if the mortgagor has sold the property and wishes the satisfy the mortgage, and mortgagee’s collection agent can demand a greater amount of attorney’s fees to satisfy the mortgage.
Singer v. Pierce & Associates, P.C., No. 03-3108 (7th Cir. 9/8/04)
A court entered a foreclosure order, stipulating $1100 in attorney’s fees pursuant to the fee language in the mortgage. But the mortgagor continued its efforts to sell the property and ultimately was able to get a final contract before the foreclosure sale occurred. The mortgagor obtained the agreement of the mortgagee to cooperate in releasing the mortgage if the contract to sell went ahead, and ultimately the mortgagee dismissed the foreclosure action. Then the mortgagee sent to the mortgagor a closing statement to obtain the specified release. The statement demanded close to $2600 in fees - a figure supported by actual billings to the lender by the law firm. Under pressure to get the release to close the sale, the mortgagor paid the fees along with the rest of the payoff demand.
Subsequently, the mortgagor filed a Fair Debt Collection Practices Act complaint against the law firm (yes, the law firm) that had billed the lender for the fees in question. The action claimed that the attorney had engaged in an “unfair or unconscionable” act under Sec. 1692(f) because it misstated the debt and misled an unsophisticated consumer.
In fact, the lender’s servicing agent, an independent entity from the law firm, was the party that sent out a notice to the borrower demanding that the borrower pay a larger amount that the fees set forth in the foreclosure order to obtain satisfaction of the mortgage. The court commented that it did not appear that the law firm could be sued for something that the agent did here, but concluded that the parties had not raised this issue, so it moved on to other questions, assuming that the lawyer in fact could be liable for such a notice.
The court further opined that the notice of what would be required to obtain satisfaction of the mortgage in this case might not be an action to collect a debt within the Act, since a foreclosure had already been ordered. Again, however, it set this question aside in order to get to the substantive issues.
The court then held that, even if the plaintiff could have overcome the above mentioned hurdles, it still had no claim because the dismissed mortgage foreclosure action was not the final determinant of what constituted appropriate fees to be collected in the satisfaction transaction. The court did say that the court’s view as to what constituted an appropriate fee might be evidence of a the reasonableness of a fee claim more than double that amount.
The court’s ruling here was limited to the conclusion that merely setting forth the amount of the billed fees in the settlement demand is not “unreasonable or unconscionable” or misleading, as these if fact were the fees and the lender was permitted to collect reasonable fees. Apparently the court was of the mind that any attack on the reasonableness of the fees could not be carried out in this kind of FDCPA action.
Comment: Leaving aside the very valid issues the court first raises, we have the naked statement that simply passing along billed attorney’s fees cannot be an overstatement of the debt. The editor questions this conclusion. Where the parties routinely assess unreasonably high fees in cases where they can extort them from a mortgagor trying to salvage a foreclosure sale, the editor believes that a violation of the FDCPA might be found. The editor believes that the court simply concluded that the $2600 figure was not sufficiently beyond the pale of reasonableness to be regarded as wholly unacceptable. Therefore, it was not misleading for the lender to demand them.
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