11th Circuit Holds It Is A Violation of the FDCPA To Charge Flat Collection Fee When Not In Contract

In Bradley v. Franklin Collection Services Inc., the Eleventh Circuit addressed an issue relating to the Fair Debt Collection Practices Act and adopted the Eighth Circuit’s view on this particular issue.

In Kojetin v. CU Recovery, Inc., 212 F.3d 1318, 1318 (8th Cir. 2000) (per curium), the Eighth Circuit “held that the debt collector violated the FDCPA when it charged the debtor a collection fee based on a percentage of the principal balance of the debt due rather than the actual cost of collection.” The Eleventh Circuit, in today’s published opinion, now joins the Eighth Circuit. 

In this case, “When Bradley signed Urology’s patient registration form, he only agreed to pay 'all costs of collection.' That is, Bradley agreed to pay the actual costs of collection; his contractual agreement with Urology did not require him to pay a collection agency’s percentage-based fee where that fee did not correlate to the costs of collection.” 

“Before Urology handed over Bradley’s delinquent account to Franklin, it added a 33-and-1/3% 'collection fee.' Franklin failed to direct this Court to any evidence that the 33-and-1/3% ‘collection fee'—which was assessed before Franklin attempted to collect the balance due—bears any correlation to the actual cost of Franklin’s collection effort. As such, the 33-and-1/3% fee breaches the agreement between Bradley and Urology, since, contractually, Bradley was only obligated to pay the ‘ osts of collection.’”

Based upon those facts, the court held “that Franklin violated the FDCPA when it collected from Bradley a debt that included a 33-and-1/3% ‘collection fee’ when Bradley only agreed to pay the actual costs of collection.” Notably, the court also stated that “this is not to say that Bradley and Urology could not have formed an agreement allowing for the collection of the percentage-based fee.”