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Legal Update – Collection Fees

A jury recently found in favor of Equity Experts in a case regarding the reasonableness of our collection fees.

Facts of the Case

The Plaintiff is a homeowner who is a member of two homeowners’ associations (both a Master Association and a Sub-Association). At some point, accounts for both associations became past due and Equity Experts was hired separately by each association to collect on the debts owed. Plaintiff brought suit against Equity Experts based on that collection action, alleging violations of the Fair Debt Collections Practices Act and the Michigan Occupational Code.

Plaintiff alleged that the collection fees charged were disproportionate to their assessments and therefore, improper and unreasonable, creating liability under the statutes listed above. Equity Experts argued that their actions followed their agreements with each association, that the fees and costs were reasonable for the actions taken, and that these costs were communicated to the plaintiff several times throughout the collection process.

When questioned on the reasonableness of Equity Experts’ fees in court, Defendants, through their testimony, addressed some of the common misconceptions about their collection charges. For example, if a letter is sent indicating the fee for services rendered is $100, that fee does not only cover the cost of sending that letter. The fee actually represents all the work Equity Experts perform on the file during that time period, which can include phone calls, processing payments, client reports, research, balance reconciliations, and general overhead. Furthermore, the cost for most of these actions does not vary based on the amount of assessments owed. So when even a modest assessment balance remains unpaid for a long period of time, the balance will naturally escalate as more work must be performed to bring the account current.

Opinion of the Court

After both sides presented their arguments and evidence, the jury ruled that the fees Equity Experts charges were reasonable, even in the light of a low association balance owed. The fact that the jury did not award the Plaintiff any money for statutory damages under the FDCPA clearly shows that they believed Equity Experts acted reasonably and appropriately.

Equity Experts’ business model was also upheld through a ruling in the 6th Circuit Court of Appeals last year. You can read more about that case here.

*Please be advised that this memo is not legal advice and should not be relied upon or constructed as such. Equity Experts, nor any of their employees, are acting in the capacity of an attorney on behalf of any management agent or association.


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