In Ahmed v. Richland Holdings, No. 2:19-CV-1925 JCM (DJA) (D. Nev. Feb. 26, 2021), the District of Nevada dismissed a pair for claims under the Fair Debt Collections Practices Act (FDCPA), alleging that a debt collector had improperly sought to recover collection fees in the amount of 50% of the outstanding debts.

The plaintiffs, Shafique Ahmed and Mayra Munoz, each entered into identical agreements to purchase furniture on credit. The loan contracts included clauses permitting the seller to recover a fee of 50% of the outstanding debt, interest, and attorneys’ fees. When the plaintiffs became delinquent on their loans, the original seller assigned the debts to Richland Holdings (Richland) in exchange for the collection fee. When Richland attempted to collect the debts, the plaintiffs filed suit under the FDCPA.

The plaintiffs first alleged that Richland violated § 1692f(1) of the FDCPA, under which a debt collector may not use unfair or unconscionable means to collect or attempt to collect a debt, including collecting any amount that is not “expressly authorized by the agreement creating the debt or permitted by law.” They argued that because their initial contracts stated, “I [the consumer] agree to pay all your [original seller’s] costs of collection,” they had only agreed to pay collection fees to the original seller and that Richard lacked express authorization to recover the fees. The court rejected this argument, finding that there was express authorization because Richland, as an assignee, had stepped into the shoes of the original seller.

However, the plaintiffs further argued that the 50% collection fee was unconscionable because it was not related to the actual costs incurred by Richland. In dismissing this claim, the court held that § 1692f only applies to unconscionable means of collecting a debt. And the means employed by Richland — sending collection letters and placing telephone calls to the plaintiffs — were commonplace and not unconscionable. Further, the court found that because the plaintiffs had expressly agreed to the collection fees, the amount of the fees could not be considered unconscionable.

This decision shows that a debt collector does not violate the FDCPA by merely attempting to recover collection fees that the debtor agreed to in the underlying contract creating the debt.