UNITED STATES OF AMERICA
May 13, 1994
Peter R. Wilson, Esquire
Dear Mr. Wilson:
This is in reply to your letter of April 4, 1994 concerning whether a collection agency can collect a contingency fee of one third the amount of a debt without violating Section 808(l) of the Fair Debt Collection Practices Act ("Act").
I enclose the Commission Staff's Commentary on the Act and refer to page 50108. There is nothing in the Act that specifically addresses the reasonableness of contingency fees charged by debt collectors. For this reason, we have chosen not to place arbitrary limits on such fees and instead rely on 1) the contract creating the debt and 2) state law, for these parameters. In the situation that you describe, charging a fee would be proper under the Act if it is expressly provided for in the contract and not prohibited by state law. Insofar as the amount of the fee is concerned, if it complies with applicable state statutory and common law, it complies with the Act.
If you have further questions about this issue, please do not hesitate to contact me.
John F. LeFevre