Adding Fees to Debts (Formerly Fastfax #8000)

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1 ACA International Compliance Updated Sept. 8, 2017 Adding Fees to Debts (Formerly Fastfax #8000) NOTICE SearchPoint access and content is a service provided exclusively to ACA Members; access and use is subject to the terms set forth at the end of this document. Overview: Some states have laws which regulate the addition of collection fees. Summary of Analysis: The Fair Debt Collection Practices Act (FDCPA) prohibits the addition of any interest, services fees, collection costs or other expenses incidental to the original debt unless it is expressly authorized by the agreement creating the debt. Some states have laws that regulate how much a collector can add in fees and interest, if anything at all. There are also situations where state law allows collectors to add fees but the contract creating the debt is silent on the issue. In these types of situations the Federal Trade Commission (FTC) has stated it is permissible to add collection fees to the debt. However, case law has stated that a percentage based fee was not impermissible in and of itself; though, the parties must actually agree to the fee in the contract that created the debt for the fee to be permissible under the FDCPA. Key Takeaways Generally, if state laws are silent to the ability to add collection fees to debts, then the contract that created the debt would have to provide for the addition of fees for a collector to be able to add them. Related SearchPoint Documents N/A Practical Considerations: Collectors should carefully review applicable state and federal laws before considering adding collection fees to debts. A careful study of relevant state laws is a prudent step when drafting the agreements that create the debt as well as during the actual collection process ACA International. All Rights Reserved.

2 Adding Fees to Debts #8000 Last Updated 09/8/17. Updated Oregon. NOTICE SearchPoint access and content is a service provided exclusively to ACA Members; access and use is subject to the terms set forth at the end of this document. Strikethrough = Deleted Text Underline = Added/New The concept is tempting adding interest, services fees and even collection costs to delinquent accounts. It seems to make sense a creditor would want to recoup collection costs from the consumer. But, before adding such costs to the debt, debt collectors must review the terms of the agreement and any relevant state laws. The addition of interest, collection costs and other fees, if done improperly, could bring unwanted legal attention. As a general rule, the addition of any interest, fees, collection costs or other expenses incidental to the original debt is permitted when such amount is expressly authorized by the agreement creating the debt or permitted by law. 15 U.S.C. 1692f(1) [ 808(1)](emphasis added). However, collection laws on both the federal and the state level also speak to this issue. It is critical for both creditors and the collection agencies that they do business with to be aware and comply with these laws, not only when an account has become delinquent but also in the stages of drafting the contract that creates the debt. The legality of adding fees or interest to an original debt is dependent not only on the contract creating the debt, but also on whether the collection of that amount is permitted by law. It is imperative to look to the provisions of specific state laws when making this determination. A complete listing of the states and their corresponding provisions can be found below. The Federal Trade Commission (FTC) has also issued commentary regarding adding collection costs. In its Official Staff Commentary on the FDCPA, the FTC stated that a debt collector may attempt to collect a fee or charge in addition to the debt if either (a) the charge is expressly provided for in the contract creating the debt and the charge is NOT prohibited by state law, or (b) the contract is silent but the charge is otherwise expressly permitted by state law. Conversely, a debt collector may not collect an additional amount if either (a) state law expressly prohibits collection of the amount or (b) the contract does not provide for collection of the amount and state law is silent. Over the years, courts have examined the issue of adding fees, including the amount of the fee. For example, in the case of Patzka v. Viterbo College, 917 F. Supp. 654 (W.D. Wis. 1996) both the college and the collection agency that it employed were found to have violated the FDCPA and state law by attempting to collect both interest and a 33 percent collection fee on a student loan. The court noted that the additional charges were not expressly authorized by the agreement of the parties and were expressly forbidden by state law. The U.S. Court of Appeals for the Eighth Circuit, in the case of Kojetin v. C U Recovery, Inc., 212 F.3d 1318 (8th Cir. 2000), affirmed a lower court decision holding that if an agency wants to impose a collection fee on a consumer, the collection costs should be itemized in the original consumer agreement and bear a relationship to the actual costs of collection. Other courts have examined the ruling in Kojetin when faced with similar circumstances. For example, in Bradley v. Franklin Collection Service, Inc., 739 F.3d 606 (11th Cir. 2014), the Eleventh Circuit cited Kojetin, when it held that a debt collector violated the FDCPA by imposing a 33 and 1/3 percent collection fee on a medical debt. The court observed that the fee was added prior to the debt being placed with the collection agency, and while the collection agency and the medical provider agreed to the addition of the percentage-based collection fee, the consumer was not a party to that agreement. Instead, the agreement between the medical provider and the consumer stated, [i]n the event of non-payment I agree to pay all costs of collection, including a reasonable attorney s fee The court concluded that such language did not authorize a percentage-based fee, but rather, only the actual costs of collection. The Eleventh Circuit was careful to stress that a percentage-based fee was not impermissible in and of itself, however, the parties must actually agree to the fee in the contract that created the debt for the fee to be permissible under the FDCPA. At least one other court, Seeger v. AFNI, Inc., 548 F.3d 1107, 1113 (7th Cir ACA International. All Rights Reserved. Page 2 of 25

3 2008), has also indicated a percentage-based fee may be permissible under the FDCPA if the fee is allowed under state law and the contract that created the debt includes the appropriate language authorizing the fee. At least two courts have also looked at the legality of adding interest to debts. These courts specifically analyzed whether a debt collector may add interest to a debt after the creditor has allegedly ceased charging interest on the account once the debts were charged off. In McDonald v. Asset Acceptance LLC, 296 F.R.D. 513 (E.D. Mich. 2013), an asset buyer purchased charged-off credit card debts from multiple creditors. The agreements between the asset buyer and the original creditors stated that the balances on the accounts did not include post charge-off interest. The asset buyer later filed suit to collect the debts, adding contractual interest to the principal from the date of charge-off to the date of the state court action. The court determined the original creditors had waived their right to contractual interest at the time of charge-off because both original creditors ceased adding interest on the outstanding accounts at the point of charge-off, the assignment agreement stated that there had been no post charge-off interest or fees added to the unpaid balance, and the agreement provided that the purpose of the assignment was the collection of the unpaid balance, which did not include post-charge-off interest. The court held that because the creditor had waived its right to the interest, the asset buyer could not retroactively impose interest for the period in which it did not own the accounts. Therefore, the asset buyer s attempts to collect interest for the periods in which the original creditors still owned the accounts constituted a deceptive practice in violation of 807 and 808 of the FDCPA. In another case dealing with the addition of interest, a court examined the addition of statutory interest after charge-off. In Stratton v. Portfolio Recovery Associates, LLC, 770 F.3d 443 (6th Cir. 2014), an asset buyer purchased a consumer s charged-off account from the original creditor, and sued to collect the balance of the charged-off debt, plus state statutory interest of eight percent per annum, adding the interest from the date of charge-off. The district court found that even though the creditor had indeed waived its right to the 21 percent interest rate set forth in the underlying original contract, the waiver did not extend to state statutory interest. On appeal, however, the Court of Appeals for the Sixth Circuit reversed the decision of the district court finding that the creditor s waiver of contractual interest also excluded its right to collect statutory interest. Therefore, the Sixth Circuit concluded that the asset buyer was not allowed to charge a statutory interest rate of eight percent because the original creditor had waived its right to collect interest at the statutory rate. Aside from the type of FDCPA concerns discussed above, careful study of relevant state law is a prudent step when drafting the agreements that create the debt as well as during the actual collection process. This proactive step could prove beneficial in protecting both the creditor and collection agency servicing the account. What follows is a list of state laws regarding the addition of fees, interest and other charges to debts. No State Provision The laws or regulations of the following states are silent in addressing whether collection agencies may add interest, fees or collection charges. Alabama Alaska Florida Indiana Kentucky Maryland Montana Ohio South Dakota Requirements of Other States The following is a compilation of the state statutes and regulations that address adding collection costs or fees to an account. ARIZONA An individual, firm, partnership, association or corporation to whom a license is to be issued under this chapter shall, except for attorneys licensed to practice law, not attempt to collect any collection fee, attorney s fee, court cost or expenses unless the fees, charges or expenses are justly due from and legally chargeable against the debtor, or have been judicially determined. Ariz. Rev. Stat. Ann (4) (West, WESTLAW through End of 45th Leg., 2nd Reg. Session and 5th Special Session 2002). A collection agency shall not threaten or attempt to collect any attorney fees, collection cost, or other fee not provided in the contract which established the debt. Ariz. Admin. Code R (West, WESTLAW current through Mar. 31, 2001). A licensee shall not give or send to any debtor, or cause to be given or sent to any debtor, any notice, letter, message or form which represents or infers that the 2017 ACA International. All Rights Reserved. Page 3 of 25

4 existing obligation of the debtor may be increased by the addition of attorney s fees, investigation fees, service fees, or any other fees or charges when in fact these fees or charges may not legally be added to the existing obligation of the debtor. Ariz. Rev. Stat. Ann (5)(c) (West, WESTLAW through legislation effective Feb. 13, 2006). ARKANSAS No collection agency mentioned in shall charge as a collection charge or fee an amount in excess of 50% of the total amount actually collected on all accounts for any one client, nor more than 50% of the total amount actually collected on any one account, nor shall a minimum charge in excess of $1.00 be made on any partially or totally collected account. Ark. Code Ann (a) (West, WESTLAW through End of 2008 First. Ex. Sess. and 11/4/08 Gen. Election). All contracts providing for a greater collection charge or fee or a greater minimum charge than provided in this section entered into between any creditor in this state and any collection agency covered by this chapter shall be void. The creditor shall have, in addition to all other remedies now or hereafter provided by law, a cause of action to recover all amounts collected by the collection agency on the creditor s account or accounts. Ark. Code Ann (b) (West, WESTLAW through End of 2008 First. Ex. Sess. and 11/4/08 Gen. Election). CALIFORNIA A debt collector shall not falsely represent that a debt may be increased by the addition of attorney s fees, investigation fees, service fees, finance charged or other charges if, in fact, such fees or charges may not legally be added to the existing obligation. Cal. Civ. Code (e) (West, WESTLAW through 1st Ex. Sess. and urgency legislation through ch. 109 of the 2001 Reg. Sess. and ch. 13 of the st Ex. Session). A debt collector shall not collect or attempt to collect all or part of the collector s fee, charges for services rendered or other collection expenses, except as permitted by law. Cal. Civ. Code (b) (West, WESTLAW through 1st Ex. Sess. and urgency legislation through ch. 109 of the 2001 Reg. Sess. and ch. 13 of the st Ex. Session). Rate of interest after breach of contract: (a) Any legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation. (b) If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach. Cal. Civ. Code 3289 (West, WESTLAW through 1st Ex. Sess. and urgency legislation through ch. 109 of the 2001 Reg. Sess. and ch. 13 of the st Ex. Session). COLORADO A debt collector or collection agency shall not use unfair or unconscionable means to collect or attempt to collect any debt, including, but not limited to, the following conduct: The collection of any amount, including any interest, fee, charge, or expense incidental to the principal obligation, unless such amount is expressly authorized by the agreement that created the debt or permitted by law. Colo. Rev. Stat. Ann (1)(a) (West, WESTLAW through Second Reg. Sess. of the Sixty-Third Gen. Assembly (2002)). Costs of Collection (1) No collection agency shall add, collect, or attempt to collect a charge for costs of collection unless such costs are expressly authorized by statute or by the contract, agreement, note, or other instrument creating the debt and are not otherwise prohibited by law. (2) No licensee shall advise, suggest, or request that a client add collection costs to any existing debt unless such costs are specifically authorized by statute. (3) If a statute, contract, agreement, note, or other instrument specifically authorizes the addition of collection costs and such costs are collected, the licensee may retain only those collection costs exclusive of attorney fees and court costs as its fee or commission for the collection of the debt, unless otherwise agreed to in writing with the assignor. (4) No collection agency shall add, collect, or attempt to collect costs of collection pursuant to (1)(b) (II), C.R.S. on any dishonored check, draft, or payment order payable to it unless the check is assigned for collection to another collection agency not owned in whole or in part by the payee collection agency. 4 Colo. Code Regs Rule 2.03 (West, WESTLAW through Oct. 2008). Editor s Note: The Colorado Collection Agency Board in an advisory opinion stated the following regarding 4 Colo. Code Regs Rule 2.03: A payment convenience fee is a fee incidental to the principal obligation. Consequently, a collection agency may not 2017 ACA International. All Rights Reserved. Page 4 of 25

5 demand, collect, or attempt to collect a payment convenience fee for any particular payment method unless the underlying agreement creating the debt expressly provides for such fees, or if they are expressly permitted by law. A creditor s contract or agreement with the consumer for a payment convenience fee must be specific and clear enough to notify the consumer of the fee. Attorney fees With respect to a consumer credit transaction, the agreement may provide for the payment by the consumer of reasonable attorney fees not in excess of fifteen percent of the unpaid debt after default and referral to an attorney not a salaried employee of the creditor or such additional fee as may be directed by the court. A provision in violation of this section is unenforceable. Colo. Rev. Stat. Ann (1) (West, WESTLAW through Ch. 8 of the nd Reg. Sess. of the 65th Gen. Ass.). Delinquent Taxes- Methods of Enforcing Collection (8)(b.5) In order to facilitate and expedite the collection of taxes more than twelve months overdue from a taxpayer who is a resident of and domiciled in the state of Colorado, the executive director may enter into contracts with two or more debt collection agencies or attorneys for the collection of the taxes due from such taxpayer, together with any penalties and interest accrued thereon pursuant to the procurement provisions of article 103 of title 24, C.R.S (8)(c)(I) Each contract entered into with a debt collection agency or an attorney shall specify that fees for services rendered shall be based on the total amount of delinquent taxes, including accrued penalties and interest, that is actually collected; however, under no circumstance shall the fees for services rendered exceed twenty percent of the total amount of delinquent taxes, including accrued penalties and interest, that is actually collected. Any fees for services rendered shall be collected by the agency or attorney in addition to the total amount of delinquent taxes, including accrued penalties and interest, actually collected. Such fees for services rendered shall be shown to the taxpayer as a separate and distinct item, and, when added, such fees for services rendered shall be a debt from the taxpayer to the agent or attorney until paid and shall be recoverable at law in the same manner as other debts. (II) If the department enters into a contract with a debt collection agency or an attorney to collect delinquent taxes, including accrued penalties and interest, and any fees for services rendered as specified in subparagraph (I) of this paragraph (c) and the contract specifies that the department is required to collect the fees for services rendered if the taxpayer chooses to pay the total amount owed directly to the department, the department shall become the agent for the agency or attorney and collect the agency s or attorney s fees for services rendered on behalf of the agency or attorney. (III) If a taxpayer makes a payment toward the total amount a debt collection agency or attorney is attempting to collect, including delinquent taxes, accrued penalties and interest, and any fees for services rendered as specified in subparagraph (I) of this paragraph (c), such payment shall be allocated among delinquent taxes, accrued penalties and interest, and fees for services rendered according to the rules or procedures of the department and the contract between the department and the agency or attorney. The taxpayer may not designate the allocation of the payment. (IV) No costs except court costs shall be reimbursed unless authorized in such contract. If a debt collection agency or an attorney files a civil suit to collect delinquent taxes, including accrued penalties and interest, suit shall be brought in the name of the executive director of the department of revenue of the state of Colorado. When suit is brought by an agency or attorney, court costs are reimbursable by the department to the agency or attorney, but fees for services of legal representation incurred by such agency or attorney on behalf of the department for the purpose of such suit shall not be reimbursable. Colo. Rev. Stat. Ann (8)-(9) (West, WESTLAW through the 1st Reg. Sess. of the 67th Gen. Assembly (2009)). CONNECTICUT No consumer collection agency or control person shall add any post charge-off charge or fee for cost of collection, unless such cost is a court cost, to the amount of any claim which it receives for collection or knowingly accept for collection any claim to which any such charge or fee has already been added to the amount of the claim unless (A) the consumer debtor is legally liable for such charge or fee as determined by the contract or other evidence of an agreement between the consumer debtor and creditor, a copy of which shall be obtained by or available to the consumer collection agency from the creditor and maintained as part of the records of the consumer collection agency or the creditor, or both, and (B) the total charge or fee for cost of collection does not exceed fifteen per cent of the total amount actually collected and accepted as payment in full satisfaction of the debt. H.B (2017 Conn.) amending Conn. Gen. Stat. Ann. 36a-805(a)(12) (West, WESTLAW through July 12, 2017) ACA International. All Rights Reserved. Page 5 of 25

6 No consumer collection shall impose a charge or fee for any child support payments collected through the efforts of a governmental agency. If the imposition of a charge or fee is permitted under section 36a-801b, no consumer collection agency shall impose a charge or fee for the collection of any child support overdue at the time of the contract in excess of twenty-five percent of overdue support actually collected. Conn. Gen. Stat. Ann. 36a-805(b) (West, WESTLAW through enactments of Public Acts enrolled and approved by the Governor on or before July 12, 2017 and effective on or before July 12, 2017). The collection of any amount, including any interest, fee, charge or expense incidental to the principal obligation, that is not expressly authorized by the agreement creating the debt or permitted by law, is an unfair or unconscionable means to collect or attempt to collect any debt. Conn. Agencies Regs. 36a (1) (West, WESTLAW through 8/26/08). No seller may impose a surcharge on a buyer who elects to use any method of payment, including, but not limited to, cash, check, credit card or electronic means, in any sales transaction. Conn. Gen. Stat. Ann ff(a) (West, WESTLAW through 2008 Supp. Conn. Gen. Stat.). DELAWARE Licensed Lenders Regulations Additional Fees and Charges; Limitations: Charges for Revolving Credit A licensee may collect the following charges for revolving credit as allowed by of 5 Del.C. Ch. 22, Subch. II: 3.1 interest, including interest at variable rates; 3.2 a periodic charge for privileges made available to the borrower; 3.3 transaction charges; 3.4 a minimum charge for each scheduled billing period during which there was an outstanding unpaid balance; 3.5 fees for services rendered in good faith by the licensee or its agents in connection with the loan; 3.6 reimbursement for expenses incurred in good faith by the licensee or its agents in connection with the loan; 3.7 late or delinquency charges; 3.8 attorney fees incurred by the licensee as a result of a default by the borrower; 3.9 court, alternative dispute resolution, or other collection costs (including collection agency fees) incurred by the licensee as a result of a default by the borrower; and 3.10 returned check charges and charges for the denial of electronic account debits limited to the amount specified in the licensee's agreement with its customers. A customer may be assessed only one such charge per item Del. Reg. Text amending 5 Del. Code Regs (West, WESTLAW through amendments included in the Delaware Register of Regulations, Volume 17, Issue 9, dated March 1, 2014)). Charges for Closed End Credit A licensee may collect the following charges for closed end credit as allowed by 5 Del.C. Ch. 22, Subch. III: 4.1 interest, including interest at variable rates; 4.2 fees for services rendered in good faith by the licensee or its agents in connection with the loan; 4.3 reimbursement for expenses incurred in good faith by the licensee or its agents in connection with the loan; 4.4 late or delinquency charges; 4.5 charges for deferred installment payments; 4.6 attorney fees incurred by the licensee as a result of a default by the borrower; 4.7 court, alternative dispute resolution, or other collection costs (including collection agency fees) incurred by the licensee as a result of a default by the borrower; 4.8 deferral charges; and 4.9 returned check charges and charges for the denial of electronic account debits limited to the amount specified in the licensee's agreement with its customers. A customer may be assessed only one such charge per item Del. Reg. Text amending 5 Del. Code Regs (West, WESTLAW through amendments included in the Delaware Register of Regulations, Volume 17, Issue 9, dated March 1, 2014). DISTRICT OF COLUMBIA No creditor or debt collector shall use any fraudulent, deceptive, or misleading representation or means to collect or attempt to collect claims or to obtain information concerning consumers in any of the following ways: (8) any representation that an existing obligation of the consumer may be increased by the addition of attorney s fees, investigation fees, service fees, or any other fees or charges when in fact such fees or charges may not legally be added to the existing obligation. Act (D.C. 2011) amending D.C. Code Ann (f)(8) (West, WESTLAW through Nov. 15, 2011). No creditor or debt collector shall use unfair or unconscionable means to collect or attempt to collect any claim in any of the following ways: (3) the collection or the attempt to collect from the consumer all 2017 ACA International. All Rights Reserved. Page 6 of 25

7 or any part of the debt collector s fee or charge for services rendered; (4) the collection of or the attempt to collect any interest or other charge, fee, or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense is expressly authorized by the agreement creating the obligation and legally chargeable to the consumer or unless such interest or incidental fee, charge, or expense is expressly authorized by law. Act (D.C. 2011) amending D.C. Code Ann (g)(3), (4) (West, WESTLAW through Nov. 15, 2011). GEORGIA A debt collector may not represent to a consumer that an existing obligation of the consumer may be increased by the addition of attorney s fees, investigative fees, service fees or any other charges when, in fact, such fees or charges may not legally be added to the existing obligation. Ga. Comp. R. & Regs. r (h) (West, WESTLAW current through Apr. 30, 2001). No debt collector may attempt to collect any interest or other charge, fee, or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense incidental to the principal obligation is expressly authorized by the agreement creating the obligation and legally chargeable to the consumer. Ga. Comp. R. & Regs. r (c) (West, WESTLAW current through Apr. 30, 2001). GUAM Use of Multiple Agreements to Obtain Higher Rate No seller may divide a consumer credit sale with the intent of obtaining a higher rate of credit service charge than would otherwise be permitted by this Chapter. The excess amount of credit service charge provided for in agreements in violation of this section are excess charges for the purposes of the provisions on the effect of violations on rights of parties ( 5201) and the provisions on civil actions by Administrator ( 6113). 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Article 2402 does not apply: (a) to sales in which the amount financed is Twenty-Five Thousand Dollars ($25,000.00) or more or to leases in which the amount payable under the lease is Twenty-Five Thousand Dollars ($25,000.00) or more. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Limitation on Default Charges Except for reasonable expenses incurred in realizing on a security interest, the agreement with respect to a consumer credit sale may not provide for any charges as a result of default by the buyer other than those authorized by this Act. An agreement in violation of this Section is void. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Article 2414 does not apply: (a) to sales in which the amount financed is Twenty-Five Thousand Dollars ($25,000.00) or more or to leases in which the amount payable under the lease is Twenty-Five Thousand Dollars ($25,000.00) or more. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Delinquency Charges (1) With respect to a precomputed consumer loan, the parties to a loan may contract for a delinquency charge on any installment not paid in full within 10 days after its scheduled due date in an amount not to exceed the greater of: (a) Two Dollars ($2.00) or an amount, not exceeding Five Dollars ($5.00), which is 5% of the unpaid amount of the installment; or (b) The deferral charge that would be permitted under 3204(1) to defer the unpaid amount of the installment for the period that it is delinquent. (2) A delinquency charge under subsection (a)(1) may be collected only once on an installment however long it remains in default. No delinquency charge may be collected if the installment has been deferred and a deferral charge has been paid in accordance with A delinquency charge may be collected at the time it is assessed or at any time thereafter. (3) No delinquency charge may be collected on an installment which is paid in full within 10 days after a scheduled installment due date even though an earlier maturing installment or a delinquency charge on it may not have been paid in full. (4) If two installments or parts thereof of a precomputed loan are in default for 10 days, or more, the lender may elect to convert the loan from a precomputed loan to one in which the loan finance charge is based on unpaid balances. In this event he shall make a rebate pursuant to the provisions on rebate upon prepayment ( 3210) as of the maturity date of the first delinquent installment, and thereafter may make a loan finance charge as authorized by the provisions on loan finance charge for consumer loans ( 3201) or the provisions on loan finance charge for regulated loans governing non-precomputed loans ( 3508(3)), whichever is appropriate. The amount of the rebate shall not be reduced by the amount of the minimum retained charge pursuant to 3210(1). If the lender proceeds under this subsection, any delinquency or deferral charges made with respect to installments due at or after the maturity date of the first delinquent 2017 ACA International. All Rights Reserved. Page 7 of 25

8 installment shall be rebated, and no further delinquency or deferral charges shall be made. The amounts of $2.00 and $5.00 in subsection (1) are subject to change pursuant to the provisions on adjustment of dollar amounts ( 1106). 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Attorneys Fees With respect to a consumer credit sale or consumer lease the agreement may provide for the recovery from the buyer or lessee of reasonable attorneys fees not in excess of fifteen percent (15%) of the unpaid debt at the time suit is brought, if paid or payable to an attorney not a salaried employee of the seller or lessor or his transferee. An agreement in violation of this Section is void. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Article 2413 does not apply: (a) to sales in which the amount financed is Twenty-Five Thousand Dollars ($25,000.00) or more or to leases in which the amount payable under the lease is Twenty-Five Thousand Dollars ($25,000.00) or more. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Except as provided by the limitations on attorneys fees in certain regulated loans ( 3512), with respect to a consumer loan the agreement may provide for the recovery from the debtor of reasonable attorneys fees not excess of fifteen percent (15%) of the unpaid debt at the time suit is brought, if paid or payable to an attorney not a salaried employee of the lender. An agreement in violation of this Section is void. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Article 3404 does not apply to loans in which the principal is Twenty-Five Thousand Dollars ($25,000.00) or more. 14 Guam Code Ann (West, WESTLAW through P.L (2005)). Effect of Violations on Rights of Parties (1) Except as otherwise provided, no violation of this Title shall impair rights on a debt. (2) The debtor is not obligated to pay a charge in excess of that allowed by this Title, and if he has paid an excess charge, he has a right to a refund. A refund may be made by reducing the debtor's obligation by the amount of the excess charge. If the debtor has paid to the creditor an amount in excess of the lawful obligation under the agreement, the debtor may recover the excess amount from the person who made the excess charge or from the person to whom the excess charge was paid. (4) If the creditor has violated the provisions of this Title applying to referral sales ( 2411) or limitations on the schedule of payments or loan term for regulated loans ( 3513), the debtor is not obligated to pay the credit service or loan finance charge. If he has paid any part of this charge he has a right to recover the payment from the person violating this Title or from a transferee of that person's rights to whom debt is then owing. No action pursuant to this Subsection may be brought in this Territory more than one (1) year after the due date of the last scheduled payment of the agreement pursuant to which the charge was paid. 14 Guam Code Ann. 5201(1), (2), (4) (West, WESTLAW through P.L (2005)). HAWAII (a) A collection agency shall not collect, or attempt to collect, any collection fee or attorney's fee or commission from any debtor; provided that an attorney's fee or commission may be collected after filing of a suit against any debtor and the fee or commission shall not be in excess of twenty-five per cent of the unpaid principal balance. All attorney's fees or commissions collected by a collection agency shall be remitted to the attorney and no portion of the collection shall be retained by the collection agency. (b) This section shall not prohibit a collection agency from collecting, or attempting to collect from a debtor, a commission authorized under a contract with the University of Hawaii, or a contract with the department of taxation pursuant to sections and Haw. Rev. Stat. Ann. 443B-9 (West, WESTLAW through the rd sp. sess. of the Haw. Leg.). No collection agency shall use any fraudulent, deceptive, or misleading representation or means to collect, or attempt to collect, claims or to obtain information concerning a debtor or alleged debtor, including any conduct which is described as follows: (8) Any representation that an existing obligation of the debtor or alleged debtor may be increased by the addition of attorney s fees, investigation fees, service fees, and any other fees or charges when in fact the fees or charges may not legally be added to the existing obligations. Haw. Rev. Stat. Ann. 443B-18(8) (West, WESTLAW through Third Special Session of the Twenty-First Legislature). No collection agency shall use unfair or unconscionable means to collect or attempt to collect any claim in any of the following ways: (3) The collection of or the attempt to collect from a debtor or alleged debtor all or part of the 2017 ACA International. All Rights Reserved. Page 8 of 25

9 collection agency s fee or charges for services rendered; (4) The collection of or the attempt to collect any interest or other charge, fee or expense incidental to the principal obligation unless the interest or incidental fee, charge, or expense is authorized by the agreement creating the obligation and legally chargeable to the debtor or alleged debtor; or unless the interest or incidental fee, charge, or expense is expressly authorized by law. Haw. Rev. Stat. Ann. 443B-19(3), (4) (West, WESTLAW through Third Special Session of the Twenty-First Legislature). IDAHO (1) Contracts between collection agency licensees or collection agencies required to be licensed under this act and creditor clients shall be in writing. (2) It shall be a violation of this act for any collection agency contract to: (a) Authorize a collection agency to retain any sums collected on behalf of a creditor client, other than the regular collection fees or commissions authorized by this act; (b) Penalize a creditor client for any unintentional error, mistake or omission in furnishing the correct name or address of any debtor to a collection agency; or (c) Require the payment of any fee, commission or compensation in excess of fifty percent (50%) of the amount actually collected on any account, bill, claim or other indebtedness entrusted to the collection agency for collection. However, in the case that a collection agency collects interest on an account, the creditor client and the collection agency may agree in writing for division of such interest between them without such percentage limitation. Furthermore, in the case of the collection of checks dishonored by nonacceptance or nonpayment, the creditor client and the collection agency, by written agreement between them, may provide, in place of a percentage fee, for the payment of a set dollar amount collection fee not to exceed the amount provided in section , Idaho Code, which shall not be subject to the fifty percent (50% ) limitation. Collection agreements to proceed under section A, Idaho Code, shall be subject to the fifty percent (50%) limitation. (3)(a) No debt counselor, credit counselor or credit repair organization licensed or required to be licensed under this act shall take or receive for services performed for any one (1) person more than fifteen percent (15% ) of the amount received by it at any one (1) time from or on behalf of that person for payment or prorating to creditors, and no other charges shall be made or received for any such service. Idaho Code (West, WESTLAW through Chs eff. on or before Mar. 18, 2008). Adding Fees (4) No collection agency licensee, or collection agency required to be licensed under this act, or agent of such collection agency shall collect or attempt to collect any interest or other charges, fees, or expenses incidental to the principal obligation unless such interest or incidental fees, charges, or expenses: (a) Are expressly authorized by statute; (b) Are allowed by court ruling against the debtor; (c) Have been judicially determined; (d) Are provided for in a written form agreement, signed by both the debtor and the licensee, and which has the prior approval of the director with respect to the terms of the agreement and amounts of the fees, interest, charges and expenses (e) Reasonably relate to the actual cost associated with processing a demand draft or other form of electronic payment on behalf of a debtor for a debt payment, provided that the debtor has preauthorized the method of payment and has been notified in advance that such payment may be made by reasonable alternative means that will not result in additional charges, fees or expenses to the debtor. Idaho Code A(4) (West, WESTLAW through Chs eff. on or before Mar. 18, 2008). In Medical Recovery Services, LLC v. Strawn, 321 P.3d 703 (2014), the Idaho Supreme Court examined Idaho Code A(4) (above), and found that the term principal obligation was limited to the amount that the consumers owed the creditor for services provided, and did not include the contractual attorney s fees specified in the contract that created the debt. Rather, the Supreme Court ruled the attorney s fees were subordinate to the debt, and therefore, incidental to the principal obligation, and could only be collected by the collection agency if the fees met one or more of the five exceptions enumerated in Idaho Code A(4). The Idaho Department of Finance issued guidance in response to the above-referenced Idaho Supreme Court decision. The guidance stated that collection agencies 2017 ACA International. All Rights Reserved. Page 9 of 25

10 are limited to collecting amounts that equate to the principal obligation, and may only collect fees or charges incidental to the principal obligation if collection of those fees or charges is authorized because of the application of one or more of the five exceptions enumerated in Idaho Code A(4). The guidance cautions that all charges and fees, however labeled, that are subordinate to the debt will be deemed incidental to the principal obligation for purposes of applying the provisions in Idaho Code A(4). Such charges include, but are not limited to, attorney s fees, collection fees, and service charges, regardless of whether such charges are included in the creditor s written contract with the consumer. Collection agencies operating in Idaho are advised to consult with their own legal counsel before claiming application of any of the exceptions listed at Idaho Code A(4). For more information, members are encouraged to review the Idaho Department of Finance s guidance on Idaho Code A(4). (Website last visited on Aug. 25, 2014). Debts Owed to Courts (1) The supreme court, or the clerks of the district court with the approval of the administrative district judge, may enter into contracts in accordance with this section for collection services for debts owed to courts. The cost of collection shall be paid by the defendant as an administrative surcharge when the defendant fails to pay any amount ordered by the court and the court utilizes the services of a contracting agent pursuant to this section. (2) (a) Contracting agent means a person, firm or other entity who contracts to provide collection services. (b) Cost of collection means the fee specified in contracts to be paid to or retained by a contracting agent for collection services. (c) Debts owed to courts means any assessment of fines, court costs, surcharges, penalties, fees, restitution, moneys expended in providing counsel and other defense services to indigent defendants or other charges which a court judgment has ordered to be paid to the court in criminal cases, and which remain unpaid in whole or in part, and includes any interest or penalties on such unpaid amounts as provided for in the judgment or by law. (4) Each contract entered into pursuant to this section shall specify the scope of work to be performed and provide for a fee to be paid to or retained by the contracting agent for collection services. Such fee shall be designated as the cost of collection, and shall not exceed thirty-three percent (33%) of the amount collected. The cost of collection shall be deducted from the amount collected but shall not be deducted from the debts owed to courts. Idaho Code (West, WESTLAW through end of the nd Reg. Sess. of the 60th Leg.). ILLINOIS A collection as defined in the Collection Agency Act or any employee of such collection agency commits a deceptive collection practice when, with the intent to collect a debt owed to an individual or a corporation or other entity, he, she or it while attempting to collect an alleged debt, adds to the debt any service charge, interest or penalty which he, she, or it is not entitled by law to add. 720 Ill. Comp. Stat. 5/17-5(c); 225 Ill. Comp. Stat. 425/9(a)(27) (West, WESTLAW through P.A of the 2010 Reg. Sess.). It is an unlawful practice for a debt collector to collect or attempt to collect any interest or other charge or fee in excess of the actual debt or claim unless such interest or other charge or fee is expressly authorized by the agreement creating the debt or claim unless expressly authorized by law or unless in a commercial transaction such interest or other charge or fee is expressly authorized in a subsequent agreement. If a contingency or hourly fee arrangement (i) is established under an agreement between a collection agency and a creditor to collect a debt and (ii) is paid by a debtor pursuant to a contract between the debtor and the creditor, then that fee arrangement does not violate this Section unless the fee is unreasonable. The Department shall determine what constitutes a reasonable collection fee. 225 Ill. Comp. Stat. 425/9(a)(29) (West, WESTLAW through P.A , through of the 2002 Reg. Session of the 92nd Gen. Assembly). Tax Collection Collection agency fees. Except where prohibited by federal law or regulation, in the case of any liability referred to a collection agency on or after July 1, 2010, any fee charged to the State by the collection agency (i) may not exceed 25% of the liability referred to the collection agency unless the liability is for a tax debt, (ii) is considered an additional liability owed to the State, (iii) is immediately subject to all collection procedures applicable to the liability referred to the collection agency, and (iv) must be separately stated in any statement or notice of the liability issued by the collection agency to the debtor. H.B (Sec. 9) (Ill. 2010) to be codified at 30 Ill. Comp. Stat. 210/ ACA International. All Rights Reserved. Page 10 of 25

11 (b) The Bureau shall have the sole authority to let the contracts with persons specializing in debt collection for the collection of debt referred to and accepted by the Bureau. Any contract with the debt collector shall specify that the collector s fee shall be on a contingency basis and that the debt collector shall not be entitled to collect a contingency fee for any debt collected through the efforts of any State offset system. H.B (Sec. 10) (Ill. 2010) to be codified at 30 Ill. Comp. Stat. 210/10(b). Creditor s Interest Rate Creditors shall be allowed to receive at the rate of five (5) per centum per annum for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing; on money lent or advanced for the use of another; on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance; on money received to the use of another and retained without the owner's knowledge; and on money withheld by an unreasonable and vexatious delay of payment. In the absence of an agreement between the creditor and debtor governing interest charges, upon 30 days' written notice to the debtor, an assignee or agent of the creditor may charge and collect interest as provided in this Section on behalf of a creditor. 815 Ill. Comp. Stat. 205/2 (West, WESTLAW through P.A of the 2006 Reg. Sess.). IOWA A debt collector shall not use a fraudulent, deceptive, or misleading representation or means to collect or attempt to collect a debt or to obtain information concerning debtors. The following conduct is fraudulent, deceptive, or misleading within the meaning of this subsection: A representation that an existing obligation of the debtor may be increased by the addition of attorney's fees, investigation fees, service fees or other fees or charges, when in fact such fees or charges may not legally be added to the existing obligation. Iowa Code Ann (4)(h) (West, WESTLAW current with 2007 Ia. Legis. Serv. S.F. 421 through end of End of nd Ex. Session). A debt collector shall not engage in the following conduct to collect or attempt to collect a debt: c. The collection of or the attempt to collect from the debtor a part or all of the debt collector's fee for services rendered, unless both of the following are applicable: (1) The fee is reasonably related to the actions taken by the debt collector. (2) The debt collector is legally entitled to collect the fee from the debtor. d. The collection of or the attempt to collect interest or other charge, fee or expense incidental to the principal obligation unless the interest or incidental charge, fee, or expense is expressly authorized by the agreement creating the obligation and is legally chargeable to the debtor, or is otherwise legally chargeable. Iowa Code Ann (5)(c)-(d) (West, WESTLAW through End of nd Ex. Session). Collection of judgment debt owed to the state or city 3.a. A city may contract with a private collection designee for the collection of judgment debt sixty days after the judgment debt in a case is deemed delinquent pursuant to subsection 2. b. The contract shall provide for a collection fee of up to twenty-five percent of the amount of the balance of the judgment debt in a case deemed delinquent. The collection fee shall be added to the amount of the judgment debt deemed delinquent. The amount of the judgment debt deemed delinquent and the collection fee shall be owed by and collected from the defendant. The collection fee shall be used to compensate the private collection designee. Iowa Code Ann B (West, WESTLAW through 3/15/2011 from the 2011 Reg. Sess.) KANSAS Except for reasonable expenses incurred in realizing on a security interest, the agreement with respect to a consumer credit transaction may not provide for any charges as a result of default by the consumer other than those authorized by K. S. A. 16a through 16a [the Kansas Uniform Consumer Credit Code]. A provision in violation of this section is unenforceable. Kan. Stat. Ann. 16a (West, WESTLAW through End of 2000 Reg. Session). (1) With respect to a consumer credit sale made pursuant to open end credit, a seller may charge a finance charge at any rate agreed to by the parties. (2) A charge may be made in each billing cycle which is a percentage of an amount no greater than: (a) The average daily balance of the account, which is the sum of the actual amounts outstanding each day during the billing cycle divided by the number of days in the cycle; (b) The unpaid balance of the account on the last day of the billing cycle. (3) If the billing cycle is monthly, the charges may not exceed 1/12 of the annual rate agreed to by the consumer. If the billing cycle is not monthly, the maximum charge is that percentage which bears the same relation to the applicable monthly percentage as the number of days in the billing cycle bears to 30. For 2017 ACA International. All Rights Reserved. Page 11 of 25