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UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C.
20580
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Division
of Credit Practices
Bureau of Consumer Protection
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May 13, 1994
Peter R. Wilson, Esquire
Stein and Moore, P.A.
1010 Minnesota Building
St. Paul, MN 55101
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.
Sincerely,
John F. LeFevre
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