Messerli & Kramer loses big for adding attorney fees onto amount of debt

Messerli & Kramer and Pipestone Financial, two major debt collectors in Minnesota, took a big hit last week in a Fair Debt Collection Practices lawsuit. Pipestone and Messerli sued Douglas Munoz and demanded, among other things, attorney fees in the amount of $2,105.35. However, Messerli had a contingent-fee arrangement with Pipestone, and Judge Erickson concluded that:

In this case, Pipestone, represented by Messerli & Kramer, alleged that attorney fees were due and owing at the outset of the state-court action. Defendants’ contingency-fee agreement determined the amount of attorney fees sought. Munoz was not a party to that agreement, and he did not agree in the Cardmember Agreement to subject himself to whatever contingency fee a debt collector agreed to pay its attorney. Instead, he agreed to pay “all collection expenses actually incurred” and “reasonable fees” of an outside attorney. Having agreed to pay Messerli & Kramer a percentage of the amount collected, Pipestone had not incurred the attorney fees sought in the state-court action when Pipestone alleged that the fees were due and owing from Munoz.

In sum: debt collectors probably violate the Fair Debt Collection Practices Act if they ask for attorney fees in a specific amount in the complaint. Since Messerli has a lot of lawsuits out there, they stand to lose quite a bit if debtors protect their rights under the FDCPA. Read the full opinion in Munoz v. Pipestone Financial (PDF link).