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When drafting demand letters and complaints, creditors and their attorneys must be cautious when demanding fees from the debtor which the creditor has not yet incurred. The Third Circuit has announced that including a demand for a specific amount of attorneys’ fees in a residential foreclosure complaint before the fees have actually been incurred is an "actionable misrepresentation under the Fair Debt Collections Practices Act" (FDCPA) and exposes debt collection attorneys to liability for damages. The Court announced this rule in a recent precedential opinion.

Judge Fisher’s opinion and order revived plaintiff’s class action FDCPA claim against a law firm that had filed a foreclosure complaint against the plaintiff and the law firm’s lending client. The Plaintiff alleged that an itemized list of total debt in the foreclosure complaint improperly included $1,650 in attorneys’ fees, not all of which had been incurred. The law firm convinced the district court to dismiss the FDCPA claim on the grounds that legal pleadings were not subject to the section of the FDCPA at issue. On appeal, the Third Circuit was not persuaded that formal pleadings filed by attorneys are exempt from the FDCPA’s requirement that debt collectors must not use any "false, deceptive or misleading representation or means in connection with the collection of any debt." Instead, subject to very limited and express exceptions, "all litigation activities, including formal pleadings, are subject to the FDCPA."

In reversing the district court, the Third Circuit relied almost exclusively on last year’s decision from McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240 (3d Cir. 2014), stating that in McLaughlin, "we held that nearly-indistinguishable conduct in a debt collection demand letter, rather than a foreclosure complaint, violated the FDCPA. We now conclude that McLaughlin’s holding extends to foreclosure complaints."

Creditors are not barred from listing an estimate of anticipated fees in their demand letter or complaint, but the creditor must do so explicitly. Otherwise, the debtor may rightly presume that the amounts listed as “due” are, in fact, due as of a particular date.