Tuesday, January 25, 2011

Elderly Woman Can Sue Law Firm for Unfair Debt Collection

An 85-year-old New Jersey woman who missed her final mortgage payment because she was hospitalized can sue a law firm for unlawful debt collection, even though the law firm contacted her lawyer about the debt and did not contact her directly, a federal court has ruled.
Dorothy Rhue Allen missed her final mortgage payment of $432 on the house she had owned since 1976 because she was in the hospital. The mortgage company began foreclosure proceedings against Ms. Allen through a law firm. When Ms. Allen's lawyer asked how much she would have to pay to resolve the problem, the bank and law firm told her the total charges would be $5,797, including nearly $2,400 in legal fees.
Ms. Allen sued in federal court, alleging these charges were much higher than allowed under the Fair Debt Collection Practices Act. A district court judge dismissed the case, finding that the charges were not covered by consumer protection law because they were sent to Ms. Allen's lawyers. However, a federal appeals court found that the communication to Ms. Allen's attorney was an indirect communication to Ms. Allen and sent the case back to the district court to revisit. Other appeals courts have been divided on this question.
Ms. Allen's attorney, Lewis Adler, who has described his client as "just a wonderful little old lady that got sick," has asked the court to certify the case as a class action, alleging that what happened to Ms. Allen is part of a pattern of systemic abuses by lenders handling foreclosures during the recent real estate bust.
For an article on the case from the Washington Post, click here.
To read the full text of the decision, click here.