Jones, Wolf & Kapasi, LLC Defeats Motion to Dismiss In FDCPA Case Regarding Contingency Fees for a Federal Student Loan

Jones, Wolf & Kapasi, LLC ("JWK") defeated a motion to dismiss by Pioneer Credit Recovery, Inc. (“Pioneer”), in the United States District Court for the District of New Jersey, based on violations of 15 U.S.C. 1692 et seq., the Fair Debt Collection Practices Act ("FDCPA").

In this matter, JWK represents New Jersey consumers in a class action case alleging violations of the FDCPA wherein Pioneer sent the consumers a misleading and deceptive debt collection letter attempting to collect a federal student loan debt along with collection costs. Plaintiff argued that these collection costs were, in reality, Pioneer’s contingency fee with the United States Department of Education, and had not been incurred by Pioneer at the time it sent the debt collection letters to Plaintiff.

As stated by the Court:

“These arguments misconstrue the nature of Plaintiffs allegations. Defendant is correct that a borrower who defaults on a loan is “required to pay . . . reasonable collection costs” under the HEA. 20 U.S.C. § 1091a(b)(1). Contrary to Defendant’s argument, however, Plaintiff does not dispute that he potentially had to pay some collection charge at some point in time. Instead, what Plaintiff is actually alleging in his Complaint is that it was false and misleading for Defendant to include the $15,206.31 collection charge in its letter when: (1) said collection charge was not for a flat fee but rather was for a contingency fee between DOE and Defendant based on the collection of the debt; (2) DOE and Defendant did not incur any expense in collecting the debt at the time the letter was sent; and (3) Defendant did not collect any debt from Plaintiff. Considering that the collection charge was allegedly contingent on the collection of the debt, Plaintiff claims that the collection charge could not be calculated, nor could it be determined as reasonable, at the time Defendant sent its collection letter.” (internal citations omitted)(emphasis added)

The case is  Alex Reizner v Pioneer Credit Recovery, Inc., 2:18-cv-16014 (D. New Jersey April 11, 2019)  and the Court's Opinion can be read here.

For more information about Jones, Wolf & Kapasi, LLC, or if you have recently been contacted by a debt collection law firm, you are invited to connect with us at:; or @JonesWolfKapasi.