Utah Court of Appeals
Can collection agencies recover both percentage commissions and attorney fees? Express Recovery Services v. Shewell Explained
Summary
Express Recovery Services appealed a trial court’s default judgment that refused to award both a 50% collection commission and attorney fees without evidence of the reasonableness of the collection costs. The trial court required an affidavit detailing actual collection costs before awarding the commission.
Analysis
In Express Recovery Services v. Shewell, the Utah Court of Appeals addressed whether debt collectors can recover both collection commissions and attorney fees without running afoul of Utah’s policy against contractual penalties.
Background and Facts
Express Recovery Services sought to collect on a dental debt that included a contractual provision requiring payment of “all costs of collection including a 50% collection agency commission, reasonable attorney fees, and interest at a rate of 21% per annum.” The trial court refused to award both the collection commission and attorney fees without evidence demonstrating the reasonableness of the collection costs, requiring Express to file an affidavit detailing actual costs incurred.
Key Legal Issues
The court addressed whether: (1) trial courts may require affidavits to establish reasonableness of collection costs; (2) contractual provisions seeking both percentage commissions and attorney fees constitute unenforceable penalties; and (3) the bad check statute governed the analysis.
Court’s Analysis and Holding
The Court of Appeals affirmed, applying Utah’s “policy disfavoring contractual penalties.” The court held that collection commission provisions “might amount to a penalty for breaching a contract” when combined with attorney fees. Such provisions are enforceable only if they: (1) bear a reasonable relationship to actual collection costs (not including attorney fees), and (2) are not disproportionate to actual damages. The court emphasized that collection costs cannot duplicate attorney fees when both are awarded separately.
Practice Implications
This decision requires careful documentation when seeking both collection commissions and attorney fees. Practitioners must demonstrate that commission percentages reflect actual collection costs and avoid duplication with attorney fees. The ruling validates trial courts’ authority under Rule 55(b)(2) to require evidentiary support for default judgments involving collection costs.
Case Details
Case Name
Express Recovery Services v. Shewell
Citation
2007 UT App 318
Court
Utah Court of Appeals
Case Number
No. 20060576-CA
Date Decided
September 27, 2007
Outcome
Affirmed
Holding
Collection commission provisions that seek both a percentage of debt and attorney fees may constitute an unenforceable contractual penalty unless they bear a reasonable relationship to actual collection costs and are not disproportionate to damages.
Standard of Review
Correctness for legal determinations and interpretation of law
Practice Tip
When seeking collection commissions in addition to attorney fees, file a detailed affidavit documenting actual collection costs incurred to demonstrate the commission’s reasonableness and avoid penalty characterization.
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