Court Rules Against Debt Collector in Cell Phone Collection Case

A federal appeals court ruled Monday that debt collection agency Afni, Inc. must pay damages to a class of 7,000 Cingular Wireless customers for imposing collection fees that were not approved by contract.

The case before the 7th Circuit Court of Appeals had been filed in 2005 and was granted class action status by U.S. Magistrate Judge William E. Callahan, Jr. in Milwaukee. Callahan ruled last year that Bloomington, Ill.-based Afni’s collection charges were not allowed because the company owned the debt. He awarded the plaintiff class more than $200,000 in damages and allowed Afni to appeal.

On Monday, the appellate court upheld Callahan’s ruling, saying that Afni’s charges amounted to 15 percent of the total owed. The court said that the amount was not allowed under the consumers’ cell phone contracts and that the fees were a violation of Wisconsin law and the Fair Debt Collection Practices Act (FDCPA).

The class can petition the court for additional damages to cover the cost of the appeal.

Afni was not acting as a third party collector on the debt, according to the original Callahan ruling. It had purchased the accounts directly from Cingular. Under Wisconsin law, only third party collectors are allowed to add collection fees. Since the 15 percent fees Afni charged were not spelled out in the original contracts, they were not authorized.

"We do strive for excellent customer service for our clients. In this particular case, it was a technical issue that was being litigated," said Debra Ciskey, Afni's director of compliance. "We interpreted the contract to allow us to add collection fees. The court looked at the specific language of the contract and interpreted it differently."