New York City Debt Collection Defense Attorney

Do I Have to Pay the Creditor's Attorneys' Fees if I Lose My Credit Card Lawsuit?

The Basic Rule: No Automatic Attorney's Fees

In New York, attorney's fees are not typically recoverable damages unless a specific contractual agreement or statute exists. This is known as "the American rule" (Green Harbour Homeowner's Ass'n, Inc. v. G.H. Dev. & Constr., Inc., 763 NYS2d 114 [NY App. Div 2003]). As the court in Citibank (South Dakota), N.A. v. Martin noted, "absent an agreement to pay such fees, an application for fees may not be granted by New York State courts" (11 Misc 3d 219, 224 [Civ Ct, New York County 2005]).

Debt Collectors' Claims for Attorney's Fees

Debt collectors may claim attorney's fees in cases involving credit card agreements or medical services. However, in New York, specific criteria must be met for such claims to be valid. The Martin case clarified that a valid agreement to pay legal fees must be submitted, supported by an appropriate affidavit, and an attorney's affirmation detailing the fee arrangement, legal services provided, and relevant factors (Martin, 11 Misc 3d at 224-225).

Limitations Under the Retail Installment Sales Act

New York's Retail Installment Sales Act permits a credit card holder to agree to pay independent collection attorney's fees, but caps them at 20% of the amount due and payable (NY Personal Property Law § 413[5]; Martin, 11 Misc 3d at 225).

Evidentiary Burdens Aid Consumers

Martin makes clear that a plaintiff must produce admissible evidence establishing a prima facie case, including tendering the original credit agreement and any revisions by affidavit with sufficient personal knowledge (Martin, 11 Misc 3d at 223-224). An affidavit signed outside NY requires a certificate of conformity (CPLR 2309[c]). As debt buyers often lack adequate documentation, demanding proper authentication can thwart claims for fees and broader recovery.

Even plaintiffs presenting applicable contracts rarely furnish the detailed attorney affirmations required by Martin to substantiate a right to legal fee reimbursement. The affirmation must provide specifics on the legal services, time spent, professional standing, and results to support the fee request (Martin, 11 Misc 3d at 225).

Use Reciprocal Fee Laws Against Overreaching Collectors

If a credit agreement allows the creditor to recover attorney's fees when they prevail, reciprocal fee statutes in 10 states, including New York, allow consumers to do the same if they successfully defend the collection lawsuit (see NY General Obligations Law § 5-327). Even if the consumer argues the contract is invalid, the reciprocal law may apply since the collector claimed a contractual basis.

Conclusion: Robust Consumer Protection

Between the American Rule, the requirements elucidated in Martin, fee caps under the Retail Installment Sales Act, and the reciprocal fee statute, New York law provides strong protections to consumers regarding attorney's fee claims in debt collection cases. Collectors must clear substantial evidentiary hurdles to recover fees. Knowledgeable consumers can use these principles to defend against unsubstantiated or excessive claims.

Three Key Takeaways:

  1. Evidence is EssentialMartin requires collectors to provide a valid contract, supporting affidavit, and detailed attorney affirmation to recover fees.
  2. Know Your Rights: NY caps fees at 20% in credit card cases and imposes strict proof requirements, as explained in Martin.
  3. Reciprocal Fees Can Deter Frivolous Claims: Under NY's reciprocal fee law, prevailing consumers can recover their attorney's fees if the credit contract would allow fees to the collector.

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