Federal Appeals Court Reinstates 85-Year Old Widow's 'Fair Debt' Suit Alleging Illegal Fee Gouging After Missing Final Payment On 30-Year Mortgage

In Philadelphia, Pennsylvania, The Washington Post reports:

• An elderly New Jersey widow billed $5,800 after missing the final payment on her 30-year mortgage can pursue her lawsuit against the debt collectors, a U.S. appeals court ruled.(1) Lawyers for Dorothy Rhue Allen call the fees charged by two banks and a law firm "unfair or unconscionable" and say they violate state and federal consumer-protection laws.

• Allen, now 85, had borrowed $40,000 to buy the Deptford, N.J., home in 1976. She failed to make the final $432 payment in 2006 because she was in the hospital, her lawyer said. "She's just a wonderful little old lady that got sick," lawyer Lewis Adler told The Associated Press on Friday.

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• In Allen's case, LaSalle Bank and Cenlar Federal Savings Bank, both of Trenton, N.J., filed court foreclosure papers in 2007. Adler's firm asked how much it would take to resolve the problem. The banks, along with a law firm,(2) outlined $5,797 in charges, including nearly $2,400 in legal fees.

• According to Allen's lawsuit, those charges are far higher than allowed under federal and state laws, including the [Fair] Debt Collection Practices Act. For example, court rules limit attorney fees to $15, not the $910 charged; document searches to $75, not $335; and process serving to $175, not $475, the suit said. "The lenders are sloppy and aggressive, trying to collect every penny," Adler said.

For more, see Widow, 85, missed last house payment; fights fees.

For the ruling, see Allen v. LaSalle Bank, N.A., No. 09-1466 (3rd Cir. January 12, 2011).

(1) According to the ruling, the lawsuit requested class action status.

(2) According to the ruling, the law firm was Fein, Such, Kahn & Shepard, PC.