PHILADELPHIA — 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.
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.
Lenders are under scrutiny in New Jersey and across the country for the way they handled foreclosures during the recent real-estate bust. Six lenders – none involved in Allen’s case – have been summoned before the New Jersey Supreme Court to fight for the right to stay in the foreclosure business.
The alleged systemic abuses include so-called “robo-signing,” in which employees signed hundreds of documents without checking them for accuracy.
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, 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 Federal 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.
Chad A. Schiefelbein, a lawyer for the defendant banks, declined to comment. LaSalle Bank is now part of Bank of America.
A lawyer representing Fein, Such, Kahn and Shepard, the New Jersey law firm named in the suit, did not immediately return a call for comment.
Allen is now in a nursing home, while a nephew serves as her advocate. The banks stopped foreclosure proceedings after she countersued, and she was able to sell the home in 2008 for $112,000, according to online records.
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Appellate ruling below…
Allen v. LaSalle Bank, N.A.
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