Are Attorneys’ Fees Recoverable in a New York Debt Collection Defense Case?

By: Robert J. Nahoum

A man in suit and tie with his arms crossed.


You have been sued by a debt collector, you hired an attorney who timely answered the lawsuit and has won.  The debt collector has lost the case because you are not the person who opened the credit card, or perhaps because they don’t have the proof they need to win. Whatever the reason, you are now out considerable money in legal fees paid to your lawyer to defend you.  You are now asking – can I recover the legal fees I paid to my lawyer from the debt collector.


The “American rule†on legal fees as it is called provides that each party is responsible for paying its own attorney’s fees, unless specific authority granted by statute or contract allows the recovery of those fees against the other party.

There are a few seldom used laws in the state of New York that permit a successful defendant to recover fees in a debt collection lawsuit.

By Contract – NY GOL §5-327

New York General Obligations Law §5-327 – Consumers’ right to recover attorney’s fees in actions arising out of consumer contracts – states that:

Whenever a consumer contract provides that the creditor, seller or lessor may recover attorney’s fees and expenses incurred as the result of a breach of any contractual obligation by the debtor, buyer or lessee, it shall be implied that the creditor, seller or lessor shall pay the attorney’s fees and expenses of the debtor, buyer or lessee incurred as the result of a breach of any contractual obligation by the creditor, seller or lessor, or in the successful defense of any action arising out of the contract commenced by the creditor, seller or lessor.  Any limitations on attorney’s fees recoverable by the creditor, seller or lessor shall also be applicable to attorney’s fees recoverable by the debtor, buyer or lessee under this section.  Any waiver of this section shall be void as against public policy.

So, in theory, in your run of the mill consumer debt collection case like a credit card default – if the credit agreement permits the creditor to recover attorneys’ fees, so can the debtor.  However, in practice, this seldom happens.  Because of the risk to the creditor under GOL §5-327, most debt collectors do not seek to recover attorneys’ fees.  For this reason, neither can the debtor.

Identify Theft – NY GBL §514

In cases of identity theft, New York General Business Law §514 provides a statutory defense that a person being sued for a debt did not apply for, receive or use the credit card account in question.  Also, New York General Business Law §514 makes it a statutory defense to a claim of credit card use that such use arose out of the unauthorized use of a credit card that was not delivered to the defendant or that such use arose after the creditor was notified of the unauthorized use.

New York General Business Law §514(2) states that:

If any of the defenses set forth in subdivision one of this section be established, the court shall order the issuer to pay the reasonable attorney’s fees incurred in the defense of the action if the court finds

(a) that the holder has cooperated with the issuer in determining the facts and circumstances relating to such unauthorized use, loss or theft, of the credit card or debit card;  and

(b) that notwithstanding such cooperation with the issuer, the issuer has brought the action without reasonable cause.

So, if before the debt collector sues, the debtor shows that he or she was the victim of identity theft and the debt collector sues anyway, the debtor can recover his or her legal fees under NY GBL §514.


Federal debt collection laws known as the Fair Debt Collection Practices Act (FDCPA for short) regulates the conduct of third-party debt collectors attempting to collect debts on behalf of others or on their own behalf in the name of another.  The intent of the FDCPA to eliminate abusive debt collection practices by debt collectors.

The FDCPA is a comprehensive statute that prohibits a catalog of activities in connection with the collection of debts by third parties.  The FDCPA imposes civil liability on any person or entity that violates its provisions and establishes general standards of debt collector conduct, defines abuse, and provides for specific consumer rights.  The operative provisions of the FDCPA declare certain rights to be provided to or claimed by debtors, forbid deceitful and misleading practices, prohibit harassing and abusive tactics, and proscribe unfair or unconscionable conduct, both generally and in a specific list of disapproved practices.

The FDCPA is a strict liability statute that provides for actual and statutory damages upon the showing of one violation.  It has been universally held that whether a debt collector’s conduct violates the FDCPA should be judged from the standpoint of the “least sophisticated consumer.â€

The FDCPA includes a private right of action under which a consumer may sue a debt collector for FDCPA violations.  If a debt collector is found to have violated the FDCPA, the consumer may recover up to $1,000.00 in statutory damages, plus actual damages and most importantly, reasonable attorneys’ fees.  Like many other consumer protection laws, the FDCPA is what is called “fee shifting†– meaning that the obligation to pay the consumers attorneys’ fees shifts to the debt collector.

If in the course of suing a consumer for a debt, a debt collector violates the FDCPA, the consumer can sue the debt collector in federal court.  Among the recoverable damages available in an FDCPA suit are the legal fees the consumer unnecessarily had to pay to defend the debt collection lawsuit.


If you are defending a debt collection lawsuit, speak with your attorney about whether your legal fees are recoverable or whether the debt collector violated the FDCPA.

If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.  With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.

The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202