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In Cerrato v. Solomon & Solomon (3:11-cv-623 (JCH)), the U.S. District Court, District of Connecticut, built on the landmark Foti decision in ruling that autodialed calls not answered by the consumer constitute “communication” under the Fair Debt Collection Practices Act. Ms. Cerrato is represented by Lemberg & Associates.
The circumstances of the case are that, over a period of 21 months, Citibank turned three of Ms. Cerrato’s debts over to Solomon & Solomon for collection. After receiving debt collection calls for the first account, Ms. Cerrato sent Solomon & Solomon a cease and desist letter. After receiving the letter, Solomon & Solomon made six more calls to Ms. Cerrato. Ten months later, the debt collection agency began calling her in reference to the third debt, and called her 117 times over the course of six months. Ms. Cerrato faxed the debt collector a cease and desist letter, together with a copy of her previous cease and desist letter.
The Solomon & Solomon clerk who processed the letter noted that communication should stop for the third account, but not the other two. Still, using an autodialer, the debt collection agency called Ms. Cerrato eight more times after Solomon & Solomon received the letter. Ms. Cerrato says that she chose not to answer the calls after her caller ID indicated that they were from the debt collector. The debt collection agency argues that the eight unanswered telephone calls aren’t “communications” under the Fair Debt Collection Practices Act, and thus can’t be held liable for communicating with Ms. Cerrato after receiving a cease and desist letter. Solomon & Solomon argues that “an unanswered telephone call does not constitute a communication because no information was conveyed; Cerrato never spoke to a Solomon representative.”
In an order denying summary judgment, the court rejected Solomon & Solomon’s citation of Wilfong v. Persolve, LLC, and instead looked at Foti v. NCO Financial Systems, Inc. In that case, “the court held that a prerecorded voice message that did not specifically reference a debt still constituted a communication under the FDCPA.” In this opinion, the court looked to the rationale behind the Foti decision, namely that the statute should be construed broadly. Further, in the Foti case, that court noted that simply stating that the call was from NCO Financial Systems was enough to communicate that it concerned a debt. In this case, the court noted that Foti received one telephone message after one letter from NCO, while Ms. Cerrato had received 117 calls prior to the eight unanswered calls. In other words, Ms. Cerrato knew that it was a debt collector calling. The court also drew parallels to the Foti calls that attempted to entice a return phone call: “In Foti, the court found that the debt collector provided enough information to ‘entice’ a return call by providing its name and return phone number and be referencing a matter that required immediate attention. Solomon provided similar information to Cerrato. Its name and telephone number appeared on Cerrato’s caller ID display, and by calling eight times within one month, it is hard to imagine how Cerrato could not realize that Solomon wanted her immediate attention.” The court went on to write that Solomon & Solomon’s argument would mean that “debt collectors could call consumers however often they wish as long as the consumer does not pick up or the debt collector hangs up before reaching the consumer.”
The judge goes on to cite the Merriam-Webster definition of “communication,” noting that it does not require a two-way exchange or any response from the recipient of the communication.
Solomon & Solomon offered contingency arguments, which were also rejected by the court. One argument said that the eight unanswered calls could fall under the FDCPA approved exceptions, namely to notify Ms. Cerrato that Solomon & Solomon would no longer try and collect the debt, or to tell her that they were going to invoke a specific remedy (such as a lawsuit). The court wrote that, because the calls stopped once the debt collection agency noted Ms. Cerrato’s cease and desist letter on all of her accounts, that argument doesn’t hold water.
Solomon & Solomon’s other contingency argument was that even if the calls constituted communications under the FDCPA, it was a bona fide error and the firm doesn’t have any liability.
Apparently, Solomon & Solomon’s computer system has a field that can be used for a code indicating that a consumer has sent a cease and desist letter. The debt collection agency says employees are trained to enter that code into the account. However, they are not trained to put the code on all of the consumer’s accounts. The debt collection agency says that the cease and desist letter listed only one account, while Ms. Cerrato says that her letter referenced all accounts.
The court found that, since Solomon & Solomon had called Ms. Cerrato six times after she had sent a previous cease and desist letter, “there are issues of material fact as to whether Solomon committed a bona fide error,” as well as whether the debt collection agency had developed reasonable procedures to prevent such a mistake to happen.
Solomon & Solomon says that it has procedures in place to train employees on provisions of the Fair Debt Collection Practices Act, and says that it specifically trains and tests employees about the meaning and importance of a cease and desist letter. Ms. Cerrato disputes this, saying that the debt collection agency’s “testing and literature merely states that employees are allowed to contact a debtor one more time after receiving a cease and desist letter.”
Because the motions for summary judgment were denied, the case will proceed.
Advertising text messages are annoying, and they are often against the law. Our new website, suespamtexters.com, explains provisions of federal Telephone Consumer Protection Act that make it illegal for advertisers to send text messages to your cell phone using an autodialer, and the provisions of the CAN-SPAM Act that prohibit companies from sending advertising text messages under certain circumstances. According to Sergei Lemberg, “Text message spam is an ever-increasing problem, and advertisers need to be held accountable.”
At the new site, you can learn about a number of topics pertaining to spam text messaging. You can discover if federal laws apply to your situation, and how the National Do-Not-Call Registry can help in stopping spam text messages. In addition, the resource center explains how you can file a spam text complaint with the Federal Communications Commission and other regulators, as well as how to sue advertisers who violate the law.
According to Lemberg, “Spam texters can be sued in federal court. Indeed, advertisers can be made to pay $500 per text message – or triple that if they knowingly and willfully violated the law.”
If you’re on the receiving end of faxed advertisements that you never asked for and don’t want, Lemberg & Associates can help. Our new website, suejunkfaxers.com, explains the provisions of federal laws that make it illegal for advertisers to send junk faxes to individuals and to businesses. According to Sergei Lemberg, “Junk faxes are annoying, and when you take into account the costs of toner and paper, they can be costly. We hope that suejunkfaxers.com helps people understand their rights with regard to junk faxes, and that we’re here to help.”
The site’s resource center outlines federal junk fax laws, provides a checklist of practices that constitute violations of those laws, and gives advice about how to stop junk faxes to your home or business. In addition, you can get information about how to file a junk fax complaint with the Federal Communications Commission and other regulators, as well as how to sue advertisers who violate the law.
According to Lemberg, “The Telephone Consumer Protection Act enables consumers and businesses to sue advertisers who send junk faxes, and caselaw has determined that these cases can be brought in federal court. In fact, the law says that consumers can recover up to $500 per page – and triple that amount if we can prove that the caller knowingly and willfully violated the law.”
Lemberg & Associates has launched a new website, do-not-call-complaints.com to help educate consumers about their rights under the federal Telephone Consumer Protection Act. According to Sergei Lemberg, “We have seen a tremendous increase in telephone harassment on the part of telemarketers and debt collectors. We hope that do-not-call-complaints.com helps people understand when telephone calls cross the line, and that we’re here to help.”
The new site has an extensive resource center that outlines federal telemarketing laws, explains automated calls (also known as “robocalls”), and provides a checklist of the practices that constitute harassment. It also includes information on the National Do-Not-Call Registry and other do-not-call lists, and explains the practice of caller ID spoofing. In addition, the resource center explains how to go about filing a complaint with the Federal Communications Commission and other regulators, as well as how to sue debt collectors and telemarketers who violate the TCPA.
According to Lemberg, “The Telephone Consumer Protection Act enables consumers to sue, and caselaw has determined that TCPA cases can be brought in federal court. In fact, the law says that consumers can recover up to $500 per call – and triple that amount if we can prove that the caller knowingly and willfully violated the law.”
Two Lemberg & Associates clients overcame a major hurdle in U.S. District Court, Western District of Pennsylvania, when a judge denied the defendants’ motion to dismiss the case. The genesis of Deeters v. Phelan Hallinan & Schmieg, LLP (3:11-cv-00252-KRG) was that the Deeters received a debt collection letter from PHS that included information about the debt, their right to dispute the debt within 30 days. A few days later, they were served with a PHS complaint saying that they were being sued in state court regarding foreclosure. That complaint did not contain a notice of the Deeters’ validation rights or conform to Fair Debt Collection Practices Act provisions.
The Deeters claim that the complaint filed in the state lawsuit overshadowed the warning language in the debt collection letters, and that the conflicting messages would have confused and misled the least sophisticated consumer, in violation the FDCPA. Phelan Hallinan & Schmieg, LLP disagreed, arguing that the case should be dismissed.
In her decision, the judge ruled against Phelan Hallinan & Schmieg, LLP, writing in part:
It is precisely for the purpose of consumer protection for which the FDCPA was enacted, that any subsequent communications after the initial disclosure of validation rights must not overshadow or be inconsistent with the consumer’s right to dispute the debt.
Writing in response to the defendants’ argument that the lawsuit complaint didn’t impact the Deeters’ right to dispute the debt, the judge said:
This argument, however, contains a slight misreading of the law. The law concerned not only with whether collection activities and communications do, in fact, have an effect on the consumer’s right to dispute the debt, but also – and perhaps more importantly – with whether a communication has the potential to effect the debtor’s right as viewed from the perspective of the least sophisticated debtor.
The Deeters also contend that the letters from PHS violated the FDCPA’s provision against using “false, deceptive, or misleading representation or means in connection with the collection of any debt.” This is because the letters included language that said, “a judgment will not be entered against you for a period of thirty days after service of the complaint to assure your opportunity to dispute the validity of the debt.” Phelan Hallinan & Schmieg, LLP argued for dismissal of that portion of the case. The judge rejected their argument, stating:
One possible reading of this clause in light of the right to dispute the debt, would be that on day thirty-one, a judgment would be entered against the debtor. Another possible reading would be that a judgment could be entered against the debtor. Also in question, is if no action is taken, could judgment be entered on the thirty-first day or ninety-first day…. (N)ot only could the least sophisticated debtor be falsely led to believe that one possible outcome was the likely outcome, but he could also read the statement that a judgment will be entered after thirty days as a threat that needed to be acted upon immediately.
Phelan Hallinan & Schmieg, LLP also argued that, if the court didn’t dismiss the case because of their other arguments, it should abstain from considering the case because the same complaints are being litigated in Pennsylvania state court. The judge ruled that the two cases are not parallel, since the federal case pertains to FDCPA violations and the state case pertains to foreclosure practices and property law.
Lemberg & Associates is pleased that the Deeters’ case will move forward.
The U.S. Ninth Circuit Court of Appeals ruled that a debt collection letter sent to a consumer “in care of” an employer is a violation of the Fair Debt Collection Practices Act. Lemberg & Associates’ client, Catherine Evon, is the plaintiff in the case. We’re pleased that the appellate court ruled in her favor. Our press release about the decision is as follows:
Reversing the findings of the U.S. District Court, the U.S. Ninth Circuit Court of Appeals has ruled that sending a debt collection letter to a consumer’s workplace is a violation of the Fair Debt Collection Practices Act’s prohibition on communications with third parties. In Evon v. Law Offices of Sidney Mickell, the defendant sent a debt collection letter to Catherine Evon in “care of” her employer, even though she had requested that they not contact her at work. As the appellate court’s majority opinion noted, “The letter was opened and read by various individuals, including people in the legal department, before it found its way to Evon.”
According to attorney Sergei Lemberg, whose firm Lemberg & Associates represents Ms. Evon, “The appellate court’s decision is a resounding victory for consumers. All too often, debt collectors use tactics of embarrassment or humiliation to extract payments from people. This ruling establishes that sending correspondence to a person’s place of employment is a violation of the law.”
The court acknowledged that, while sending a debt collection letter to a consumer’s workplace without consent is a violation of the Fair Debt Collection Practices Act (FDCPA), “The trickier question is whether sending a letter addressed to the debtor but using the debtor’s employer’s address constitutes a violation.” Although the district court judge was adamant that the FDCPA doesn’t explicitly prohibit sending correspondence to an employer, the appellate court cited a U.S. Senate report predating the 1968 enactment of the FDCPA that explicitly stated, “Collection abuse takes many forms, including…disclosing a consumer’s personal affairs to friends, neighbors, or an employer…” Moreover, the appellate court noted that “the FDCPA is a remedial statute which should be interpreted ‘liberally.’” The court opined, “Even if Mickell assumed that some debtors receive mail at their place of employment, it is not reasonable for Mickell to assume that all debtors’ mail so received remains unopened and unseen before reaching the debtor. As a lawyer in the business of debt collecting, Mickell should have known of the real possibility that a letter to a debtor’s place of employment, even one marked “Personal and Confidential,” would be viewed by someone other than the debtor.”
In the same opinion, the appellate court reversed the district court’s denial of Evon’s class certification motion on that issue, calling the district court’s concern about whether or not consumers consented to having letters sent to their workplaces “a red herring.” Going further, the opinion noted, “…there is nothing in the record that supports the district judge’s conclusion that Sergei Lemberg was not qualified to represent the class.” The appellate court further opined, “The FDCPA is a consumer protection statute and was intended to permit, even encourage, attorneys like Lemberg to act as private attorney generals to pursue FDCPA claims. Moreover, plaintiffs have already benefitted and will continue to benefit from this case.”
In addition, the appellate court granted Evon’s request to reassign the case to a different district court judge, noting that while honoring such requests demand “unusual circumstances” that “rarely exist,” “the record reflects an unfortunate dismissive attitude by the district judge both toward Lemberg and the class Evon seeks to represent.”
Lemberg concluded, “We are pleased that the Court of Appeals ruled in our client’s favor, and that the Court clarified that debt collectors who send letters to consumers at their workplaces are in violation of the law. We also appreciate the court’s recognition that consumer attorneys play an important role in holding debt collectors accountable. Finally, we welcome the opportunity to seek class certification for the more than 250 people who received similar letters from the Law Offices of Sidney Mickell at their workplaces.”
This release references Evon v. Law Offices of Sidney Mickell (U.S. Court of Appeals for the Ninth Circuit, 310-16615, D.C. No. 2:09-cv-00760-JAM-KJN).
On behalf of a client and others who experienced the same issue, Lemberg & Associates filed a class action complaint in U.S. District Court, District of Connecticut against Cardtronics, Inc. and Dunkin’ Brands, Inc. The lawsuit alleges that the defendants repeatedly violated the Electronic Funds Transfer Act (EFTA) and related regulations. The EFTA requires that those who charge consumers a fee for using what are called “host transfer services” provide consumers with a notice informing them of the fee and the amount being charged. According to the law, the notice must “be posted in a prominent and conspicuous location on or at the automated teller machine at which the electronic fund transfer is initiated by the consumer.” Lemberg & Associates’ client used an ATM inside a Dunkin’ Donuts, but the fee notice was placed below knee level – which the suit argues is neither a prominent nor conspicuous location, and is thus a violation of the law. Because many other consumers have used the same ATM inside the same Dunkin’ Donuts, it is logical to assume that other consumers have also been charged an ATM fee without proper notice; hence taking the route of a class action.
In related news, the Washington Times reports that Congress is moving to amend the Electronic Funds Transfer Act to remove the requirement that a physical sign or placard be posted on ATMs charging fees; instead, only that a digital message displayed on the ATM screen would be required. The House of Representatives unanimously approved the legislation, and the Senate is expected to take action shortly.
Among those opposing the legislation are Consumer Action, Consumers Union, and U.S. PIRG. Sergei Lemberg added his voice to the opposition, saying, “Transparency in financial transactions is critical in protecting consumers from the insidious hidden fees propagated by those in the financial services industry. Relaxing disclosure requirements could easily have a cascading effect, causing unsuspecting consumers to incur fees that could push them over the financial brink.” Urging U.S. Senators to vote against the measure, Lemberg continued, “Ever wonder why banks are putting the notice on the side of the machines or at ankle height? It’s because people would be less likely to insert the card into the machine if they knew what it cost.”
InsideARM reports that, according to WebRecon LLC, as of April 30 Sergei Lemberg is the “most active consumer attorney” of 2012. We welcome this designation, and hope to continue to help consumers throughout the rest of the year, and for years to come.
Lemberg & Associates Of-Counsel Tammy Hussin was quoted in the Sacramento Bee over the weekend. The article, written by Marjie Lundstromand, discussed the uptick in lawsuits against debt collection agencies by California consumers. Hussin noted that the poor economy means people have less money with which to pay their debts, which results in more aggressive debt collection tactics.
The article reported the increase in debt collection-related complaints to the Federal Trade Commission, as well as enforcement actions taken against rogue California-based debt collection agencies. Unsurprisingly, representatives of the debt collection industry portrayed themselves as victims of consumer attorneys, unclear laws, and consumers who file multiple lawsuits. But the article also sheds light on California’s debt collection statute, the Rosenthal Act, as well as the downright nasty practices engaged in by some debt collectors.
Excerpted from last week’s press release:
Consumer Attorney Sergei Lemberg (www.stopcollector.com) applauded the U.S. Department of Education’s recent actions regarding student loan debt collection. Late last week, the Education Department said that it would mandate that debt collectors use an income-based formula in collecting payments on defaulted student loans, rather than a minimum payment based on the loan amount. The agency also indicated it would review debt collection scripts and the commission structure it uses with private debt collection agencies.
Lemberg said that these actions, which will likely take effect in mid-2013, will help offset economic conflicts of interest that cause debt collectors to violate the Fair Debt Collection Practices Act by threatening to garnish the wages of those with defaulted student loans. Lemberg said, “While the law says that a court judgment isn’t needed to garnish wages to repay federal student loans in default, the debt collection agency is required to provide the consumer with a notice of intent to garnish. We’re seeing a disturbing trend whereby debt collection agencies threaten consumers with garnishment if an immediate minimum payment isn’t made.”
In addition to sending the consumer a notice of intent to garnish, the law mandates that the person in default has a right to an impartial administrative hearing. “Several of our clients have been threatened with garnishment, without having been served a notice of intent nor having been informed of their right to an administrative hearing,” Lemberg said. “This is a clear violation of provisions of the Fair Debt Collection Practices Act that prohibit debt collectors from threatening actions that they neither have the ability nor intent to carry out.”
Indeed, some of Lemberg’s clients report that debt collectors have deceived them into supplying their financial information, ostensibly to be considered for a “hardship program,” and instead use the information to press for immediate payment. One client began receiving verbal garnishment threats from a debt collector in December 2011, and to date hasn’t received the legally required notice of intent to garnish.
According to Lemberg, the Department of Education’s current financial arrangements with private debt collection agencies create a situation ripe for abuse. “Debt collection agencies get a sizeable commission from each dollar they collect, while getting only an flat administrative fee for accounts on which they don’t collect,” he said. “Moreover, the Education Department gives each debt collection agency a quarterly ranking, and awards new accounts based on that ranking. Seventy percent of the ranking is based on dollars collected. There is zero incentive for debt collection agencies to help consumers enter a loan rehabilitation program that lowers their monthly payments.”
Lemberg goes so far as to propose that the Department of Education do a bit of borrowing of its own. “The Education Department should take a page from the IRS playbook,” he said, noting that – like back taxes – defaulted student loans aren’t dischargeable in bankruptcy. “The IRS had a disastrous experience with private debt collection agencies, and brought collections back in-house. Consumers with student loans shouldn’t be treated more poorly than those who owe back taxes.”