Fair Debt Collection Practices Act Manual
- Basic Definitions. 4
- Who is an FDCPA “debt collector?”. 4
- Persons Excluded from the Term “Debt Collector”. 7
- Transactions Covered by the FDPCA. 8
- Communication: 10
- Specific Provisions of the FDCPA. 10
- 1692b – Violations Arising from Contacts with Third Parties. 10
8) 1692e(6) – “The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause a consumer to – (A) lose any claim or defense to payment of the debt or (B) become subject to any practice prohibited by this subchapter.” 30
- 1692h – Multiple Debts. 43
- 1692i – Legal Actions. 43
- 1692j – Deceptive Forms by Creditor – Flat Rating. 44
- General Rule: The addition of any interest, service fees, collection costs or other expenses incidental to the original debt is permitted when “such amount is expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. 1692f(1). 47
- The laws or regulations of the following states are silent in addressing whether collection agencies may add interest, fees or collection charges 47
- Specific State Laws. 48
- Telephone Consumer Protection Act – 47 U.S.C. 227, et seq. 58
- General Prohibitions – Claim for ‘robocalls’ to numbers which consumer did not authorize creditor contact. 58
Fair Debt Collection Practices Act
The FDCPA applies to mainly debt collection agencies and lawyers, but several states have adopted similar statutes that apply to all collectors of debt. In addition to the FDCPA, many states have equivalent statutes that cover original creditors.
A single violation is sufficient to support judgment for the consumer. Cacace v. Lucas, 775 F.Supp. 502, 505 (D.Conn. 1990).
“The term ‘debt collector’ means any person who uses any instrumentality of interstate commerce or the mails in any business, the principal purpose of which is the collection of any debts.”
An important distinction is that collecting debts is the principal purpose of a business.
- A collection agency that also operates a large credit reporting agency might not be considered a “debt collector.”
- A company that merely collects debts as a sideline to its principal business is not automatically covered under the FDCPA.
However, some of these businesses may still be covered under the FDCPA through the alternative prong of the “debt collector” definition, which covers any person who “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”
- Creditors who collect debts for one another are considered debt collectors. This occurs when creditors enter into “reciprocal collection agreements.” For example, a bank’s debtor moves to a distant state. The bank may enlist the aid of a bank in the distant state to collect the debt, while agreeing to perform similar services for the distant bank.
- An officer who is active in a company’s debt collection activities would be liable as a debt collector.
- The owner of a collection agency who did not engage in collection activity personally, may be found liable for the FDCPA violations of the collection agency.
- Stockholders and officers of a debt collection business could be liable as debt collectors if they had a high level of involvement in the illegal collection activities of the business.
- A collection agency’s parent company can be considered a debt collector if the parent was shown to be “thoroughly enmeshed in the debt collection business” and “a significant participant in the debt collection process.”
- Telecommunication companies that facilitated debt collection for others by obtaining debtors’ unlisted telephone numbers through deceptive means are covered under the FDCPA.
- FDCPA covers debt buyers who engage in debt collection activities. To determine if a debt buyer is considered a creditor or debt collector, it is important to note whether a debt was in default when it was acquired. (If it was, then the buyer is considered a debt collector, if not, he is considered a creditor).
- A company that regularly purchases delinquent debts is a “debt collector” with the meaning of the FDCPA with respect to the delinquent debts. Schlosser v. Fairbanks Capital Corp., 323 F.3d 534 (7th Cir. 2003).
- Since litigation is a means of debt collection, someone who acquires debts in default and files collection lawsuits is subject to the FDCPA.
- A creditor is considered a debt collector if it uses a name other than its own, poses as a collection lawyer or agency, uses a flat rate debt collector ( a debt collector who is paid to only send out letters), or uses a third party’s name in its collection efforts.
- For repossession, eviction, and foreclosure companies: if the facts show that such companies are seeking payment from the consumers, directly or indirectly, then they are required to comply with all of the provisions of the FDCPA.
- A creditor is subject to FDCPA liability if it hires a company solely to send out debt-collection letters under its name. This practice is referred to as “flat-rating” because these companies tend to charge a single flat-rate per each letter sent out. If the flat-rating company did not otherwise participate in the debt collection process, then the creditor is liable under the FDCPA. This is aimed at preventing “flat-rating” because of its deceptive nature.
- FDCPA applies to any attorney who “regularly collects or attempts to collect, directly or indirectly, [consumer] debts owed or due or asserted to be owed or due to another.” ‘Regularly’ refers to attorneys collecting debts more than isolated instances/more than a few times a year.(Originally this was a loophole and many attorneys offices were nearly indistinguishable from debt collection offices – some law firms even advertised their exemption from the FDCPA as an advantage).
- A lawyer sent out 145 notices demanding delinquent rent over one year as part of an ongoing relationship with a landlord. This was considered regularly collecting debts even though the work constituted only 0.5% of his revenues.
The following are exclusions from the term debt collector that shield exempted individuals from most provisions of the FDCPA. However, a person just outside of the exemption is likely to be considered a debt collector under the Act.
- The term debt collector does not include employees of a creditor. This includes a creditor’s in-house collectors, as long as they use the creditor’s real name.
- A commonly owned or affiliated corporate collector collecting only for its affiliates is specifically excluded as long as it is not principally a debt collector. Aubert v. American General, 137 3d 976 (7th Cir. 1998).
- One finance company branch may transfer a debt to a corporate affiliate in another city or state because the consumer owing the debt has moved. This exemption does not include unaffiliated companies transferring debt amongst each other or companies whose principal business is debt collection.
- Any Federal or State employee who has to collect or attempt to collect a debt as part of their job (within their official duties). This exemption does not include private collection agencies hired by a state or federal agency. Note: The FDCPA does not apply to a state agency collecting student loans.
- Process servers or “any person serving or attempting to serve legal process on another person in connection with the judicial enforcement of any debt” are exempt from being referred to as a debt collector under the FDCPA.
- A sheriff serving a subpoena upon a witness to appear in an action for debt.
- A private non-profit company collecting a student loan debt for the U.S. Department of Education is not considered a “debt collector.”
- Nonprofit consumer credit counselors are not considered debt collectors. If credit counselors work on a for-profit basis, then this exemption does not apply.
- Any person attempting to collect a debt that originated from such person that was later sold or assigned to another creditor (but that the original creditor still had some responsibility over), is not considered a debt collector.
- A retailer who assigned its retail credit contracts to a bank but retained responsibility for collecting delinquent assigned accounts is exempt from being considered a debt collector.
- Any person attempting to collect a debt that they received from another individual, if the debt was not in default when it was received, is exempt from being considered a debt collector.
“Any natural person obligated or allegedly obligated to pay any debt.” Due to the term ‘allegedly,’ even someone incorrectly identified as a debtor, due to a mistaken identity or a legally unobligated spouse, is considered a consumer under the FDCPA.
The FDCPA only covers consumer debts, not business debts. A consumer debt is considered “an obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.”
- Medical bills
- Utility bills
- Insurance bills and claims
- Student loans
- Credit Cards
- Condominium fees
- Attorney fees
- Obligations discharged in bankruptcy
- The Following are Not Considered Debts Under the FDCPA:
- Child Support
- Shoplifting Civil Claims
- Car Accidents
- Persons Who are Not the ‘Debtor’:
Consumer refers to both persons obligated to pay a debt as well as persons allegedly but not actually obligated to pay a debt. The FDCPA protects persons erroneously treated as a debtor by a debt collector. The victim of a forged check or identity theft subject to debt collection is protected by this broad reach of the FDCPA to “alleged debts.”
As long as a debt collector is directly or indirectly attempting to collect a debt, any interchange of information to accomplish the collection of that debt must be construed as a “communication.” However, solely reporting a debt to the credit reporting agencies is not a communication.
A communication is defined as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” 15 U.S.C. §1692a(2). Usually this takes the form of dunning letters or telephone calls. However, the term is broadly and literally construed to encompass other forms of conveying information as well. Tolentino v. Friedman, 833 F.Supp. 697 (N.D.Ill. 1993), aff’d in part and rev’d in part, 46 F.3d 645 (7th Cir. 1995) (debt collector sent consumers a copy of the summons and complaint prior to service accompanied by an “IMPORTANT NOTICE” discussing the consequences of filing bankruptcy).
Collecting debts is a tough business: debtors don’t want to pay, don’t have the money to pay. It’s hard to locate debtors. Therefore, one of the favorite techniques of debt collectors is to either to locate debtors through 3rd party contact, or to use 3rd party contact as leverage to embarrass the debtor into contacting the collector (called ‘dredging up the debtor’).
The bottom line on 3rd party contact is this: debt collectors may not contact third parties except for very limited reasons, and virtually any transmission of information relating to the debt to a third party leads to FDCPA liability.
Debt collectors are not allowed to contact any of the following persons with regard to a consumer’s debt unless strictly to locate the consumer, or with the consumer’s direct prior consent, a court’s permission, or to effect a post-judgment judicial remedy:
- Consumer’s employer
- Consumer’s co-worker or secretary
- Consumer’s relatives (except the consumer’s spouse)
- Consumer’s friends
- Consumer’s social worker
- Consumer’s neighbors
Exceptions to the general prohibition
Debt collectors may contact third parties in an attempt to correct or confirm location information on the consumer only if they do not already have it. This is only a valid reason to contact third parties if the debt collector does not know both the consumer’s home address and phone number, and his work address. If the debt collector has either of those pieces of information, he cannot contact third parties in an attempt to receive the remaining contact information.
In contacting a third party for location information, the debt collector must identify himself but not discuss the debt. He also cannot request more explanation than specified in the statute. Shaver v. Trauner, 97-1309, 1998 U.S.Dist. LEXIS 19648 (C.D.Ill., July 1, 1998), adopting, 1998 U.S. Dist. LEXIS 19647 (C.D. Ill., May 29, 1998). Such a communication can be made only once unless requested by that third party. If the consumer is represented by an attorney, the debt collector may not communicate with any other person. Furthermore, if the collector already has the permitted information, he should not be able to request it in order to harass the debtor. Id.
However, if the collector has good reason to believe that the location information in the consumer’s file is incorrect or outdated, then he can pursue third parties to obtain more recent contact information.
- If a debt collector knows a consumer’s work address, he cannot contact third parties to learn the consumer’s home address.
- If a debt collector has good reason to believe that a consumer does not currently reside at the address they have on file for the consumer, then the debt collector can contact third parties to learn the consumer’s location.
- 1692b(1) – Guidelines for Contacting 3rd Parties –
If a debt collector has to contact one of the above mentioned third parties in order to locate the consumer, they must follow the following guidelines…
“Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall…”
1692b(1) “identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer”
Debt collectors, when contacting third parties, must use their own individual name, or in some jurisdictions, a consistently used and recorded alias.
- In contacting third parties, collector may state that, “he is confirming or correcting location information concerning the consumer.”
- Example: “This call is for Byran Kempa. This is Maria at CadleRock Joint Venture. Please give me a call.” Id. Section 1692b(1) clearly states that the debt collector must “state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer.” 15 U.S.C. § 1692b(1). CadleRock has not provided any evidence to show that, in any of her messages or communications to Kempa’s parents, she stated that the purpose of her call was to obtain location information. Kempa v. Cadlerock Joint Ventures, L.P. 2011 WL 761500 ED Michigan.
- 1692b(2) – “May Not state that such consumer owes any debt”
When contacting third parties collectors may not state that the call is regarding any debt that the consumer may owe.
Collectors may “Not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.”
- 1692b(4) “Not communicate by postcard”
- 1692b(5) – Prohibitions Against Using Debt-Related Language on Envelopes
Debt Collectors may not “use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt.”
After the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, he may not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.
- Example: CMS knew Valdez was represented by counsel and communicated with the credit bureau to acquire location-identifying information. This conduct violated § 1692b(6). Valdez v. Capital Management Services, LP, 2010 WL 4643272 S.D. Texas.
*** See 1692c(b) below for detailed examples of prohibited forms of third party contact by debt collectors***
“Communication with the consumer generally- without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt – (1) at any unusual time or place or a time or place known or which should be known as inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8am and before 9pm local time at the consumer’s location.”
Examples of Inconvenient/Unusual Time:
- Outside of 8am-9pm
- While consumer is entertaining friends, eating a meal, or attending to an illness in the family, of which debt collector has knowledge
- Neighbor’s home, a hospital, a funeral parlor
- While debt collectors cannot communicate with a consumer at their place of work if they know that the consumer is prohibited from engaging in such communications, communicating with a consumer at their place of work is additionally a violation if it is considered an inconvenient place.
- Communication may be applied to personal visits and other means of communicating, such as by telephone, mail and telegram.
- Late night phone calls saying “it’s me again” or “Hi, I’ll call again tomorrow night” which do not specifically mention a debt, are still considered forms of communication
- 1692c(a)(2) – Communication with Consumers represented by Attorneys
A debt collector cannot communicate with a consumer if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer.
- Once the collector learns that the consumer is represented by an attorney, the collector must deal exclusively with the attorney, and should not contact the consumer even to confirm the attorney’s retention or to provide a verification of rights notice. Not only does the collector have to cease communication directly with the consumer, but the collector cannot send letters to the consumer in care of his attorney, either.
- 1692c(a)(3) – Communications at Work
A debt collector cannot communicate with a consumer “at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.” Example:
- Consumer just has to say in plain English that she cannot talk at work to invoke the protections of section 1692c(a)(3)
- If an employer generally prohibits personal or nonemergency letters, calls, or visits, then debt collection contacts are within the employer’s prohibition
- A court may infer that a collector has knowledge of an employer’s policy if the collector has dealt with other employees of the same employer in the past. Also, collectors are responsible for general knowledge that workers in certain occupations do not receive mail, phone calls, or visits except in emergencies; such industries include factory, health, school, and retail jobs
- 1692c(b) – Communication with third parties
Communication with third parties – “except as provided in section 1692b of this title, without prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a post-judgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.” This is only permissible when the debt collector is attempting to locate a consumer.
This section is violated by any communication to a third party, even if the debt is not expressly referenced, other than one that strictly complies with the provision allowing location information to be gathered. Thus, a message left with a neighbor for the debtor to call regarding some urgent matter is illegal. West v. Nationwide Credit, Inc., 998 F. Supp. 642(W.D. N.C. 1998).
- A debt collector has to assume that a voicemail or answering machine is a third party unless the answering machine device is used exclusively by the debtor or the debtor has consented directly to the debt collector that he can leave messages on his answering machine. If the debt collector has not received direct permission, he must hang up the phone after reaching an answering machine and call back later, or write to the consumer to avoid unlawful third party contact
- A debt collector cannot contact a legitimate nonprofit counseling service assisting the consumer with his or her debt or the consumer’s bank, to compare a signature specimen
- A debt collector may not contact the parents of a non-minor, even if they continue to assume overall financial responsibility of their child. A debt collector is allowed to ask the parents whether they take financial responsibility for the non-minor child as long as the collector does not reveal the existence of the debt.
- A collection agency cannot contact the U.S. Immigration and Naturalization Service with the goal of collecting a student loan from a resident alien except for the sole purpose of determining the location of that resident alien
- A debt buyer may not provide a debtors contact information to a credit card issuer with the goal of having the credit card account pay off the debt
- Example: A person communicates when he or she shares with or conveys information to another. It is therefore possible to communicate with someone in spite of lacking a deliberate or purposeful intent to convey something to that particular person—for example, one may communicate with an unintended audience. Further, to the extent that the FDCPA is ambiguous as to whether “communicate … with” requires deliberate or purposeful intent, any such ambiguity vanishes on consideration of the FDCPA as a whole. The FDCPA is a strict liability statute, which conflicts with requiring deliberate or purposeful intent. Zortman v. J.C. Christensen & Associates, Inc., 2011 WL 1630935 D. Minnesota.
The only people aside from the above mentioned (consumer’s attorney, credit reporting agency, creditor and creditor’s attorney) that a debt collector can contact are: the consumer’s spouse (in certain states), the consumer’s parent if the consumer is a minor, a guardian, executor or administrator, and co-debtors.
***The consumer may waive the protection of 1692c(a) and (b), allowing a collector to communicate with the consumer at inconvenient or unusual time or places, when represented by an attorney, or at his or her place of employment. The consumer can also give prior consent to the collector to make third party contacts.
“If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communications with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except-
(1) to advise the consumer that the debt collector’s further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or credit; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.”
- Examples of Permissible Communications after Cease and Desist
- Permissible further communications from the debt collector may not request payment
- A debt collector must immediately stop all communication with the consumer on the date that they receive a cease and desist letter in the mail
“A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.”
The general wording of this section of the FDCPA enables the courts to take measures against any form of improper collection conduct, even those that are not specifically addressed in the FDCPA.
- Threats to contact third parties
- Telephone messages left with third parties when the collector could have reached the consumer directly
- Intimidating, belittling, criminal and insulting behavior
- Calling the consumer at her place of employment to collect on the debt notwithstanding warnings on prior occasions that she could not talk at work
- A collector’s failure to provide meaningful self-identification when communicating other than by telephone
- Continuing to collect, including filing suit and obtaining judgment, after multiple notices of bankruptcy discharge
- Standard is Hypothetical ‘Least Sophisticated Consumer’…(not actual client)
Instance of possible harassment should be viewed from the perspective of a consumer relatively susceptible to harassment. If a debt collector knows about a person’s relatively high sensitivity to misconduct, then even mildly abusive conduct has the “natural consequence” of harassment and oppression.
- If a collector knew or had reason to know that the person they are contacting was already under great stress from a financial catastrophe, a death in the family, or illness, the collector should expect the natural consequences of improper collection conduct to be more severe with respect to that person than with respect to a person under ordinary stress.
- It is not necessary to show that the plaintiff was actually misled by a collection notice under the least sophisticated consumer standard. Avila v. Rubin, 84 F.3d at 227 (7th Cir. 1996). However, some courts require that a misrepresentation or omission be material to the unsophisticated or least sophisticated consumer. Wahl v. Midland Credit Mgmt., 556 F.3d 643 (7th Cir. 2009).
** This section protects not only consumers allegedly obligated to a debt but “any person” such as friends, family members and relatives of a consumer.
(The following conduct is a violation of section 1692d)
“The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.”
- A debt collector who threatens to visit the consumer personally might be implying the use of violence, criminal means, or a breach of the peace.
- Additionally, threats of harm violate this section of the FDCPA if they are directed at a consumer’s children, friends and other third parties
- 1692d(2) – Obscene or Profane Language
“The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.”
- Collection attorney’s letter: “You cannot even begin to know the trouble and expense that is about to come into your life over this matter as we intend to do whatever is necessary to compel you to pay this obligation.”
- “Why the hell don’t you pay your debts?”
- Allegations of profanity alone are sufficient to state a claim under this section. Stuart v. AR Resources, Inc., 2011 WL 904167 E.D. Pennsylvania
- 1692d(3) – Publication of Lists of Consumers
“The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 1681a(f) or section 1681b(3) of this title.”
- Debt collectors cannot post “deadbeat lists” or “shame lists” in the window of a collection agency or publish similar lists in local newspapers, or online
- Collectors cannot report a debtor’s delinquency to creditors subscribing to its mailing service, since not every creditor has a legitimate business need for the information
- Sending a collection letter to a consumer’s employer violates this subsection as well as other sections of the FDCPA
- 1692d(4) – “The advertisement for sale of any debt to coerce payment of the debt.”
- Advertising a list of accounts for sale would cause shame and/or embarrassment to the consumer by listing his or her name publicly in the advertisement
- 1692d(5) – Causing Telephone To Ring
“Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.”
- Not only does this subsection prohibit excessive actual phone conversations, but also redialing a telephone after a consumer has hung up.
- This violation applies not only to the consumer but “any person” such as the consumer’s baby-sitter.
- A single call the day before and after a promised payment would probably not violate this provision, but six calls within a single day would. Violations of this subsection are based on the circumstances of the calls. Also, violations of this section likely violate other sections of the FDCPA as well.
- Lack of uniformity in courts’ decisions regarding what constitutes harassment of this sort means that almost any telephone harassment involving many, repeated phonecalls can be actionable.
|MEADOWS, 2011 WL 479997 (11TH Circuit) – 300 calls over two and a half years presents a genuine issue of material fact for the jury, where Plaintiff told collector that the debts weren’t hers. Answering the phone is not necessary for there to be harassment.||PUGLIESE, 2010 WL 2632562 (E.D.Mich.)- Defendants placed approximately 350 calls over an eight-month period, but only about ten calls resulted in actual conversations. SJ for Defendant.|
|VALENTINE, 2010 WL 1727681 (D.S.C.) -11 calls over 19 days is a question of fact for the jury to decide.||SHULER, 2010 WL 1838626 (N.D.Ala.)- 5 calls over 17 days was not considered excessive (Udell v. Kan. Counselors, Inc., 313 F.Supp.2d 1135, 1143 (D.Kan.2004) (four automated calls over seven days without leaving a message did not, as a matter of law, constitute harassment under the FDCPA); Kuhn v. Account Control Tech., Inc., 865 F.Supp. 1443, 1453 (D.Nev.1994) (holding that calling a consumer at her place of employment back two times in a five-minute period after she had hung up on the collector constituted harassment).|
|KRAPF, 2010 WL 2025323 (C.D.Cal.) -Court realizes there is no rhyme or reason between jurisdictions on what is considered excessive calls. As a result, court allows the claim to survive summary judgment based on the Plaintiff’s testimony that he was called between 4-8 times per day.
|TUCKER, 2010 WL 1849034 (M.D.Fla.) -As to the number of calls, the undisputed facts show that Ingram initiated telephone contact with Roger Shuler on five occasions over a 17-day period, never called repeatedly at the same location, and only made contact with plaintiffs once (and for less than five minutes) on a call Ingram initiated. The court finds that, collectively, these five telephone call attempts do not violate § 1692d(5), as they were not abusive, annoying, or harassing.|
|SANCHEZ, 520 F.Supp.2d 1149- Interesting case that compares other cases, and gives summary judgment for Plaintiff.
|CASEY, 2010 WL 415310 (M.D.Fla.)
Excessive calls always a question of fact that survives summary judgment. (171 calls)
|ATCHOO, 2010 WL 1416738 (W.D.N.Y.) – The fact that a Debtor does not answer the phone is not fatal to a claim for excessive calls.
|AKALWADI, 336 F.Supp.2d 492 – Time span over which the calls occurs matters- Whether there is actionable harassment or annoyance turns not only on the volume of calls made, but also on the pattern of calls. In Kuhn v. Account Control Tech., Inc. 865 F.Supp. 1443, 1453 (D.Nev.1994), the court found that six phone calls in a span of twenty-four minutes constituted harassment in violation of § 1692d(5). In Bingham v. Collection Bureau, Inc. 505 F.Supp. 864, 873 (D.N.D.1981), the court held that when a call was terminated and the collection agency called * back immediately, that subsequent call alone could constitute harassment under § 1692d(5) regardless of the content of the call.
The record reflects periods in which telephone calls were made on a daily basis and three telephone calls being made within five hours on the same day. (Amed.Compl.¶ 62). The reasonableness of this volume of calls and their pattern is a question of fact for the jury. See cf. Gill, 82 F.Supp.2d at 1360 (quoting Narwick, 901 F.Supp. at 1282). Therefore, both Akalwadi’s and RMA’s Motion for Summary Judgment are denied as to Count VI.
- 1692d(6) – “…the placement of telephone calls without meaningful disclosure of the caller’s identity.”
- Debt collectors must identify their own name and the company they work for. A prerecorded message left with a consumer that identifies the caller as CCS (where there had been no previous dealings with the debt collector, Corporate Collection Services) violates this subsection;
- A debt collector blocking their telephone number from appearing on a consumer’s Caller ID does not violate this provision, but putting a false name on the debt collector’s caller ID does violate the provision;
- The use of aliases is a controversial subject on which the FTC and courts disagree. If debt collectors consistently use the same alias then this would satisfy the purposes of the provision more than if they used different aliases. The debt collector has a legitimate concern about not revealing their identity to prevent any retaliation from angry consumers. On the other hand, an alias can be worse than an anonymous phone call because it can mislead a consumer about the collector’s identity.
- Example: Although Defendant may have sought to communicate with Plaintiff’s spouse, Defendant’s messages failed to name any particular individual. Plaintiff could have reasonably believed the messages were directed at her. Bryant v. Credit Adjustments, Inc., 2011 WL 902009 S.D. Florida.
“A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
**While there are 16 subsections of 1692e, which outline many specific prohibitions, the language of this general standard was intended to cover any type of deceptive collection misbehavior that the Act did not originally foresee
- Brown v. Card Serv. Ctr. deals with a debt collector who sent a letter to a consumer that says that unless the consumer made arrangements to pay off their debt within five days, the matter “could” result in referral to an attorney and “could” result in a lawsuit. The court decided that this falls under deceptive collection tactics because the debt collection company rarely litigates or refers their client’s debts to an attorney. The court determined that the least sophisticated debtor might get the impression that litigation or referral to a lawyer would be imminent if he or she did not respond to the letter within five days. A debt collection letter is deceptive where “it can be reasonably read to have two or more different meanings, one of which is inaccurate.”
(The following conduct is a violation of section 1692e)
“The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.”
- Debt collection companies cannot use off-duty uniformed police officers to collect debts
- Debt collectors cannot use a collection name that implies a governmental affiliation, such as “Maryland Collection Service”
- Certain symbols on collection letters are prohibited such as a police badge, or a judge or scales of justice, because of their deceptive nature
- Sample letter that violates this provision: “We [debt collectors] provide the systems used by a major branch of the federal government and various state governments…You must surely know the problems you will face later if you do not pay.”
- 1692e(2)(A) “The false representation of the character, amount, or legal status of any debt.”
- A collector attempts to collect a debt that arises out of unordered, mailed merchandise
- A lawsuit is threatened on debts for which the statute of limitations has expired
- Debts are claimed against individuals who are not legally obligated for them, such as a consumer’s relative
- Debts are claimed due which have been discharged in bankruptcy
- Debt collectors continuing to attempt to collect a debt even after the consumer informed the collector of the disputed status of the debt
- A debt collector labels the charge in a confusing way
The amount of a debt is misrepresented when…
- A debt collector fails to give a consumer credit for payments received
- A debt collector adds illegal, unauthorized, mistaken, or un-accrued fees to the balance of the debt. These may include attorney fees, interest, dishonored check fees, credit card fees, mortgage fees, and condominium fees
- A substantial new charge added to the balance of a debt is not disclosed
- A collector demands payment on a nonexistent debt
The legal status of a debt is misrepresented when…
- A debt collector attempts to collect money on a nonexistent judgment
- A debt collector threatens immediate garnishment of a consumer’s wage when judgment has not been taken
- A debt collector sends a letter such as “Collector v. Smith” which implies that a lawsuit has been filed when in actuality it has not
- A debt collector sends a letter with an attorney letterhead which threatens to advise the collection agency to take legal action if no payment is received within a certain time period if the attorney in question has not reviewed the claim
- A debt collector attempts to deter a consumer from pursuing a defense
- A debt collector attempts to collect fees which are not permitted by law
“The false representation of any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.”
- Prohibits falsely representing that a “flat-rate” collector will engage in collection activities beyond mailing a series of dunning letters
- A debt collector falsely represents that a consumer is subject to collection charges that are in fact illegal
“The false representation or implication that any individual is an attorney or that any communication is from an attorney.”
- If an attorney supplies form letters to a creditor or collection agency and did not otherwise participate in the collection efforts in the manner implied by the letters, he or she violates this section
- A collection agency which sent out a mass-produced letter containing their part-time general counsel’s name in the letterhead and a scanned image of his signature was considered false and misleading when the attorney did not review either the debtor’s individual file nor the particular dunning letter to each consumer
- ** A debt collector does not violate this provision if it includes a disclaimer on said letter, stating for example, “At this time, no attorney with this firm has personally reviewed the particular circumstances of your account. However, if you fail to contact this office, our client may consider additional remedies to recover the balance due.” But see recent developments in PA to the contrary
“The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.”
- A threat that a consumer will be arrested if he does not pay off his debt
- A threat to seize property exempt by law from seizure
“The threat to take any action that cannot legally be taken or that is not intended to be taken.”
Examples of Prohibited False Threats (threats that are not intended to be taken)
- Threats to report a consumer’s delinquency to a credit reporting agency
- Threats to press for a criminal prosecution or to report the write-off of the debt as taxable income to a consumer, to the Internal Revenue Service
- Threats that falsely imply that a debt collector will seek any available information on practically all of a debtor’s assets, to “determine what further collection effort to take” if the debt was not paid
- Threats of suit by an attorney not licensed within the jurisdiction or who does not in fact file suits in the jurisdiction. Rosa v. Gaynor, 784 F.Supp. 1, 5 (D.Conn. 1989).
- Threats may be implicit as well as express. Statements that a debt will be subject to “legal review” or “will be transferred to an attorney” are implicit threats of suit. Drennan v. Van Ru Credit Corp., 950 F.Supp. 858 (N.D.Ill. 1996).
- A statement that suit would be “recommended” is misleading where the collector knows suit is never filed because of the small size of the debt. Boyce v. Attorney’s Dispatch Service, C-3-94-347, 1999 U.S. Dist. LEXIS 1124 (S.D. Ohio, Feb. 2, 1999).
- A collection letter that stated that the creditor had authorized whatever legal means were necessary to collect the debt and that referred to post-judgment attachment and garnishment implied that legal proceedings were imminent when they were not and violated this section. Bentley v. Great Lakes Collection Bureau, 6 F.3d 60 (2d Cir. 1993).
- To properly demonstrate a violation of 1692e(5), two elements must be shown: (1) that the least sophisticated debtor would believe that legal action was threatened and (2) that the debt collector did not intend to take legal action
The following circumstances indicate that the threatened legal action will likely not be taken:
- The debt is relatively small
- The debt is disputed
- The creditor has in the past tended not to pursue similar actions
- The proper court is far away from the collector or creditor
- The collector lacks authority to sue either under state law or under the collector’s agreement with the creditor
Examples of Threats of Illegal Action
- Threats that violate the following federal laws: student loan laws, servicemember protections, wage garnishment protections, the Fair Credit Reporting Act, the Bankruptcy Code
- Any threat that would violate another subsection of the FDCPA, such as threatening to contact a consumer’s employer
- Example: “I’m not threatening you. I’m making you a promise. I’m going to file a lawsuit against you here real soon.” Santacruz v. Standley and Associates, LLC, 2011 WL 1043338 D. Colorado.
- 1692e(6) – “The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause a consumer to – (A) lose any claim or defense to payment of the debt or (B) become subject to any practice prohibited by this subchapter.”
This provision was designed to prevent debt collectors from making false threats to transfer a consumer’s account to a different debt collector, with the implication that the new debt collector’s methods were harsher. It also covers a collection agency’s threats to turn a debtor’s file over to an attorney or a repossession agency.
- 1692e(7) – “The false representation or implication that a consumer committed a crime or other conduct in order to disgrace the consumer.”
- A false accusation of fraud
- Accusing a consumer who had paid the debt of disregarding all good business practices
- A letter referring to a dishonored check which states, “YOU ARE EITHER HONEST OR DISHONEST YOU CANNOT BE BOTH.” “That calls into question a debtor’s honesty and good intentions when there are other reasons for dishonored checks.”
- 1692e(8) –
“Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.”
- Threats to tell a third party without elaboration that a consumer refuses to pay a debt when either the consumer is not obligated to or the debt is disputed
- Threats may involve a suggestion that the false credit information will be shared with a welfare office, a neighbor, or an employer
- This provision requires a debt collector to report a debt as disputed if it has reason to know it is disputed when communicating with lenders, creditors, or credit reporting agencies
- 1692e(9) – Simulated Documents
“The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.”
- Letters using legal captions
- Letters using legalistic formats, titles, or phraseology
- Letters creating the false impression that they were approved by the collector’s state licenser
- Letters sent by a collection agency using an attorney’s letterhead stationery or signed by the collection agency’s executive, who were not involved in collecting the debt
- Letters misrepresenting the collector to be a credit reporting agency
- Letters sent by a creditor on a collection agency’s stationary
- 1692e(10) – Any False Representations to Collect the Debt
“The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.”
** Even unsuccessful attempts to collect debts by deceptive means are expressly prohibited by this subsection.
- Using a fictitious or misleading name (such as use of a collection agency name by a creditor or use of an attorney’s letterhead by a collector)
- False threat of suit
- Misrepresentation of the imminence of suit or other collection activities
- False threat to report the consumer’s debt to third parties, such as the consumer’s employer or a consumer reporting agency
- Stating that payment “needs” to be made by wire transfer through Western Union or by express mail service, when any method of delivery of payments is accepted
- Misrepresenting that the debt collector only has authority to accept payment in full
- Misrepresenting that a consumer must sign a wage assignment to avoid suit
- Falsely implying that the collector is providing legal advice to the creditor
- Creating the false impression that the IRS required the collector to send a notice
- Failing to reveal the collector’s close association to the creditor
- Deterring the consumer from seeking a defense to the collection efforts
- Sending the consumer notice of debt verification rights in an envelope that appears to be junk mail or a credit card solicitation (dissuading the consumer from reading the contents of the letter)
- Example: Defendants’ failure to include the “in writing” requirement in a letter could easily deceive the least sophisticated debtor into believing that oral notice is sufficient, and therefore cause the consumer to forfeit his or her rights under subsections (a)(4) and (5) of Section 1692g (verification of debt or name and address of original creditor). Bicking v. Law Offices of Rubenstein and Cogan, 2011 WL 1740156 E.D. Virginia.
- 1692e(11) – Mini Miranda
“The failure to disclose in the initial written communication with a consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.”
- When a debt collector contacts a consumer or permissible third party, they are required to say that they are a debt collector, attempting to collect a debt, and that any information they obtain will be used for that purpose
- Examples of the potential deception that this disclosure is designed to prevent, includes prize offers where filling out the entry form for the prize may reveal the consumer’s current address and other private information to the debt collector, or a communication from a collector stating, “Please call John about important business at 765-4321,” where the communication’s purpose was to collect a debt
- Even in straightforward initial letters that are not designed to deceive, debt collectors must state both that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose
- Example: The automated telephone messages did not identify the caller in any fashion. The fact that a debt collector may leave a message, in which the debt collector is otherwise unidentified, to contact the consumer at a phone number that had previously been contained in the debt collector’s correspondence with the consumer is insufficient to identify the subsequent communication as being from a debt collector as is required by this section. Garo v. Global Credit & Collection Corp., 2011 WL 251450 D. Arizona.
- 1692e(12) –
“The false representation or implication that accounts have been turned over to innocent purchasers for value.”
- Collectors cannot misrepresent that they purchased a consumer’s debt, when in fact they were paid a flat rate or a contingent fee for its collection activities. This “suggests to the consumer that the collector is innocently collecting an account for an over-reaching creditor and that the collector has already paid the consumer’s debt.”
- 1692e(13) – False Legal Process
“The false representation or implication that documents are legal process.”
- Collection letters that very closely resemble the format, words, and type size and style of legal documents such as court summons and complaints
- Sending a complaint and summons to a consumer before they are filed may violate this provision
- Mailing a copy of a filed summons and complaint with a dunning “notice” urging the consumer to arrange payment of the debt to avoid bankruptcy violates 1692e(13)
- For letters whose format and wording only partly simulate legal process, it can be helpful to compare this letter with a collection letter that in no way simulates legal process. FTC staff believe that to determine if the letter violates 1692e(13) is based on the implication of the document as a whole
“The use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization.”
- This provision requires that whenever another FDCPA provision requires that a collector reveal his name, that he use his real name and the true business name
- 1692e(15) –
“The false representation or implication that documents are not legal process forms or do not require action by consumer.”
Prevents debt collectors from implying that consumers only have to send in payments after being sued, when in fact legal inacation will result in a default judgment.
- One finance company, after issuing summons to a number of consumers, ensured them that if they paid off all of their back payments, then “everything would be taken care of.” In actuality, the finance company receive their payments yet still took default judgments.
- 1692e(16) –
“The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by the section 1681a(f) of this title [Section 603(f) of the Consumer Credit Protection Act].”
- A collection agency with a name including the words “credit bureau” or words and symbols of similar meaning
“A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”
Legal concept of “unfairness” must pass three-prong test: (1) substantial injury to the consumer; (2) not outweighed by countervailing benefits to the consumers or competition; and (3) not reasonably avoidable by the consumer.
(The following conduct is a violation of this section)
“The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Examples of possible illegal charges:
- Non-contractual collection charges
- Interest charges
- Dishonored back checks
- Service charges
- Attorney fees
- Litigation costs
- Collection agency fees
- Late fees
- Prepayment fees
- Charges under dispute
- Criminal penalties
- In order for a charge to be authorized (legal), a contract must exist in which the consumer is a party. (Not a contract between a debt collector and a creditor). A collector attempting to collect a contractual charge that was illegal under state law violated this provision.
- A sign at a check cashing counter in a store announcing a charge for dishonored checks may not create a contract under state law
- Keeping the consumer’s garnished wages without obtaining a judgment, as required by state law, violates this provision
- 1692f(2) – Post-dated check restrictions
“The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.”
- A collector’s acceptance of a postdated check violates the Act unless it gave the consumer who wrote the check three to ten business days notice prior to depositing the check. This provision applies to payment instruments aside from checks, such as preauthorized checks or electronic money transfers
- 1692f(3) –
“The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.”
- A debt collector pressures a consumer to send a postdated check, without knowing if the consumer has sufficient funds to cover the check. When the debt collector receives the check, he intimidates the consumer into giving priority to paying that check with the threat of criminal prosecution under criminal check writing laws if they do not.
- The consumer’s attorney may have difficulty proving that the postdated check was solicited by the collector with the intention of later threatening to institute criminal prosecution. One method of proof is to show that the collector has exhibited a pattern of threatening consumers or instituting bad check prosecutions on postdated checks that it had solicited. Evidence may be supplied by clients, dockets of local criminal prosecutions and discussions with prosecutors.
- 1692f(4) –
“Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.”
“Causing charges to be made to any person for communications by concealment of the true purpose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.”
- When placing a collect call to a consumer, a debt collector has to have the operator tell the consumer that the purpose of the phone call is to collect a debt. However, this would violate Section 1692c(b) which prohibits communication about a consumer’s debt with third parties
- 1692f(6) –
“Taking or threatening to take any non-judicial action to effect dispossession or disablement of property if – (A) there is no present right to possession of the property claimed as collateral through an enforceable security interest; (B) there is no present intention to take possession of the property; (C) the property is exempt by law from such dispossession or disablement.
- A repossession company violates this provision by repossessing the consumer’s car prior to the expiration of the consumer’s right under state law to cure his default
- 1692f(7) – “Communicating with a consumer regarding a debt by postcard.”
- Because section 1692e(11) requires a debt collector to state it is a debt collector in all communications, sending a postcard to a consumer violates FDCPA provisions about communicating with third parties (such as a post office worker who will be able to see the content of a postcard)
- 1692f(8) –
“Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name is such name does not indicate that he is in the debt collection business.”
- If a debt collector’s name contains variants of the words “debt” or “collect” in it, the collector cannot use its name in the return address or elsewhere on its collection envelopes
- Writing inside an envelope that clearly projects through the envelope violates this provision
1692g(a) “Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing..
(1) The amount of the debt;
(2) The name of the creditor to whom the debt is owed;
(3) A statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) A statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) A statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor
- This provision is not satisfied merely by including the required debt validation information; the notice must be conveyed effectively to the debtor. It must be large enough to be easily read and sufficiently prominent to be noticed – even by the least sophisticated debtor. Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997).
- It is sufficient that the collector send the notice; nonreceipt does not amount to a violation if it was sent. Mahon v. Credit Bur. of Placer County Inc., 171 F.3d 1197 (9th Cir. 1999).
- Where the validation notice is placed on the back of the correspondence, without a legible and reasonably prominent reference on the front, §1692g is violated. Riveria v. MAB Collections, Inc., 682 F. Supp. 174, 178 (W.D.N.Y. 1988).
- A form from the debt collection agency that says “IMMEDIATE FULL PAYMENT. PHONE US TODAY.NOW,” contradicts the 30-day validation notice and violates this provision. “The manner of Payco’s presentation plainly undercuts and overshadows the message of the validation notice. Screaming headlines, bright colors and huge lettering all point to a deliberate policy on the part of the collector to evade the spirit of the notice statute, and mislead the debtor into disregarding the notice.” Miller v. Payco-General American Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991).
- In Chauncey v. JDR Recovery Corp., 118 F.3d 516 (7th Cir. 1997), the Seventh Circuit held that a letter insisting that the collector receive a check within 30 days in one paragraph (a demand which would require the debtor to transmit the check in less than 30 days) followed by the §1692g notice in the next, and concluding with a demand for a “prompt response” to avoid “further collection activities” violated §1692g.
- A consumer’s statement that, “I dispute the debt” is sufficient to dispute the validity of a debt under the FDCPA.
- Debt collectors who send out a written debt verification notice cannot require that consumers dispute the debt only in writing. Oral disputes are valid, as well. Brady v. Credit Recovery Co., 160 F.3d 64 (1st. Cir. 1998). If the consumer orally disputes the debt, the debt collector cannot assume that the debt is valid or report it as undisputed to a credit bureau, but need not provide validation information to the debtor.
- A debt verification letter cannot include only a part of the balance of a debt and state that additional fees or charges, like attorney fees or service charges, are also owed without specifying the amount of the additional charge.
- A letter stating the balance but inviting the debtor to call to obtain “the most current balance information” creates doubt as to whether the balance stated is increasing and violates the FDCPA unless an explanation is provided. Chuway v. National Action Financial Services, 362 F.3d 944 (7 th 2004).
- A debt verification must disclose the dollar amount of the debt as of the date of the letter. The collector must be very clear and careful in directing a consumer to an 800 number in order to obtain a consumer’s “most current balance information, if such service is offered.”
- Example: Defendants’ failure to include the “in writing” requirement could easily deceive the least sophisticated debtor into believing that oral notice is sufficient, and therefore cause the consumer to forfeit his or her rights under this section. Bicking v. Law Offices of Rubenstein and Cogan, 2011 WL 1740156 E.D. Virginia.
- Right to Verification of the Debt after Dispute
1692g(b) – “If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor is mailed to the consumer by the debt collector.”
- A consumer must mail the dispute or verification request within thirty days
- Any collector who charges a fee for copies of a requested verification of a debt pursuant to 1692g, violated 1692f(1)
- Verification requirements should vary depending upon the reason for the dispute over the alleged debt. A consumer claiming mistaken identity as a debtor needs a very different verification than a consumer claiming full payment or uncredited payments or breach of warranty
- General requirements in a few situations would be a statement issued by the consumer, a statement that the debt has not been paid, and a statement that the creditor (to whom the debt was originally owed), in consideration of the consumer’s debt, had either delivered a merchantable product or properly rendered a service
- The debt collector must cease collection activities on the date it receives the request for verification, and it will be held liable if it continues to collect the debt until it provides an appropriate verification
- The debt verification letter must include the name of the original creditor and the amount of the debt
- 1692g(c) – “The failure of a consumer to dispute the validity if a debt under this section may not be construed by any court as an admission of liability by the consumer.”
- A collection letter, which gives the impression contrary to 1692g(c), that a debt not timely disputed by the consumer would be presumed valid by a court, was deceptive and violated the FDCPA
1692h – “If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer’s directions.”
- This provision gives a consumer the right to decide how to allocate payments among multiple debts being collected by the same collector. For example, a consumer can decide to give preference in paying a secured debt over an unsecured debt. A debt collector has to apply a consumer’s payments to debts not disputed by the consumer.
1692i(a) – “Any debt collector who brings any legal action on a debt against any consumers shall (1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which sued real property is located; or (2) in the case of an action not described in paragraph (1) bring such action only in the judicial district or similar legal entity (A) in which such consumer signed the contract sued upon; or (B) in which such consumer resides at the commencement of the action.
- This section prohibits a debt collector from taking legal action to collect a consumer obligation in a location other than where the consumer resides, signed the contract, or in the cases of real estate, where the property is located.
- When a collector proceeds against real property in which it has no interest, the FTC staff has stated that the action must be brought either where the consumer resides or where the contract was signed
- If a consumer did not sign a contract, the collector may only sue the consumer where the consumer resides
- When a suit is filed in state court, state court geographical boundaries, rather than federal districts, are determinative of appropriate venue
1692j(a): “It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.”
(b): “Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 1692k for failure to comply with a provision of this title.”
- This is the only section of the FDCPA that not only applies to debt collectors, but also creditors and others specifically excluded from the FDCPA definition of “debt collector”
- This provision prohibits debt collection agencies or collection lawyers from writing dunning letters without any additional involvement in the collection process. These companies, often referred to as “flat rate companies,” charge a few dollars or less to mail debt collection letters in their name. Flat-rating may violate 1692e(3) or (10) because it often involves misrepresenting that a debt collection agency is more involved in the collection process than it really is. In this case, both the creditor and debt collector are subject to FDCPA liability.
- A debt collection agency may violate this provision by including in its form letters threats of action it lacks the authority to take. To avoid violating 1692j, flat-rate suppliers should remove its name from both the letterhead and the bottom of the letter where it may be names as a recipient of a copy of the form letter
Evidence that indicates that a collection agency’s participation in the debt collection process was so minimal that the creditor should be deemed liable as a debt collector:
- The collection agency is a mere mailing service or performs only ministerial functions
- The collection agency sends out letters that state that if a debtor does not pay, the debt “will be referred for collection”
- The collection agency is paid merely for sending letters rather than on the percentage of debt collected
- The collection agency does not receive any payments or forwards payments to creditor
- If a debtor fails to respond to the letter(s), the collection agency has no further contact with the debtor or the creditor decides whether to pursue collection
- The collection agency does not receive the files of the debtors
- The collection agency never discussed with the creditor the collection process or what steps should be taken with certain debtors
- The collection agency cannot initiate phone calls to debtors
- Any correspondence received by the collection agency is forwarded to the creditor
- The collection agency has no authority to negotiate collection of debts
- The letters do not state the collection agency’s address or phone number. Cortez v. Trans Union Corp., 94 C 7705, 1997 WL 7568, 1997 U.S. Dist. LEXIS 31 (N.D. Ill. Jan. 3, 1997).
- The letter which directs questions or payments to the creditor
- The creditor has substantial control over the content of the letters
Evidence that indicates a creditor is not acting as a debt collector includes:
- The collection agency provides traditional debt collection services for the creditor such as direct contact with debtors, locating debtor’s assets, and referrals to collection attorneys;
- Accounts remain with collection agency if debtor does not pay after receipt of a letter;
- The collection agency has authority to decide to pursue debts that remain unpaid after letters are sent;
- The collection agency provides follow-up services;
- The creditor pays only for successful collection efforts;
- The creditor exercises only limited control over the collection agency;
- The collection agency retains information about the debtors;
- The letters state collection agency’s telephone number or address;
- The collection agency drafts the letters;
- The collection agency collects debts for others;
- The collection agency answers debtors’ inquiries; and
- The collection agency recommends how to pursue stubborn debtors.
- Adding Fees to Debts
- Example: Patzka v. Viterbo College, 917 F. Supp. 654 (W.D. Wis. 1996). Both the college and the collection agency that it employed were found to have violated the FDCPA and state law by attempting to collect both interest and a 33 percent collection fee on a student loan. The court noted that the additional charges were not expressly authorized by the agreement of the parties and were expressly forbidden by state law.
- Example: Kojetin v. C U Recovery, Inc., 212 F.3d 1318 (8th Cir. 2000). 8th Circuit affirmed a lower court decision holding that if an agency wants to impose a collection fee on a consumer, the collection costs should be itemized in the original consumer agreement and bear a relationship to the actual costs of collection.
- The laws or regulations of the following states are silent in addressing whether collection agencies may add interest, fees or collection charges
- South Dakota
An individual, firm, partnership, association or corporation to whom a license is to be issued shall, except for attorneys licensed to practice law, not attempt to collect any collection fee, attorney’s fee court cost or expenses unless the fees, charges or expenses are justly due from and legally chargeable against the debtor, or have been judicially determined. Ariz. Rev. Stat. Ann. § 32-1051(4)
A collection agency shall not threaten or attempt to collect any attorney fees, collection cost, or other fee not provided in the contract which established the debt. Ariz. Admin. Code R20-4-1509
A licensee shall not give or send to any debtor, or cause to be given or sent to any debtor, any notice, letter, message or form which represents or infers that the existing obligation of the debtor may be increased by the addition of attorney’s fees, investigation fees, service fees, or any other fees or charges when in fact these fees or charges may not legally be added to the existing obligation of the debtor. Ariz. Rev. Stat. Ann. § 32-1051(5)(c)
A debt collector cannot falsely represent that a debt may be increased by the addition of attorney fees, investigation fees, service fees, finance charges, or other charges if, in fact, such fees or charges may not legally be added to the existing obligation. Cal. Civ. Code § 1788.13(e)
A debt collector cannot collect or attempt to collect the whole or any part of the debt collector’s fee, or charge for services rendered, or other expense incurred by the debt collector in the collection of the consumer debt, except as permitted by law. Cal. Civ. Code § 1788.14(b)
Any legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation. Cal. Civ. Code § 3289
A debt collector or collection cannot not use unfair or unconscionable means to collect or attempt to collect any debt, including, but not limited to, the following conduct: The collection of any amount, including any interest, fee, charge, or expense incidental to the principal obligation, unless such amount is expressly authorized by the agreement that created the debt or permitted by law. Colo. Rev. Stat. Ann. § 12-14-108(1)(a)
A collection agency cannot add, collect, or attempt to collect a charge for costs of collection unless such costs are specifically authorized by statute or by the contract, agreement, note, or other instrument creating the debt and are not otherwise prohibited by law. 4 Colo. Code Regs. § 903-1 Rule 2.03
No licensee shall advise, suggest, or request that a client add collection costs to any existing debt unless such costs are specifically authorized by statute. 4 Colo. Code Regs. § 903-1 Rule 2.03
If a statute, contract, agreement, note, or other instrument specifically authorizes the addition of collection costs and such costs are collected, the licensee may retain only those collection costs exclusive of attorney fees and court costs as its fee or commission for the collection of the debt, unless otherwise agreed to in writing with the assignor. 4 Colo. Code Regs. § 903-1 Rule 2.03
No collection agency shall add, collect, or attempt to collect costs of collection pursuant to § 13-21-109(1)(b) (II), C.R.S. on any dishonored check, draft, or payment order payable to it unless the check is assigned for collection to another collection agency not owned in whole or in part by the payee collection agency. 4 Colo. Code Regs. § 903-1 Rule 2.03
With respect to a consumer credit transaction, the agreement may provide for the payment by the consumer of reasonable attorney fees not in excess of fifteen percent of the unpaid debt after default and referral to an attorney not a salaried employee of the creditor or such additional fee as may be directed by the court. A provision in violation of this section is unenforceable. Colo. Rev. Stat. Ann. § 5-5-112(1)
A consumer collection agency cannot add any charge or fee to the amount of any claim which it receives for collection, or knowingly accept for collection any claim to which any charge or fee has already been added to the amount of the claim, unless the consumer debtor is legally liable, in which case, the charge or collection fee may not be in excess of 15% of the amount actually collected on the debt. Conn. Gen. Stat. Ann. § 36a 805(a)(13)
The collection of any amount, including any interest, fee, charge or expense incidental to the principal obligation, that is not expressly authorized by the agreement creating the debt or permitted by law, is an unfair or unconscionable means to collect or attempt to collect a debt. Conn. Agencies Regs. § 36a-809-3(g)(1)
- DISTRICT OF COLUMBIA
A debt collector cannot represent that an existing obligation of the consumer may be increased by the addition of attorney’s fees, investigation fees, service fees, or any other fees or charges when in fact such fees or charges may not legally be added to the existing obligation. D.C. Code Ann. § 28-3814(f)(8)
A debt collector cannot collect or attempt to collect from the consumer all or any part of the debt collector’s fee or charge for services rendered; the collection of or the attempt to collect any interest or other charge, fee, or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense is expressly authorized by the agreement creating the obligation and legally chargeable to the consumer or unless such interest or incidental fee, charge, or expense is expressly authorized by law. D.C. Code Ann. §§ 28-3814(g)(3),(4)
A debt collector may not represent to a consumer that an existing obligation of the consumer may be increased by the addition of attorney’s fees, investigative fees, service fees or any other charges when, in fact, such fees or charges may not legally be added to the existing obligation. Ga. Comp. R. & Regs. r. 120-1-14-.23(h)
A debt collector cannot attempt to collect any interest or other charge, fee, or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense incidental to the principal obligation is expressly authorized by the agreement creating the obligation and legally chargeable to the consumer. Ga. Comp. R. & Regs. r. 120-1-14-.24(c)
A collection agency commits a deceptive collection practice when, with the intent to collect a debt owed to a person, corporation, or other entity, he, while attempting to collect an alleged debt, adds to the debt any service charge, interest or penalty which he is not entitled by law to add. Ill. Admin. Code tit. 68, § 1210.60(c)
It is an unlawful practice for a debt collector to collect or attempt to collect any interest or other charge or fee in excess of the actual debt or claim, unless such interest or other charge or fee is expressly authorized by the agreement creating the debt or claim, expressly authorized by law or, in a commercial transaction such interest or other charge or fee is expressly authorized in a subsequent agreement. If a contingency or hourly fee arrangement (i) is established under an agreement between a collection agency and a creditor to collect a debt and (ii) is paid by a debtor pursuant to a contract between the debtor and the creditor, then that fee arrangement does not violate this Section unless the fee is unreasonable. The Department shall determine what constitutes a reasonable collection fee. 225 Ill. Comp. Stat.425/9(a)(29)
Creditors shall be allowed to receive the rate of five (5) percent per annum for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing; on money lent or advanced for the use of another; on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance; on money received to the use of another and retained without the owner’s knowledge; and on money withheld by an unreasonable and vexatious delay of payment. In the absence of an agreement between the creditor and debtor governing interest charges, upon 30 days’ written notice to the debtor, an assignee or agent of the creditor may charge and collect interest as provided in this Section on behalf of a creditor. 815 Ill. Comp. Stat. 205/2
A debt collector cannot falsely represent any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt. Me. Rev. Stat. Ann. tit. 32, § 11013(2)(B)(2)
The collection of any amount, including any interest, fee, charge or expense incidental to the principal obligation, unless the amount is expressly authorized by the agreement creating the debt or permitted by law. Me. Rev. Stat. Ann. tit. 32, § 11013(3)(A)
It is an unfair practice for a debt collector to collect or attempt to collect any amount, including any interest, fee, charge or expense incidental to the principal obligation, unless such amount is expressly authorized by the agreement creating the debt or permitted by law. Mass. Regs. Code tit. 209, § 18.17(1)
It is an unfair practice for a debt collector to represent that an existing obligation of a consumer may be increased by the addition of attorney’s fees, investigation fees, service fees, or any other fees or charges, if in fact such fees or charges may not legally be added to the existing obligation. Mass. Regs. Code tit. 209 § 18.17(9)
A licensee cannot commit any of the following acts: demanding or obtaining a share of the compensation for service performed by an attorney in collecting a claim or demand or collecting or receiving a fee or other compensation from a consumer for collecting a claim, other than a claim owing the creditor pursuant to the provisions of the original agreement between the creditor and debtor. Mich. Comp. Laws Ann. § 339.915a(e)
No person, firm or corporation shall receive or impose any fee or charge, other than one expressly provided for by statute, for arranging credit in the amount of one thousand dollars or less, the proceeds of which are intended to be used by the borrower primarily for personal, family or household purposes. Any contract evidencing such excess fee or charge and any note evidencing credit so arranged is void. Any person, firm or corporation who receives or imposes a fee or charge prohibited by this section is guilty of a class B misdemeanor. Mo. Ann. Stat. § 408.096
Notwithstanding any other provision of law to the contrary, attorney’s fees are permitted to enforce a credit agreement provided the enforcing attorney is a licensed member of the Missouri bar or is authorized to practice law in Missouri, and such fees meet one of the following requirements:
- Such fees are included in the written credit agreement, and are not otherwise prohibited by law; or
- Such fees do not exceed fifteen percent of the outstanding credit balance in default, provided such credit was extended by a for-profit business or credit union.
At the court’s discretion, additional fees may be awarded to the attorney for the prevailing party. Mo. Ann. Stat. § 408.092
No provision of this section shall be construed to authorize or limit attorney’s fees permitted parties and transactions not covered by this section. Mo. Ann. Stat. § 408.092
A collection agency cannot collect or attempt to collect any interest, charge, fee, or expense incidental to the principal obligation unless:
- Any such interest, charge, fee or expense as authorized by law or as agreed to by the parties has been added to the principal of the debt by the creditor before receipt of the item of collection;
- Any such interest, charge, fee or expense as authorized by law or as agreed to by the parties has been added to the principal of the debt by the collection agency and described as such in the first written communication with the debtor; or
- The interest, charge, fee or expense has been judicially determined as proper and legally due from and chargeable against the debtor. Rev. Stat. 649.375(2)
- NEW HAMPSHIRE
Any debt collection or attempt to collect a debt shall be deemed unfair, deceptive or unreasonable if the debt collector:
- Makes any representation that an existing obligation may be increased by the addition of attorney’s fees, investigation fees, service fees or any other fees or charges when in fact such fees or charges may not be legally added to the existing obligation; or
- Makes any representation that an existing obligation will definitely be increased by the addition of attorney’s fees, investigation fees, service fees or any other fees or charges when the award of such fee or charge is discretionary by a court of law; or
- Collects or attempts to collect any interest or other charge, fee or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense is expressly authorized by the agreement creating the obligation and legally chargeable to the debtor; provided that the foregoing shall not prohibit a debt collector from attempting to collect court costs in a judicial proceeding. N. H. Rev. Stat. Ann. § 358-C:3 (VIII)-(X)
- NEW JERSEY
If a borrower defaults under the terms of a plan and the bank refers the borrower’s account for collection to an attorney or collection agency, for collection, the bank may, if the agreement governing the revolving credit plan so provides, charge and collect from the borrower a reasonable attorney’s or collection agency’s fee and, in addition, if the agreement governing the plan so provides, the bank may recover from the borrower all court or other collection costs actually incurred by the bank. N.J. Stat. Ann. § 17:3B-40
- NEW YORK
New York State: No principal creditor or his agent may knowingly collect, attempt to collect, or assert a right to any collection fee, attorney’s fee, court cost or expense unless such charges are justly due and legally chargeable against the debtor. N.Y. Gen. Bus. Law § 601(2). “Principal creditor” means any person, firm, corporation or organization to whom a consumer claim is owed, due or asserted to be due or owed, or any assignee for value of said person, firm, corporation or organization. N.Y. Gen. Bus. Law § 600(3)
New York City: A collector may not collect any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law. New York City, N.Y., Rules, Tit. 6, § 5-77(e)(1)
- NORTH CAROLINA
A collection agency cannot collect or attempt to collect a debt or obtain information concerning a consumer by any fraudulent, deceptive or misleading representation. Such representations include, but are not limited to, the following: Falsely representing that an existing obligation of the consumer may be increased by the addition of attorney’s fees, investigation fees, service fees, or any other fees or charges; N.C. Gen. Stat. § 58-70-110(6)
A collection agency cannot collect or attempt to collect any debt by use of any unconscionable means. Such means include, but are not limited to, the following: Collecting or attempting to collect from the consumer all or any part of the collection agency’s fee or charge for services rendered, collecting or attempting to collect any interest or other charge, fee or expense incidental to the principal debt unless legally entitled to such fee or charge; N.C. Gen. Stat. § 58-70-115(2)
It is an unlawful collection practice for a debt collector, while collecting or attempting to collect a debt to do any of the following: Represent that an existing debt may be increased by the addition of attorney fees, investigation fees or any other fees or charges when such fees or charges may not legally be added to the existing debt. Or. Rev. Stat. § 646.639(2)(m)
It is an unlawful collection practice for a debt collector, while collecting or attempting to collect a debt to do any of the following: Collect or attempt to collect any interest or any other charges or fees in excess of the actual debt unless they are expressly authorized by the agreement creating the debt or expressly allowed by law. Or. Rev. Stat. § 646.639(2)(n)
It is unlawful for a collection agency to collect any amount, including any interest, fee, charge or expense incidental to the principal obligation, unless such amount is expressly provided in the agreement creating the debt or is permitted by law. 18 Pa. Cons. Stat. Ann. § 7311(b.1)
A debt collector may not use unfair or unconscionable means that employ the following practices: collecting or attempting to collect interest or a charge, fee, or expense incidental to the obligation unless the interest or incidental charge, fee, or expense is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer. Tex. Fin. Code Ann. § 392.303(a)(2)
A debt collector may not use a fraudulent, deceptive, or misleading representation that employs the following practices:
- Representing that a consumer debt may be increased by the addition of attorney’s fees, investigation fees, service fees, or other charges if a written contract or statute does not authorized the additional fees or charges;
- Representing that a consumer debt will definitely be increased by the addition of attorney’s fees, investigation fees, service fees, or other charges if the award of the fees or charges is subject to judicial discretion. Fin. Code Ann. § 392.304(a)
- Telephone Consumer Protection Act – 47 U.S.C. 227, et seq.
- General Prohibitions – Claim for ‘robocalls’ to numbers which consumer did not authorize creditor contact.
- Without prior consent, automatic telephone calls or prerecorded messages to
- to any emergency telephone line
- hospital or health care facility
- any cellular telephone service or paging service
- Without prior consent, telephone calls to residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party,
- Without prior consent or outside of an established business relationship, the sending of unsolicited faxes
Damages: $500 per violation, which may be trebled