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Need some guidance/suggestions - Debt Collection


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I received a dunning letter from a law firm stating "CitiBank has placed your account with our office for collection and possible legal action. This communication is from a debt collector and is an attempt to collect a debt. Any information will be used for that purpose."

So the law firm identified itself as a debt collector in the dunning letter and on the lawsuit appears as attorneys for the plaintiff. Can the law firm be a debt collector and later appear as attorney for the plaintiff?

??????????

Thanks for any comments

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So the law firm identified itself as a debt collector in the dunning letter and on the lawsuit appears as attorneys for the plaintiff. Can the law firm be a debt collector and later appear as attorney for the plaintiff?

Yes, the FTC defines attorneys whose practice is primarily suing to collect debts as "debt collectors" and thus subject to the FDCPA. The notice you received is mandated by the FDCPA. If they had failed to give that notice, you would have them on a violation.

So, the lawfirm is both attorney for the creditor and a debt collector at the same time. There is no conflict in that role.

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I certainly agree with both the responses pf Alva and Debt Guy. But the other other things to say. (1) Any collector has an option to later use a court of law option in collection. Regardless if they hire an in or out of house attorney to file a lawsuit. (2) Many collection agencies use the implied threat of a lawsuit to try to intimidate uninformed consumers. The fact is, in most cases, a collector filing a lawsuit is a risky and possibly money losing tactic by the CA. The other fact is that directly saying we will sue and then not following through is a FDCPA violation, but implied threats of this nature are legal.

But it has little bearing on the probability that the collector will file a lawsuit to try to force collection. Which has more to do with the size of the alleged debt, the quality of CA documentation, and the unknowable possibility that they may win the lawsuit and then not get any blood out of a turnip.

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and by doing so, violate the FDCPA

In a word no Nascar, saying they are a law firm jam packed with attorneys is not in itself enough to constitute a FDCPA violation. Only the direct threat of a lawsuit they do not follow up with constitutes a FDCPA violation.

But any consumer is free to file lawsuit on the Nascar contention, best of luck getting a judge to agree with you. But Nascar could have a point in the case of a CA that has no attorney's and no track record of ever filing a lawsuit against a consumer.

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Only the direct threat of a lawsuit they do not follow up with constitutes a FDCPA violation.

Where do you guys get this stuff? Thinly veiled threats of legal action have been held to be violations ever since the FDCPA became law. The cite below is typical of scores of others just like it.

Again, the court applies the “least sophisticated debtor” standard, in deciding whether there is a perceived threat of litigation. Plaintiffs contend that five of CEA's dunning letters satisfy the first prong of the test, even without an overt threat to sue, as long as the letter creates the impression that legal action is a real possibility. Irwin v. Mascot, 112 F.Supp2d 197 (N.D.Cal., 2000).

Statements in debt collection letters may constitute threats to take legal action when they are “calculated to intimidate the least sophisticated consumer into believing that legal action against her is imminent” and “that the debtor's only options are either payment or being sued.” The conditional nature of a statement, such as the use of the words “may” or “possible,” does not negate the existence of a threat if a letter, in its entirety, could lead the least sophisticated debtor to believe that legal action is a real possibility. (“The use of the word ‘may’ does not mitigate the tone of the letter which purports to be a ‘formal notice’ ....”); see also Baker v. G.C. Servs. Corp., 677 F.2d 775, 779 (9th Cir.1982) (upholding a district court's determination that a statement constituted a threat when it “ ‘create(d) the impression that legal action by the defendant is a real possibility ...’ ”) (alteration in original). Schwarm v. Craighead, 552 F.Supp2d 1056 (E.D.Cal., 2008).

from a recent opinion out of Florida dealing with this and a couple of other issues;

Upon review and consideration, the court finds that the Unifund dunning letter threatens to take collection action ... The communication is unmistakably an effort by Unifund to collect on a bad debt either amicably or via a thinly veiled threat of legal action if necessary.... Unifund, as a debt collector acting through its legal department, is seeking to collect on a debt he has failed to pay; if the bad debt is not resolved in 35 days, referral to an attorney may occur ... Plaintiff's motion for partial summary judgment on this claim is granted. LeBlanc v. Unifund CCR Partners, 552 F.Supp2d 1327 (M.D.Fla., 2008).

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Thinly veiled threats of legal action have been held to be violations ever since the FDCPA became law. The cite below is typical of scores of others just like it.

Is there a condition under which a creditor can threaten legal action and not be in violation of the FDCPA?

Are decisions like those you cited the reason we see more and more posts like "I just got served and the creditor never even contacted me?"

I don't deny those decisions exist. They just don't make a lot of sense to me. I've always read the spirit and intent of the Act to allow a creditor to "threaten" any action that they can legally take and have the intent to do so (or at least a solid track record of doing so). That includes filing a lawsuit. Guess I must have misunderstood what I read. That's probably why I'm not a judge -- to much common sense.

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I've always read the spirit and intent of the Act to allow a creditor to "threaten" any action that they can legally take and have the intent to do so

Debt Guy, your statement is correct. However, the quote to which I was responding to was a much more broad statement;

Many collection agencies use the implied threat of a lawsuit to try to intimidate uninformed consumers ... but implied threats of this nature are legal.

Remember, a debt collector is not a creditor and as such, very seldom has the legal right to bring suit against a consumer. Nor do they have the right to "recommend legal action," since such conduct has been held to be the practice of law.

In the case of the original poster here, the original creditor is still in play and the attorney is representing the original creditor. One would be hard-pressed in this particular circumstance to find that the law firm is violating the Act. No doubt the original creditor has the right to retain the law firm to bring an action.

But, take the collection agency who uses law firms to send "imminent legal action" letters, or hints at "possible legal action" if the consumer fails to do one thing or another by a particular time. That's considerably different from an original creditor who directly retains an attorney. The statement to which I was responding implied that such activity is "business as usual" for collection agencies and is "legal." Such a general statement accomplishes in many ways what the debt collector is attempting to do when it sends letters of this type in the first place - to get consumers to overlook their legal rights.

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Nascar

Thanks. I guess I somehow missed the drift of the thread that we were talking about a third party CA instead of the Creditor.

But, answer this in relation to your FL case citation re Unifund. Unifund is the creditor -- albeit not the OC but still the owner of the debt and thus the creditor (to my knowledge, Unifund does not collect for others). Additionally, Unifund's primary collection tool is litigation. They may do an internal letter or two but otherwise it goes to the attorney.

How did the court manage to find that Unifund made a wrongful threat of legal action?

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Unifund is the creditor -- albeit not the OC but still the owner of the debt ...How did the court manage to find that Unifund made a wrongful threat of legal action?

Under the FDCPA, Unifund is a debt collector. Debt buyers like to call themselves creditors, but for purposes of the Act, there is effectively only one creditor - the original creditor.

It so happens that Unifund, at least at the time of this action, was not registered as a debt collector in the State of Florida.

Under Florida law, Unifund could not seek to take nor threaten to take such action absent its registration with the Office of Financial Regulation. LeBlanc v. Unifund CCR Partners, G.P., 557 F.Supp.2d 1327 (M.D.Fla., 2008).

I'm going to add that Unifund's "right" to sue comes only when an assignment from the original creditor effectively transfers those rights. Note that Unifund almost always tries to bring suit in the name of the original creditor, along with themselves as co-plaintiffs. This is because, for whatever reason, they have a really hard time proving valid assignments and have to try to slide past the court by using the original creditor's name. Without an effective assignment of rights, they cannot legally sue. They probably would have been just as liable under the Act if they were forced to prove such an assignment here. I'll bet they could not have done it.

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Thanks,

I went back and re-read the definition of creditor in the Act. I guess I am reluctantly forced to agree that the Act was written in the context of only one creditor and that being the original creditor. In the days of Jimmy Carter and 50 cent a gallon gasoline when this thing was written, the sale of charged-off debt was virtually non-existent.

Ironically, the notion that a debt buyer is a debt collector is not in the Act either. We draw that definition from an FTC opinion letter. I think the opinion letter was appropriate and have never had a difference of opinion with the conclusion.

I do struggle with the idea that a debt buyer is not the creditor. Maybe this is just one of those inexplicable conundrums that we find from time to time. Of perhaps the question was never posed to the FTC Staff. I don't know. I strikes me as nonsensical that it would be in any context illegal for the owner of the debt to say "pay or I'll sue". The concept is just so damn basic.

Clearly, in the FL case, Unifund stepped in it by not properly registering in the state.

I've seen a few Unifund lawsuits. I've never seen one where they claimed to be co-plaintiff so that is rather a surprise to me. I never understand why a court would allow such a petition to be filed. If I were the judge I would want to know that the Plaintiff had standing to bring the action.

In any event, if they are having problems proving up the assignment of the debt, then someone is just flat lazy or too damn cheap to get the job done right. In that case, they deserve the misfortune that befalls them. I would never tolerate such a thing. It is some extra work and some extra money to go back and get all the paperwork in order. I would think it would be more expedient and less expensive in the long run to just do it right the first time.

Anyway, thanks for the explanation. You gave it a perspective I had not considered before.

Regards. DG

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