SingleDadJames

Debt Validation in MI: CA's must provide # & Amt of previous payments. But Attorneys?

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Like other states, MI has its own state fair debt collection laws and the occupational code which essentially adds “extra” protection to MI consumers in addition to the federal FDCPA. Of particular interest is a portion that places additional debt validation requirements for collection agencies. It seems like good news at first but it actually does little good when you carefully look at things.

I’m not sure if my interpretation is incorrect or if I’m right. I’m having a little difficulty wrapping my head around some of the particular details and I’m hoping some of you can help. But first, a little background.

Similar to federal laws, in MI when a collection agency sends you the proper initial communication containing the required statements (“If you notify this office within 30 days that you dispute this debt. …yadda yadda …we’ll obtain verification of the debt and send it to you”) and you send in a timely written dispute of the alleged debt , a collection agency in MI has to stop validate the debt. The difference is Michigan statutes add an extra requirement defining proper validation.

Long story short: When validating a debt in MI, a collection agency also has to provide the number and amount of previous payments within their validation response.

Michigan Fair Debt Collection Practices Act 339.918 Communication with consumer; notice; effect of disputing validity of debt; verification of debt; failure to dispute validity of debt.

Sec. 918.

(1) Within 5 days after the initial communication with a consumer in connection with a collection of a debt, a collection agency shall send the consumer, unless the following information is contained in the initial communication or the consumer has paid the debt, a written notice containing all of the following information:

(a) The amount of the debt owed.

(
B)
The date the communication was sent to the debtor.

© The name of the creditor to whom the debt is owed.

(d) A statement specifying that unless the consumer, within 30 days after receipt of this notice, disputes the validity of the debt, or a portion of the debt, the debt will be assumed to be valid.

(e) A statement specifying that, if the consumer notifies the collection agency in writing within 30 days after receipt of this notice, that the debt, or any portion of the debt, is disputed, the collection agency shall obtain verification of the debt or a copy of a judgment against the consumer and that a copy of the verification or judgment shall be mailed to the consumer by the collection agency.

(2) If the consumer notifies the collection agency in writing, within 30 days after receiving the written notice, that the debt, or any portion of the debt, is disputed, collection of the debt or any disputed portion of the debt shall cease until the collection agency obtains verification of the debt and a copy of the verification or judgment is mailed to the consumer by the collection agency. Verification of the debt or any disputed portion of the debt shall include the number and amount of previously made payments and the name and address of the orginal creditor, if different from the current creditor, or a copy of the judgment against the debtor.

This sounds like great news on the surface. In fact many websites out tout this as a wonderful rule for MI consumers. These sites frequently say 339.918(2) says “debt collectors” in MI must provide the number and amount of previously made payments. I’ve read and believed that myself, but MI residents need to look closely at the entire article. I believe (and I could be wrong) that this portion of the statute does not apply to all debt collectors in MI, but rather only applies to “collection agencies” which MI specifically defines at the beginning of the article.

At the start of the Michigan Fair Debt Collection Practices Act is a list of definitions for terms used in the article. Since many Michigan residents have attorneys attempting to collecting debt from them here is where I fear the additional validation requirements suddenly get a little less useful to many of us.

As used in this article:

(a) “Claim” or “debt” means an obligation or alleged obligation for the payment of money or thing of value arising out of an expressed or implied agreement or contract for a purchase made primarily for personal, family, or household purposes.

(B) “Collection agency” means a person directly or indirectly engaged in soliciting a claim for collection or collecting or attempting to collect a claim owed or due or asserted to be owed or due another, or repossessing or attempting to repossess a thing of value owed or due or asserted to be owed or due another arising out of an expressed or implied agreement. A collection agency shall include a person representing himself or herself as a collection or repossession agency, or a person performing the activities of a collection agency, on behalf of another, which are regulated by this act. A collection agency shall also include a person who furnishes or attempts to furnish a form or a written demand service represented to be a collection or repossession technique, device, or system to be used to collect or repossess claims, if the form contains the name of a person other than the creditor in a manner indicating that a request or demand for payment is being made by a person other than the creditor even though the form directs the debtor to make payment directly to the creditor rather than to the other person whose name appears on the form. Collection agency also includes a person who uses a fictitious name or the name of another in the collection or repossession of claims to convey to the debtor that a third person is collecting or repossessing or has been employed to collect or repossess the claim.

Still sounds great right? That definition certainly sounds like a generic definition that would apply to the majority of debt collectors you’d encounter? So what's the big deal? Well you need to read the next paragraph because the subsection continues . . .

Collection agency does not include a person whose collection activities are confined and are directly related to the operation of a business other than that of a collection agency such as, but not limited to, the following:

[i have omitted exceptions i-x for the sake of brevity]

(xi) An attorney handling claims and collections on behalf of clients and in the attorney's own name.

The way I interpret this, an attorney attempting to collect a debt in MI does NOT meet MI’s definition of a collection agency. In fact it’s specifically defined as NOT a collection agency. So an attorney who has been “assigned” an account from a junk debt buyer etc can attempt to collect and if you request validation of the debt they don’t need to provide you with anything beyond what you’d get with requesting validation under the federal FDCPA.

While “an attorney handling claims and collections on behalf of clients and in the attorney’s own name” is defined as a “regulated person” for other protections under the Michigan FDCPA/Occupational code, nothing in 339.918(2) says a “regulated person” has to follow the additional validation requirements. It specifically says “collection agency”.

:?::?:

Is my interpretation correct in this? Here’s what I’m having a hard time deciphering:

1. I’m not sure exactly how (xi) above applies and I wasn’t able to find any court cases dealing with it. I’m assuming when it says “An attorney handling claims and collections on behalf of clients” it means when the attorney has been assigned a debt for debt collection. Or is it possible (xi) is really referring more to a strict attorney-client relationship with regard to actual litigation: i.e. an attorney trying to collect on a judgment for a client after they helped the client win a lawsuit?

2. If (xi) above applies to an attorney collecting debt in ANY capacity why on earth would they make attorneys the exception to this rule? Is it because attorneys are supposed to be reviewing things with a much more critical eye and a higher level of sophistication than a typical debt collector? :roll: Is it the good ole’ boy system in full swing? :?:

Sorry for the long post but I’m hoping someone more knowledgeable can come along and help clarify things. I have a friend who has a MI attorney acting as a debt collector and when validation was requested they simply provided an alleged copy of the signed credit card application. They didn’t provide any of the validation info required under 339.918(2). I’m trying to figure out whether it was because they don’t have to or because they don’t know/don’t care. After all, I think the penalties awarded to the consumer for a regulated person not complying are only along the lines of $50 and 3x the damages or $150 (whichever is greater) if it’s willful violation. So it's not like there is much of a monetary deterrent to keep these guys honest. I think there are civil fines that are higher if the attorney general takes things further and petitions the court etc. but the odds that it will go that far are probably pretty slim.

I'm also curious about this because this might explain why, from what I've seen, many companies and junk debt buyers jump right to hiring an attorney to collect on alleged credit card debts in MI. I can't speak for everyone but in my own observations there is usually one demand for payment from a jdb/collector in MI and if you request validation they ignore it and go straight to having an attorney try to collect.

Edited by SingleDadJames
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SDJ I found this thread while doing my research on this very topic. Still can't decipher exactly where he was going with it though

h tt p://xxx.debt-consolidation-credit-repair-service.com/forums/showpost.php?p=546681&postcount=2

20 post limit again but you should be able to figure it out :wink:

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Thanks Widto! Unfortunately, like you've suggested, it would be nice to have a little more info on the topic in that thread. From what I can tell it's little more than an opinion. I just wish we could find some case law or court opinion to help clarify how the COURT interprets these rules.

Thanks so much for the help and post though. It gave me a little hope that maybe I'm interpreting things too rigidly or that I'm flat out wrong.

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When I spoke with the licensing department early on they only said that an Attorney collecting under their own letterhead did not have to be licensed separately as a collection agency.

My understanding at the time was that did not mean they did not have to follow State and Federal laws, hence the dunning letter with miranda and the ability to sue them for violations.

Lesher vs. Mitchell N Kay

Attorney Letterhead implies threat of Litigation and violates FDCPA

Just because a Michigan Attorney does not have to be licensed if they use their own letterhead doesn' mean that the use of their letterhead doesn't violate FDCPA as defined in Lesher v Kay since the implication from the letterhead is that your are being sued. seems like a catch 22 for them.

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When I spoke with the licensing department early on they only said that an Attorney collecting under their own letterhead did not have to be licensed separately as a collection agency.

My understanding at the time was that did not mean they did not have to follow State and Federal laws, hence the dunning letter with miranda and the ability to sue them for violations.

Lesher vs. Mitchell N Kay

Attorney Letterhead implies threat of Litigation and violates FDCPA

Just because a Michigan Attorney does not have to be licensed if they use their own letterhead doesn' mean that the use of their letterhead doesn't violate FDCPA as defined in Lesher v Kay since the implication from the letterhead is that your are being sued. seems like a catch 22 for them.

Thanks for the input antiquedave! I understand that an attorney still has to follow federal fdcpa laws and MI state laws that apply to the conduct of "regulated persons". My specific concern is whether or not they have to follow the specific requirements for debt validation pursuant to MCL 339.918(2).

I think you did help answer that because your response when you talked with the licensing department seems to verify an attorney using their own letterhead collecting for a client is NOT a collection agency.

I'm pretty sure this a loophole that allows a lot of jdbs to employ attorneys to skate around the additional validation requirements in MI. I'm still not 100% convinced until I see some court cases that spell it out in black and white.

You make a great point with the letterhead implying your being sued issue and I wasn't aware there was a case that relates to it. I'm off to review that right now because it came at the PERFECT time. I know someone who is dealing with a very similar issue right now. Thanks!

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Yet another great post SDJ!

I've got to look into this further and get these Michigan specific laws down pat. Everyone I've dealt with the last couple years is a CA except the one law firm that sued me on behalf of a JDC. Just brushing this subject it appears there is an extra standard for debt collectors that must be met regarding validation in Michigan. This is big news where I'm at right now!

You mentioned:

This sounds like great news on the surface. In fact many websites out tout this as a wonderful rule for MI consumers. These sites frequently say 339.918(2) says “debt collectors” in MI must provide the number and amount of previously made payments.

Can you provide a link or two to sites that deal with this issue?

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Yet another great post SDJ!

I've got to look into this further and get these Michigan specific laws down pat. Everyone I've dealt with the last couple years is a CA except the one law firm that sued me on behalf of a JDC. Just brushing this subject it appears there is an extra standard for debt collectors that must be met regarding validation in Michigan. This is big news where I'm at right now!

You mentioned:

Can you provide a link or two to sites that deal with this issue?

Well there IS an extra standard for validation of debt in MI under the MI FDCPA/Occupational Code. However it doesn't apply to all "debt collectors" per se. From what I can tell it only applies to those debt collectors that are officially defined as a "collection agency" under MI law. My understanding right now is this does NOT include an attorney collecting for one of their clients using the attorney's name, letterhead etc. If a true collection agency validates a debt in MI they need to provide all of the info under MCL 339.918 (2) to be in compliance. Of course if you've been sued on an alleged debt that doesn't mean if a collection agency violates MCL 339.918(2) that a case will go away. It just means if you get sued and they violate this statute you may have a small counterclaim, and leverage, to assert with the plaintiff.

You can read the entire rule here. You can also read a little more HERE, but be careful because this site is a little misleading in that it refers to the validation requirements applying to "debt collectors" rather than "collection agency" as the statute actually states. This site SEEMS to imply that the validation requirements would apply to an attorney collecting debt but that's not what the statute really says if you read it closely. I'm still trying to figure out who is right and,most importantly, how MI courts view the matter.

Edited by SingleDadJames
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Thank you for the excellent information SingleDadJames. Since prevailing in the lawsuit against me, everyone who I deal with at this point is a collection agency. I'm getting some validation requests out ASAP!

No problem...those lil gems aren't helping me out right now so they might as well benefit SOMEONE!

Good luck!

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I think you did help answer that because your response when you talked with the licensing department seems to verify an attorney using their own letterhead collecting for a client is NOT a collection agency.

No the impression I got was that they are a collection agency they just get to skip on getting a license because they are being retained by clients and not pursuing debt collection on accounts they own.

This is where I question the accounting and assignment and wonder if there is something in the Master Agreement that gives them more control or interest in the acount than a simple assignment.

Seems to me if you can prove they have ownership over a single account that they are suing on then they are circumventing the licensing laws in Michigan.

Thats another reason why I think its important to have more specific state information and case information from each county in a state. I think they are getting away with a lot because we can't access and organize the information better then we do now.

can you imagine if there were volunteers in every county watching the dockets and reporting on cases?

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SingleDadJames, I am researching this topic. Are you around? I would like to fire up the discussion on this again....

So, the way Kay v Lesher reads is IF the attorney puts a dunning letter on their letterhead, and after the 30 day validation is up, does not sue (in what time frame???), that is the violation.

If they do sue, there is no violation?

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This is a common topic. Attorneys who pursue collections as a regular part of their practice are not subject to licensing in most states, but they are subject to the FDCPA. Also, if the JDB lawyer has an IQ above plant life, they will argue that state banking law and consumer protection law does not apply, as national banks are regulated ONLY by the Comptroller of the Currency. (Fed) They may also argue that the choice of law provision in the cardholder agreement precludes your state statutes. Complicated? Yeah, but it opens up good arguments on both sides.

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Because the FDCPA only applies to third party debt collectors, not the OC. When the OC sends you statements, calls you because you are late, that is billing, not collection. Collection starts when they hire some outside firm to do the dirty work for them.

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BUMP >

If the Comptroller refers me to the FDCPA for relief, why doesn't that mean an OC is liable for violations under the FDCPA?

Because federal law says OC does not fall under the FDCPA. The OC will do some forms of collection, but the real "collections" takes place after the OC farms out the account to a debt collector (collection agency).

However, regardless what you call it, the FDCPA does not apply to the OC.

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