FDCPA and catch-22 for collectors

[Guest usctrojanalum]

This may not be the most appropriate forum to post this, but figured this forum gets the most views so I would post it here.

 

A colleague of mine is an upstate NY FDCPA attorney.  He does both prosecution of violations and defense of law firms accused of violations. 

 

He came across an interesting set of facts recently where he was not able to find any cases in the 2nd circuit that dealt with this issue.

 

Law Firm sends out a first demand letter, defendant responds by disputing the validity of the debt saying that the balance is not owed. he concludes the same letter with a cease and desist not to contact him again.

 

My colleague has this law firm on a retainer who sends him all disputes and he advises the law firm how to proceed.  Law firm wants to file lawsuit to collect balance owed.

 

Now, we all know that any dispute within the 30 day window requires that the debt collector obtain validation pursuant 1692(g)(  b )and send same to the debtor. However there is the issue of the cease and desist at the end of the letter which would be violated if the law firm sends the verification.

 

Now I have not done any research, but he says he has not found any cases which have dealt with this issue at all in the 2nd circuit.

 

The debtor kind of has the law firm in a tough spot here, because if the law firm files a lawsuit he can allege a violation of proceeding with collection activity after receiving a timely dispute.  If the law firm sends the verification, he is at risk because debtor can allege he violated a cease and desist.

 

What are your guys thoughts?  I would think that because the statute specifically requires that debt collectors respond with verification to timely disputes that would over ride the cease and desist but who really knows.

 

I don't want to advocate trying to trick debt collectors, but I think it is fair game to use the laws as they are written to gain an advantage or leverage until there is case law or a statutory amendment to correct the issue.

[CommoSGT]

@usctrojanalum - Sounds like it could cause a bit of frustration for them....  Your cease and desist doesn't carry any weight if they sue you though.  Court cases are adversarial anyway....you file the DV, they respond.  They sue....you have to fight the suit.

 

That being said, if you argue your case well enough in the right venue.... who knows.  A jury might be convinced...a single judge too, but it might not work more than once or twice. 

[Clydesmom]

What are your guys thoughts?  I would think that because the statute specifically requires that debt collectors respond with verification to timely disputes that would over ride the cease and desist but who really knows.

 

The FDCPA allows a creditor to contact the consumer one more time to tell them what action they intend to take if any, in response to a cease and desist and it isn't a violation.

 

If it were me I would send a version of the following letter:

 

Dear Consumer:

 

This is our communication to your letter in which you requested validation of the debt that you sent on [date] in response to our collection letter to you dated [date].  Per the FDCPA in response to your request that we cease and desist contact in the DV letter, we are allowed to contact you this one time to inform you of any action we intend to take in response.  

 

Our client [name] has advised us that they wish to proceed with litigation in regards to the account #, [original creditor] in the amount of $xxxx.xx after verifying the OC (if different than client) and amount owed on the account #123456789.

 

Sincerely,

 

Bud Howe

Senior Legal Counsel

Dewey, Cheatham, and Howe

 

This not only complies with DV but clearly states it is the last communication informing the consumer they are going to exercise their right to litigate.  I would send it with delivery confirmation and the day I verified it was received the court papers would be stamped by the clerk.  PERIOD.  

 

I don't want to advocate trying to trick debt collectors, but I think it is fair game to use the laws as they are written to gain an advantage or leverage until there is case law or a statutory amendment to correct the issue.

 

Using the laws appropriately for leverage is one thing.  Sending a DV and cease and desist (and we all know which site advocates baiting debt collectors this way) is an entirely different story.  While I don't support the collection tactics much of this industry uses, I don't advocate for consumers to bait debt collectors this way in an attempt to mitigate their damages from bad debts they have by creating violations for a counter claim against a potential suit.  It is as dishonest as the debt collector tactics.

 

Due to sites like DB that continuously push this idea out there eventually a debt collector IS going to fight this through the appellate system to get a definitive ruling that letters like that are NOT a free pass to eliminate your debts when the intent is clearly to bait a violation.

[BV80]

@usctrojanalum

 

Marino v. HOGANWILLIG, PLLC, 910 F. Supp. 2d 492 - Dist. Court, WD New York 2012

Section 1692g(b) of the United States Code provides that if a consumer disputes a debt in writing, the debt collector must cease collection of the debt until it has verified the debt with the creditor and forwarded that verification to the alleged debtor. 15 U.S.C. § 1692g(b). HoganWillig argues that this section "required" it to send the validation letter. Although this is not technically accurate — the statute only prohibits further action on the debt without validation, it does not require validation — this Court agrees with the principle behind HoganWillig's argument. To hold otherwise would force HoganWillig into a frozen state where it could not seek to collect the debt because compliance with Section 1692g(b) would violate Section 1692c©. See Heintz v. Jenkins, 514 U.S. 291, 296, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995) (suggesting that courts interpret Section 1692c© to avoid "anomalies" within the FDCPA); Recker v. Cent. Collection Bureau, Inc., No. 1:04-CV-2037-WTL-DFH, 2005 WL 2654222, at *4 (S.D.Ind. Oct. 17, 2005) ("Because verification is a statutorily required activity in order to resume collection activities, verification activities could be communications allowed implicitly under exception 1692c©(3)."). Thus, this Court finds that HoganWillig's September 15, 2010 letter did not violate the FDCPA.

 

 

Heintz v. Jenkins, 514 US 291 - Supreme Court 1995

We agree with Heintz that it would be odd if the Act empowered a debt-owing consumer to stop the "communications" inherent in an ordinary lawsuit and thereby cause an ordinary debt-collecting lawsuit to grind to a halt. But, it is not necessary to read § 1692c© in that way—if only because that provision has exceptions that permit communications "to notify the consumer that the debt collector or creditor may invoke" or "intends to invoke" a "specified remedy" (of a kind "ordinarily invoked by [the] debt collector or creditor"). §§ 1692c©(2), (3).

[WhoCares1000]

I have to agree with Clydesmom here. The law does say that you are allowed one communication after a cease and desist to inform the debtor of your intentions and you can use that letter to perform the DV too. This will allow your client to abide by the intent of the law and at the same time, be able to sue the debtor. The debtor certainly can (and probably will) file a counterclaim for FDCPA so make sure you understand the law and cases mentioned above so that you can defend against the counter claim.

[Coffee_before_tea]

If the statute allows for verification, and one more contact with the debtor, then the attorney can validate regardless of the C&D.  BV has mentioned some good cases.

 

I'll have to disagree to a certain extent of what Clydesmom said, however.  First, there is no "high road" when being sued by a JDB or DC.  They will use every tactic and form of trickery they can get away with.  They prey upon the fact, that 99% of consumers don't have knowledge of the law.

 

Second, we all know that violations of the FDCPA by a JDB or DC is a matter of when, not if.  

 

Third, a debtor that knows and understands the law, and decides to participate in the JDB/DC collection efforts against him (i.e. answering the phone, sending DV's etc...) cannot be considered tricking the JDB into violating consumer statutes. It is perfectly legal and acceptable to aggregate consumer law violations in gaining leverage against any action a JDB or DC takes against you.  In fact, I only wish more consumers understood this, and took this action

 

I suppose this comes down to what your definition of "bait" is.  If a debtor simply asks questions regarding the debt, their rights, their options, the penalties etc...it's a VERY strong possibility that the phone jockey will start racking up violations.  That's not baiting, that's participating in collection efforts.  The JDB has every option not to do collection calls, or dun debtors.  They know they run the risk if they do.

[BV80]

@Coffee_before_tea

 

Third, a debtor that knows and understands the law, and decides to participate in the JDB/DC collection efforts against him (i.e. answering the phone, sending DV's etc...) cannot be considered tricking the JDB into violating consumer statutes.

 

 

That depends upon the circumstances.  A NY federal court judge disagrees with you.

 

Huebner v. Midland Credit Management, Inc., Dist. Court, ED New York 2015

 

"This case has all the earmarks of a setup. Plaintiff and his lawyer decided they were going to outsmart the collection company and make a little money while at it. But this statute is not a game, and its purpose is not to provide a business opportunity. There are still consumers who are in fact harassed by debt collectors, albeit less often than prior to the statute's enactment. Those genuinely aggrieved parties are entitled to the protection of the statute. It should not be diluted to become a plaything for fast talking plaintiffs and their lawyers."

[Coffee_before_tea]

@BV80

 

It certainly does depend on the circumstances.  The case you cited, there wasn't a violation, and it was clear the intent was to bait them.  This is one instance, and unfortunately it doesn't represent the Debt Collection Industry as a whole.

 

I have multiple recorded (inbound) calls, where the collection representative violated the FDCPA multiple times within the call.  There was no baiting involved, in fact, I refused to answer most of their personal questions, to which many responded in anger, and then the violations started accruing...

[BV80]

@Coffee_before_tea

 

 

 

I have multiple recorded (inbound) calls, where the collection representative violated the FDCPA multiple times within the call.  There was no baiting involved, in fact, I refused to answer most of their personal questions, to which many responded in anger, and then the violations started accruing...

 

 

In the above circumstances, you definitely didn't do any "baiting". 

 

I guess my point is that we have to be careful how suggest posters handle debt collectors.  In the past, we've definitely had posters who suggested baiting.

 

I do take issue with this statement:

 

we all know that violations of the FDCPA by a JDB or DC is a matter of when, not if.

 

 

While many debt collectors will violate, it's not a matter of when.  I've dealt with some debt collectors who sent numerous letters and made numerous phone calls but never once violated even in conversations (and believe me, I was looking and listening for violations).   I was disappointed when they were nice and didn't push or become testy.

 

I think to imply that they will definitely violate at some point can cause some consumers to believe they have violations when, in fact, they do not.

[WhoCares1000]

I agree that there are bad debt collectors/CAs/JDBs but I bet this board gets quite a few people who can pay their debts but do not want to and are looking for a way to make it impossible for the creditor to collect on the debt without violating law. That is what I think is happening here.

The problem I have with the FDCPA is its enforcement mechanism. The main mechanism is enforcement in the courts by those who have been violated rather than by the government. What happens though is that usually, it is not the single mother of 2 who is called 100 times in 1 hour and when she answers, is cussed at so much that a sailor would blush with shame. They usually do not know the laws and how to enforce their rights. The usual enforcement is by someone who is trying to cheat the system and use the law as a club rather than a shield.

I do not know where this guy stands but I think he is about to get a lesson on believing and using everything you find on the internet. I do not believe (like many courts as BV80 has noted), that any debtor should be able to bring the process to a halt using the law. Apparently Congress did not either because the FDCPA gives an explicit way to keep things moving and as long as the OP follows the process to the letter, this person will find out that the law is really a shield and not a club.

[Guest usctrojanalum]

Holy smokes, I never read the Huebner vs. Midland case before - and in the next order after that one, that judge sanctioned the plaintiff's attorney $500.00

 

It almost seems that some plaintiff's attorneys and debtors are getting a little too greedy like the JDB's which can lead to an entire revision of the FDCPA if plaintiff's attorneys do not start being more careful. 

[Coffee_before_tea]

@WhoCares1000

 

I wholeheartedly disagree with that assessment.  I bet the vast majority of people coming here seeking information cannot pay their debts.  If they could, then they would have paid them before they went into collection.  Moreover, most people coming here for information have zero clue about the law, and their rights afforded to them via State & Federal Consumer Laws.  A quick glance at the first & second post by a new user will prove this.

 

The everyday, average debtor, has very little in the way of options.  The law doesn't shield them, unless they know the law, and exercise their rights.  They then become part of the 95% default judgment club.

[RyanEX]

First, there is no "high road" when being sued by a JDB or DC.  They will use every tactic and form of trickery they can get away with.  They prey upon the fact, that 99% of consumers don't have knowledge of the law.

 

Totally agree. The whole basis of their lawsuit industry are things like false affidavits & passing off employees as "qualified witnesses" to the debts. They fight dirty and there is no high-road as far as they are concerned. Furthermore JDBs are nothing but profiteers. The debtors are, by nature, typically vulnerable economically & lawsuits and judgments only put them further in a hole, otherwise they'd never have gotten into trouble with their debts - the industry has the perfect victims to attack: little money, bleak financial outlook and the likelihood of being unsophisticated when it comes to legal matters. Fight fire with fire.

[Anon Amos]

I think most people are here today as a result of the latest recession, and most came from previous good credit. The JDB's deserve whatever the debtors find to use against them.

People that just blow off their debt don't invest the time learning and fighting in courts, they become the 95% default rulings.

[WhoCares1000]

I am sorry, I have seen enough on these boards to figure out that there a few here whom I would not want to have financial dealings with, regardless of their ability to pay. I will not name them by name but I am sure other members could figure out who they are. I do believe that most people coming here are nice folks who need a shield and other nice folks who do not know the shield exists, but again, most of the enforcement is done by people using the law, not as a shield, but as a club.

Now, I cannot say whether the creditor of the OP is one of those nice people thinking they are using the law as a shield or one of those people who are using is as a club. The law however was never intended to be used as a way to stop the legal process. That is why there is the relief valve for CAs/JDBs to be able to go to court should a C&D letter be sent and why, if the debt is within SOL, I would be careful about sending a C&D with or as the first line of defense.

You are also correct that the CAs/JDBs and ultimately OCs have created this situation too. They are using the courts as a collection arm where winning is everything and justice is nothing. They go to any means, some illegal, to get a judgement. The OCs stopped keeping records when it became too expensive and the courts simply glossed over the documents or did not even look at them in cases where the judgement would be a default. However, regardless of that, the creditors do not, nor should they, have the right to stoop down to the level of the CAs/JDBs.

[fisthardcheese]

@WhoCares1000 I disagree with your over all assumption that it is wrong to use consumer laws as "a club".

 

First, I would say that more agressive consumers using a club helps less informed consumers by causing those OC, JDB and CAs to perhaps think twice before going after consumers in an agressive way.  It may cause them to change their practices to the benifit of all consumers.

 

Second, I would say that the banks and JDBs most certianly use the laws as a club on consumers as a regular practice.  In fact, they MAKE the laws that allow them to have bigger clubs and multiple clubs to use on consumers.

 

When a company "restructures", people lose their jobs and the company's debts are wiped out, but if an individual does the same thing with their personal finances, they are labled negatively as using the system or using a "club" against creditors.  The banks get free money from the Fed or the Government, then lend that money at a 4% - 30% interest rate to consumers on top of other fees in addition to nickle and diming a consumer for storing their own money with the bank.  After decades of being used by this kind of system, a handful of consumers use the laws "as a club" against the banks to get a tiny fraction back and attempt to make some little change to the system and THAT is the problem?