In passing the FDCPA 40 years ago, Congress found that there was “abundant evidence” of the use of abusive, deceptive and unfair debt collection practices. Later case law clarified that the purpose was to protect consumers victimized by unscrupulous debt collectors while allowing collectors efficient, reasonable and ethical practices in pursuit of their profession.
Fast forward to today, and while so many things in our lives have changed like cell phones, email and electric cars, the FDCPA remains mired in a collection reality that no longer exists. Moreover, consumer advocates (and I use that phrase guardedly) now seek to use the FDCPA shield as a sword for their financial benefit; to manipulate protective language into profits.
Nowhere is this more prevalent than in the required lettering under the FDCPA. Most of us will recall when our clients required we provide notice of the tax consequences of settlements. I can tell you that not a single one of these clients added this language to trick the consumer into thinking the IRS was involved in their case. The client thought they were allowing the consumer to make an informed decision at settlement. Yet, soon thereafter, an act of consumer empowerment was the subject of lawsuits that transformed into an abusive practice. Oscar Wilde’s adage that “no good deed goes unpunished” was particularly resonant here.
With the passage of four decades, FDCPA case law no longer defines what is or is not a violation: Consent Decrees play that role. While I believe the regulators tread too heavily, they set bright line rules for everyone to follow. This, I believe did not please the consumers bar who prefer to deal in the gray areas of the law. As a result of these clear guidelines, consumer lawyers are now pursuing theories that contort the intended purpose of the FDCPA.
Recent FDCPA filings bear this out. More and more, consumer lawyers are not having clients come to them with collection abuses. Rather, they are intentionally taking actions to generate violations. Let me give a couple examples. In one recent lawsuit, a consumer firm changed names but the attorneys remained the same. The court ordered the “new” consumer firm to file an appearance. They never did and never came back to court. After the case languished for months, a notice letter as to the next court date was sent to the attorney and his client to ensure someone appeared at the next court date. Lo and behold, an FDCPA lawsuit was filed for improper notice to the consumer. The FDCPA case was dismissed because the state’s rules required an attorney to appear to receive notice. However, the case became more interesting when the decision was circulated to our state creditors bar. It was discovered that several practitioners had been hit with the same set of facts, by the same law firm, and they had paid out settlement monies. This switching names was a pattern and practice of this firm.
More recently, clients have been sued for untimely updates of disputes on credit reports. Here, a consumer firm utilizes a form letter that announces their representation but, buried in the letter was the word “dispute.” If the dispute was not recorded by the 14th day, they were suing debt collectors. Then, as clients began training employees to look for the keyword “dispute” the form letter miraculously changed its language to eliminate the word “dispute” and replace it with “balance not accurate.” To date, tens of cases have been filed on that theory. Hence, a purposefully generated violation not consumer victimization.
The same is happening with demand letters. With many clients no longer charging interest, the consumer bar suddenly could not sue for so-called balance inaccuracies or that the interest disclosures were improper. With that avenue foreclosed, their recent tactic is a claim an FDCPA violation because a pre-suit demand letter did not disclose we might incur costs, if we file suit and if we win. Why? Because we are misrepresenting the potential exposure to the consumer. Sound vaguely familiar to the 1099 language issue? There we warned about potential exposure and still were sued. Here, if we were to take them up on their suggestion, the same firm would claim we were misrepresenting that costs were already awarded.
Candidly, these actions by the consumer bar are troublesome to say the least. If you do the research, you will see that in many jurisdictions, there are many of these type letter disputes being filed in quantity. Some are settled, some are being fought and some are being taken to a higher court. As always, you need to determine your pain threshold for the cost of fighting these claims.
Internally, training is the best approach. Make sure your staff knows the players, what to look for and how to handle these common tactics. Further, your compliance staff should be looking at recent case law to determine the trends in your location.
Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA.