Source: http://www.lenghea.com/index.php/debt-collection/
Timestamp: 2019-04-26 09:52:16+00:00

Document:
Until recently, most lawyers had never heard of the Federal Fair Debt Collection Practices Act and had certainly never had occasion to review the Florida Consumer Protection Practices Act. Then in April of 1995, the U.S. Supreme Court handed down an eye-opening decision in Heintz v. Jenkins, 115 S.Ct. 1489 (1995), and lawyers around the country began to contact their malpractice carriers and review their United States Code Annotated. There remain, however, those attorneys, either oblivious to the federal and state “Debt Collection Acts,” or who simply surmise the acts do not apply to them. This article is intended not only for those who assume they are in an elite class to whom the acts do not apply, but also for those who are familiar with the acts. This article focuses on the federal act as the state act essentially mirrors the federal act.
The Federal Fair Debt Collection Practices Act, 15 U.S.C. §§1692 et seq. (FDCPA), was enacted in 1977 in an effort to curb the abusive practices by third party debt collectors.
In 1986, the FDCPA was amended to include attorneys under the definition of “debt collectors” covered by the Act. Before this amendment, the FDCPA contained an express exemption for lawyers that indicated that the term “debt collector” did not include “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.” In 1995, the Supreme Court in Heintz v. Jenkins held that the FDCPA applied to attorneys who “regularly” engaged in consumer-debt-collection activities, even when that activity consists of litigation.
The problem with Heintz is that it never explains how the FDCPA applies to litigation. For instance: Why would you have to attach the FDCPA notification required by 15 U.S.C. §1692g to a lawsuit giving the debtor 30 days to verify the debt when the rules of civil procedure require a response within 20 days? Do you have to repeat the “mini-Miranda” notice required by 15 U.S.C. §1692e(11) on all succeeding documents sent to the debtor, including court-issued documents? Do you have to give the debtor the “mini-miranda” at hearings? What about statutory notice letters such as the 3-day eviction letter, is the state statute pre-empted? You get the idea.
Clearly, the Supreme Court was not aware of the confusion that would be caused by the brevity of its decision. Fortunately, prior to and after the Heintz ruling, the circuit courts, as well as the Federal Trade Commission (FTC), have attempted to give guidelines to attorneys involved in debt collection.
Under the definition of “debt,” this author believes that included as “consumer” debt collection activities are evictions on residential properties and the replevin of a personal automobile or household items as both involve “personal, family or household” interests. The collection of child support, however, has been specifically exempted from the FDCPA as a “debt.” The FDCPA has also been interpreted as not covering the collection of taxes, student loans, and obligations for a civil liability.
This author is not convinced that the “least sophisticated consumer” gives a fair interpretation of the actions of the debt collector. The Seventh Circuit has adopted an “unsophisticated consumer” test, which strikes this author as a more reasonable test. Currently, however, the 11th Circuit follows the “least sophisticated consumer” test.
The FDCPA also outlines the general requirements for communications with the consumer, which include no communications with a third party unless you have the consent of the debtor and no calls before 8 a.m. or after 9 p.m.18 Further, the FDCPA requires the debt collector to include the “mini-miranda” in all communications to collect a debt or to obtain information about a consumer, that the “debt collector is attempting to collect a debt and any information obtained will be used for that purpose.” Moreover, specific language giving the consumer information regarding his or her rights under the FDCPA, including the right to request a verification of the debt, must be sent to the consumer within five days after the initial communication with the consumer, unless the debt is paid in full. However, since the initial communication with the consumer is oftentimes a telephone call, it is important to immediately send out the notification after speaking with the consumer to comply with the FDCPA. The notice should be clearly visible and in a type size that is clearly clear and conspicuous to the consumer.
The question has arisen as to whether an attorney can file suit within the 30-day notice period required by the FDCPA. According to the FTC, a lawsuit may be instituted within the 30-day time period. However, if a lawsuit is the first communication by a debt collector (attorney) with the debtor, the attorney must give the notification information required by 15 U.S.C. §1692g within the lawsuit itself.
Once a “debt collector” attorney has established contact with the debtor, it is very important that no wording or language within the attorney’s communications “overshadow” the initial notification information so that the least sophisticated consumer might be confused. A debt collector’s letter should not lead a consumer to ignore the right to take 30 days for the verification of the debt by putting conflicting language within the letter that would lead the consumer to believe that he or she must act within a different time period. In 1988, the Ninth Circuit held that where a collection letter stated “if the debt was paid within 10 days, it would not be reported in the master files as an unpaid collection item” that a reasonable consumer would believe that he or she would have less than 30 days to verify the debt. However, the use of the words “IMMEDIATE SETTLEMENT NOTICE” and “your account must be settled now” has been held not to violate the Act.
What Constitutes Harassment or Abuse?
The damage provision for violations of the FDCPA is of special concern to most practitioners. The FDCPA provides that a debt collector may be liable for damages for violation of the FDCPA for actual damages; additional damages for each violation not exceeding $1,000; or in the of case of a class action, for an amount not to exceed the lesser of $500,000 or one percent of the net worth of the debt collector; and attorneys’ fees. On March 8, 1995, Payco American Corporation, one of the nation’s largest debt collection firms, agreed to pay a civil penalty of $500,000 to resolve federal charges that it violated the FDCPA.27 The FDCPA is a strict liability statute and only a few defenses are applicable.
However, a debt collector may, in certain situations, minimize or completely eradicate liability under the FDCPA for violations that were not intentional and resulted from a “bona fide” error notwithstanding the maintenance of procedures recently adapted to avoid such error. The burden of proving evidence of procedures reasonably adapted to avoid an error is on the debt collector.
Another avenue for defense is the statute of limitations, as suits brought for a violation of the FDCPA must be brought within one year of the date on which the violation occurs. In Maloy v. Phillips, 197 B.R. 721 (M.D. Ga. 1996), the court held that in computing the limitations period, the date of mailing is excluded as the triggering date in accordance with the Federal Rule of Civil Procedure 6(a). Maloy followed Mattson v. U.S. West Communication, 967 F.2d 259, 261 (8th Cir. 1992), reasoning that the statute of limitations begins to run on the date the letter was mailed because it is the debt collector’s last “opportunity” to comply with the FDCPA.
Of critical concern to an attorney debt collector faced with a FDCPA suit is the statutory provision for attorneys’ fees. Attorneys’ fees in a federal case can often surpass any actual damages or fine assessed by the court. This has lead attorneys to settle FDCPA cases quickly or, if prosecuting the case, overwork the case in the quest for a larger fee award. Recently, however, the Fifth Circuit, in an attempt to curb escalating fee awards, held that plaintiffs are not entitled to a large attorneys’ fee award when a mere technical violation of the FDCPA has occurred.
Of possibly greater concern to Florida attorneys should be a threat of a class action lawsuit under the Florida Consumer Collection Practices Act. The Florida Consumer Collection Practices Act indicates that liability for its violation may be actual damages or $500 whichever is greater, together with reasonable attorneys’ fees. The problem that exists is that there is no state “cap” on class actions as with the FDCPA, which limits the fine in class actions to $500,000 or one percent of the net worth of the collector. Potentially, in a class action brought under the Florida Consumer Protection Practices Act, the debt collector could have unlimited liability and, depending on the size of the class, could be subject to significant exposure.
Attorneys should actually act like attorneys. In this automated time, it is common for the practitioner to delegate responsibilities to a paralegal or a collector without any oversight by the attorney. Attorneys with this type of practice should be aware of the recent ruling in the Seventh Circuit in Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996), wherein the court held that where an attorney authorized sending mass-produced debt collection letters bearing a mechanically reproduced signature that he “never considered the particular circumstances of (the debtor’s) case prior to the mailing of the letters and never participated personally in the mailing” and, therefore, had violated the FDCPA by giving the false impression that the communication was from the attorney.
Is a Bad Check a Debt?
One of the more recent hot beds for dispute between consumer counsel and debt collector defense counsel is whether a worthless check is considered a “debt” covered by the FDCPA. Currently, this issue is pending before the Seventh and the Ninth circuits. The argument propounded by defense counsel is that a worthless check is not “an offer or extension of credit” and is, therefore, not a debt covered by the FDCPA.
Where does this all leave the ordinary practitioner who only sends an occasional demand letter? Quite simply, the Federal Fair Debt Collection Practices Act and the Florida Consumer Collection Practices Act are laws that should be understood by all attorneys regardless of the volume of consumer collection.

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