Collection Attorneys Beware of New FDCPA Rulings
The Fair Debt Collection Practices Act (FDCPA) is a federal law that governs
what actions a debt collector can take while trying to collect a debt. Collection
attorneys are also governed by the FDCPA. As such, collection attorneys should
take note of several recent rulings in 2005 from federal courts around the
country regarding the FDCPA.
Oral Disputes of Debts Count, Too
The Ninth Circuit has held that debt collectors cannot tell consumers that
they will assume a debt is valid unless they receive written notification of
a dispute. A consumer can dispute the validity of a debt in writing or orally.
Although there are some sections of the FDCPA that require written notice,
the Court declined to impose the written notice provision on other sections.
The Court reasoned that it would not make sense to read a written notice requirement
into §1692g(a)(3) because other sections of the FDCPA require debt collectors
to take note of consumers' oral disputes.
The Ninth Circuit followed Supreme Court rulings that have held that courts
should not insert language into a statute unless the failure to do so would
result in absurd or unreasonable results.
Collectors Must Notify Credit Bureaus of Orally-Disputed Debts
The FDCPA requires a collector to notify the credit bureaus that a debt
is disputed if the collector has reason to know the debt is disputed and reports
about the debt on a consumer's credit report. This requirement applies even
if the consumer disputes the debt orally.
This requirement has been extended by recent court rulings. First, the debt
collector does not have the authority to decide unilaterally if a consumer's
dispute has any merit. As long as a consumer has disputed the debt, the collector
is required to inform the credit bureaus of the dispute.
Second, a simple inquiry by a consumer about the validity of additional charges
is an oral dispute of the debt and requires reporting to the credit bureaus
that the debt is disputed.
Lastly, a collector has to report that the debt is disputed in a timely manner.
Summary judgment was denied for a collector in a recent case in Pennsylvania
where the collector took seven months to report that the debt was disputed.
The court believed that a jury could find that seven months was an unreasonable
delay and a violation of the FDCPA.
Affidavits for Garnishments are Covered by the FDCPA
In an important ruling, the Sixth Circuit has recently held that debt collectors
and collection attorneys who sign and file affidavits to obtain garnishments
in state courts are fair game for FDCPA lawsuits. Collection lawyers will now
have to be more careful about what they and their clients say in these affidavits.
In the Sixth Circuit case, the collector's attorney filed an affidavit stating
that he had a reasonable basis to believe that the debtor's property was nonexempt
and garnishable. The debtor's property, however, was Social Security benefits,
which are exempt.
The court also stated that the FDCPA violation was an independent federal
claim from the state court action and therefore the Supreme Court's Rooker-Feldman
doctrine, which bars federal courts from reviewing state court decisions, did
Repeated or Continuous Telephone Calls Can Mean Trouble
Recent court decisions reaffirm that repeated or continuous calls to a
consumer by a debt collector can bring about FDCPA violations.
In one case, six voice-mail messages left on a consumer's home answering
machine over a 10-day period was sufficient to defeat summary judgment and
could be viewed as harassment, false threats or unfair practices.
In another case, the debt collector was denied summary judgment where it
called a consumer multiple times without leaving any messages. The court determined
that the possible FDCPA violation turned on the volume of calls made and on
the pattern of the calls.
In yet another case, a debt collector was found to have violated the FDCPA
by repeatedly calling a consumer after the consumer had hung up the telephone.
The Financial Pain of FDCPA Violations
Consumers have the right to file a lawsuit against any debt collector or
collection attorney who violates the FDCPA. The consumer can recover actual
damages, statutory damages of up to $1,000 and attorney's fees and costs.
Some of the secondary costs to debt collectors and collection attorneys include
decreased collection rates, increased insurance rates and the costs of defending
a lawsuit, just to name a few. As the recent rulings point out, avoiding FDCPA
violations is the best road to travel.
Sonya A. Smith-Valentine is a member of the Valentine
Legal Group, LLC, in Greenbelt, Maryland. She concentrates her practice on
violations of the Fair Debt Collections Practices Act (debt collection harassment)
and the Fair Credit Reporting Act (credit report disputes).