What is a "false, misleading and deceptive" communication under the Fair Debt Collection Practices Act

The Fair Debt Collection Practice Act (FDCPA) was enacted to “eliminate abusive debt collection practices.”   Among the abusive tactics that the FDCPA sought to eliminate was the proscription of “false, misleading and deceptive” communications from debt collectors to consumers.

Consumer, Paula Maple, took out a loan from Midland Funding, LLC successor in interest to Bank of America, N.A., for personal, family, or household services.  Sometime thereafter the debt was transferred to the law firm of Sprechman & Associates, P.A. for collection.

On March 6, 2012, Sprechman & Associates, P.A. sent a letter to Paula Maple which stated in part:

“If your client fails to make payment or fails to make appropriate arrangements they will leave us with no choice but to subject all of their assets to actions to collect this Judgment.”

Paula Maple filed a lawsuit in United States District Court, Middle District of Florida, against Sprechman & Associates, P.A. alleging, among other things, that the statement in the letter were false given the numerous exemptions to executions on judgments.

Paula Maple also alleged in her lawsuit that the letter sent to her by Sprechman & Associates, P.A. violated the Fair Debt Collections Practices Act and the Florida Unfair and Deceptive Practices Act.

Whether a collection letter or other communication is false, deceptive, or misleading under the FDCPA is determined from the perspective of the objective least sophisticated consumer.  Under this standard, collection notices can be deceptive if they are open to more than one reasonable interpretation, at least one of which is inaccurate.   Debt collectors that violate the FDCPA are strictly liable, meaning that a consumer need not show intentional conduct by the debt collector to be entitled to damages.

For more information about debt collection harassment, or Sprechman & Associates, P.A., visit us at http://www.ConsumerRightsOrlando.com.

Plaintiff accused by Court of intentionally defaulting on debts in order to create FDCPA claims

The Fair Debt Collection Practice Act (FDCPA), enacted in 1977, aimed to "eliminate abusive debt collection practices.” Among many other reforms, the FDCPA prohibits harassing or oppressive conduct on the part of debt collectors, and it requires debt collectors to provide notice to debtors of their right to require verification of a debt. Both the text of the FDCPA and its legislative history emphasize the intent of Congress to address the previously common and severe problem of abusive debt collection practices and to protect unsophisticated consumers from unscrupulous debt collection tactics. The Act, as a U.S. District court recently stated, was not intended to enable plaintiffs to bring serial lawsuits against different debt collector defendants alleging various and often insignificant deviations from the Act’s provisions.

In Ehrich v. Credit Prot. Ass’n, 2012 U.S. Dist. LEXIS 134142 (E.D.N.Y. Sept. 19, 2012), accused the plaintiff in that case of abusing the FDCPA by, among other things, filing a total of nine complaints, including the present case, over the past seven years. The court stated that the record suggests that the plaintiff may be deliberately defaulting on his debts in order to provoke collection letters which are then combed by his lawyer for technical violations of the FDCPA.
The facts of this unique case are that Ehrich filed a complaint against Credit Protection Association, L.P., alleging violations of the FDCPA. Ehrich alleged that CPA sent him a collection note seeking to recover a debt owed to Time Warner Cable Company. Ehrich did not dispute the validity of the debt CPA sought to collect, nor did he claim that the primary text of the letter violates the FDCPA. Rather, Ehrich based his claim on two Spanish sentences at the top and bottom of the letter.
Printed at the top of the letter is the phrase “aviso importante de cobro,” which Ehrich, relying on a Google translation, translated as “important collection notice.” At the bottom of the collection notice were three Spanish phrases: “Opciones de pago,” “Llame” followed by a phone number, and “Envíe MoneyGram,” which Ehrich translated as “Payment options,” “Call" and “Send MoneyGram.” Ehrich, who does not speak Spanish, claimed that the notice’s inclusion of these Spanish phrases without a Spanish translation of the FDCPA-mandated disclosures and notices provided in English could mislead Spanish-speaking consumers and cause them to inadvertently waive their rights under the FDCPA.

CPA moved for summary judgment which was granted by the court based on lack of standing. The basis for the Court’s ruling was that the collection notice contained all disclosures required by the FDCPA and that Ehrich fully understood it. Therefore, he suffered no injury sufficient to support standing.

For more information about the Fair Debt Collection Practices Act, or, its state law counterpart, the Florida Consumer Collection Practices Act, visit us at:

• Stop Collection Harassment;

or
• Consumer Rights Orlando

Letter Stating that Student Loan is “Ineligible for Bankruptcy Discharge” is False, Deceptive and Misleading Statement under FDCPA

Student loans are presumptively nondischargeable in bankruptcy.  However, student loans can be discharged in bankruptcy if a debtor demonstrates, by a preponderance of the evidence, that requiring their repayment would impose an undue hardship on the debtor.   To seek an undue hardship discharge of student loans, a debtor must commence an adversary proceeding by serving a summons and complaint on affected creditors. To succeed in such a proceeding, the debtor must show: (1) that the debtor cannot maintain, based on current income and expenses, a ”minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.

 

With this state of the law as a background, would a statement to a consumer that her/his student loan was “ineligible for discharge in bankruptcy” be deemed a false statement under the FDCPA? The Second Circuit recently responded to this question in the affirmative.

 

In  Easterling v. Collecto, Inc., 2012 U.S. App. LEXIS 18444 (2d Cir. N.Y. Aug. 30, 2012), Berlincia Easterling obtained a student loan. Approximately 4 years later she filed for bankruptcy, however, in her petition, she classified the student loan as non-dischargeable. Accordingly, her student loan was not discharged. When the debt collector for the Department of Education learned about the bankruptcy, it sent Easterling a letter advising her that her account was “NOT eligible for bankruptcy discharge. After receiving the letter, Easterling filed a claim under the Fair Debt Collection Practices Act ("FDCPA"), contending that the collection letter’s statement that her student loan was “ineligible for bankruptcy discharge” was false, deceptive, or misleading under the least sophisticated consumer standard. The District Court granted defendant/debt collector's motion for summary judgment.  Easterling appealed.

 

The Second Circuit held that the debt collector violated the FDCPA’s proscription against false, misleading, or deceptive practices by sending the debtor a collection letter incorrectly informing her that her student loans were “ineligible for bankruptcy discharge” because, although the debtor may have faced significant hurdles to discharging her student loans in bankruptcy, the least sophisticated consumer would have interpreted the letter as representing, incorrectly, that bankruptcy discharge of her loans was wholly unavailable to her. The Court concluded that the letter’s capacity to discourage debtors from fully availing themselves of their legal rights rendered its misrepresentation exactly the kind of abusive debt collection practice that the FDCPA was designed to target.

For more information about the Fair Debt Collection Practices Act, or, its state law counterpart, the Florida Consumer Collection Practices Act, visit us at: Stop Collection Harassment; or Consumer Rights Orlando

Confusing Debt Validation Notice violates FDCPA

The Fair Debt Collection Practices Act (“FDCPA”) requires, among other things, that debt collectors, within five days after first communicating with an individual debtor about a debt, to provide the debtor with a validation notice provides the consumer a written notice containing -- along with other information – the name of the creditor to whom the debt is owed and the amount of the debt. This notice is sometimes referred to as a debt validation notice. Simply stating the amount due is not enough, however. The notice must state the amount of the debt clearly enough that the recipient is likely to understand it. It is not enough for a debt collection agency simply to include the proper debt validation notice in a mailing to a consumer. Congress intended that such notice be clearly conveyed. Therefore, a notice that letter fails to state amount of debt where a consumer reading it could reasonably interpret the amount of debt in two ways, is a violation of the FDCPA. In Melillo v. Shendell & Assocs., 2012 U.S. Dist. LEXIS 9248 (S.D. Fla. Jan. 26, 2012), the plaintiff recieved a collection letter from a law firm representing his condominium association. Plaintiff alleged in his Complaint that the collection letter failed to state a clear amount of the debt owed because it referred to different amounts. The Court applied the objective "least sophisticated consumer" standard to the collection letter. In denying defendant’s motion to dismiss, the Court stated that in reading the complaint in the light most favorable to plaintiff, to the extent that the parties dispute factual issues regarding whether the collection letter was actually confusing will ultimately be for the jury to decide at trial.

For more information about the Fair Debt Collection Practices Act, or, its state law counterpart, the Florida Consumer Collection Practices Act, visit us at:

• Stop Collection Harassment;
or
• Consumer Rights Orlando

Florida Consumer Collection Practices Act ("FCCPA")

In 1993, the Florida Legislature enacted the Florida Consumer Collection Practices Act ("FCCPA") which law targets unfair debt collection tactics, including those inflicted upon residential mortgage customers. The statute proscribes a broad range of deceptive, harassing, and abusive practices.  It also provides a right to bring litigation against wrongdoers and to recover actual damages, costs, and attorney fees.

The following are some of the most common possible violations of the FCCPA:

•    Harassment - frequent phone calls to alleged debtors, their family and friends, repeated calls with no messages, hang-ups, lies, misleading comments, speaking in a belittling manner, embarrassing, argumentative and rude conduct are examples of harassing conduct.

•    Collecting money not owed - if an alleged debtor doesn’t owe the money it is a violation of the law for a collector to try and force the alleged debtor to pay the money.

•    Threats - creating a “false sense of urgency” or suggesting arrest, criminal prosecution, jail.

•    Calls at work - calls to the workplace, especially after a collector is told not to call, such as speaking to or leaving messages with a receptionist, calling the cell phone while alleged debtor is at work or calling alleged debtors direct line, is a violation.

•    Contacting 3rd parties - collectors may not contact any party about a debt without the express permission of the alleged debtor, including the spouse or any other family member, neighbors, friends, or co-workers.

•    Contact after attorney representation - once a collector is told a individual is represented by all conversations, messages, letters or any other communication must immediately stop.

For more information about the Fair Debt Collection Practices Act, or, its state law counterpart, the Florida Consumer Collection Practices Act, visit us at:

• Stop Collection Harassment;
or
• Consumer Rights Orlando

Mistakes in Debt Validation Notice result in FDCPA lawsuit

The FDCPA, among other things, mandates that, as part of noticing a debt, a “debt collector” must send the consumer a written notice containing -- along with other information – “the name of the creditor to whom the debt is owed.” This requirement is sometimes referred to as the "Debt Validation Notice." In addition, the Act prohibits a “debt collector” from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” For purposes of the FDCPA, a false representation in connection with the collection of a debt is sufficient to violate the FDCPA facially, even where no misleading or deception is claimed. In Bourff v. Rubin Lublin, LLC., 674 F.3d 1238 (11th Cir. 2012), the plaintiff claimed that the creditor’s law firm violated the prohibition on false, deceptive, or misleading representations by falsely stating in its collection statutory notice that BAC was the creditor when it was really the assignee of the original creditor - America’s Wholesale Lender (AWL). The facts of the case are that when the debtor failed to make a payment on the loan causing a default, AWL assigned the loan and security agreement to BAC. The law firm hired by BAC sent the debtor a letter stating that it was notice pursuant to the FDCPA and that it was an attempt to collect a debt; the notice identified BAC as the creditor. In his suit, the debtor claimed that the notice violated the FDCPA because it falsely represented that the company, BAC, was the creditor on the loan. The district court concluded that the error was a harmless mistake and dismissed the Complaint. In reversing the trial court and vacating the order of dismissal, the Court found that the statement in the notice that BAC was the creditor was a false representation and that it was made by a debt collector under the FDCPA. The Court considered that the identity of the “creditor” in the statutory notices is “a serious matter.”

For more information about the Fair Debt Collection Practices Act, or, its state law counterpart, the Florida Consumer Collection Practices Act, visit us at:

• Stop Collection Harassment;
or
• Consumer Rights Orlando

Does the FDCPA apply to mortgage foreclosures?

A recent Eleventh Circuit decision responded to this question in the affirmative. In Reese v. Ellis, Painter, Ratterree & Adams LLP, 678 F.3d 1211 (11th Cir 2012) the Reeses defaulted on a loan and mortgage. A law firm representing the lender sent the Reeses a letter and documents demanding payment of the debt and threatening to foreclose on the property if they did not pay it. The Reeses then filed a lawsuit against the law firm alleging that the communication violated the Federal Debt Collection Practices Act. The district court dismissed the complaint finding that the law firm was not a “debt collector” under the FDCPA and that the letter and documents it sent were not covered by the FDCPA. The basis for the trial Court’s dismissal was, in part, based on the decision in Warren v. Countrywide Home Loans, 342 Fed. Appx. 458 (11th Cir. Ga. 2009) which held that the FDCPA, except for limited circumstances, does not apply to mortgage foreclosures and such collection activity does not constitute debt collection activities governed by the FDCPA. In holding that the FDCPA applied to the collection efforts of the lender’s law firm, the Court rejected defendant’s arguments that the purpose of the letter was to inform the Reeses that the lender intended to enforce its security deed. That argument, the Court observed, wrongly assumed that the letter could not have had a dual purpose – to give notice of foreclose and to demand payment on the note. The Court went on to state that the rule the law firm was asking the Court to adopt would exempt from the provisions of the FDCPA any communication that attempted to enforce a security interest regardless of whether it also attempted to collect the underlying debt. That rule, the Court said, would create a loophole in the FDCPA and the practical result of such a rule would be that the FDCPA would apply only to efforts to collect unsecured debts. Under such a rule, the court noted, a lender (or its law firm) could harass or mislead a debtor without violating the FDCPA as long as a debt was secured. That, the Court said: “can’t be right.” In summarizing its ruling on this point, the Court said: “A communication related to debt collection does not become unrelated to debt collection simply because it also relates to the enforcement of a security interest.”

The twists and turns of the Colorado River Doctrine

A Property Owners Association (Alaqua) retained a law firm to recover delinquent homeowner association maintenance assessments from plaintiff. The law firm mailed to plaintiff a letter demanding payment of the assessments, interest, and other charges.  The debt remained unpaid so the law firm sued the plaintiff Acosta on behalf of Alaqua in Florida state court to foreclose a lien on Acosta’s property or recover a money judgment (the “State Action”).  Alaqua later replaced the first law firm with James A. Gustino and his law firm to litigate the State Action.

While the State Action was pending against him, Acosta filed suit in federal court alleging that Alaqua, the first law firm and Gustino, violated, among other state and federal statutes, the Fair Debt Collection Practices Act in attempting to collect the assessments.  The defendants filed a motion to dismiss the amended complaint.  In the alternative, the motion asked the court to stay the action pursuant to the Colorado Riverabstention doctrine pending the outcome of the State Action.

The district court granted the motion insofar as it sought dismissal pursuant to theColorado River doctrine and dismissed the case without prejudice.  Acosta appealed and the Court of Appeals framed the issue as having to decide whether the federal and state proceedings were parallel for purposes of the Colorado River abstention doctrine.   The court concluded they were not parallel and reversed the trial court’s dismissal, without prejudice.

The Court first emphasized the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.  It stated that “The doctrine of abstention . . . is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.”   Furthermore, the Court stated, that the threshold requirement for application of the Colorado River doctrine is that the federal and state cases be sufficiently parallel.    In other words, whether the cases “involve substantially the same parties and substantially the same issues.”   And, if the federal and state proceedings are not parallel, then, the Court opined, that the Colorado River doctrine should not apply.

On appeal, plaintiff, Acosta, argued that the district court erred by applying theColorado River doctrine because the State Action and his federal suit were not parallel because, the two actions involve different parties because the federal action is against Alaqua’s attorneys, not Alaqua.   He also maintained that the two cases presented different legal issues.

The Court of Appeals stated that the district court’s decision depended on its conclusion that if the State Action were decided against Acosta, he would have no viable claims in federal court.  However, the appellate Court observed that the key to the federal case is not only whether the debt was enforceable but also whether the defendants’ conduct when collecting that debt complied with the Fair Debt Collection Practices Act.   This, according to the reviewing panel, raises some doubt about whether resolution of the State Action would decide the FDCPA issues along with the other federal claims that were brought.  Based on its analysis, the Court of Appeals reversed the trial court’s order dismissing the complaint, without prejudice. 

Acosta v. Gustino, 2012 U.S. App. LEXIS 11339 (11th Cir. Fla. June 6, 2012)

Plaintiff sues surety and law firm over bond forfeiture that was set aside

Plaintiff paid a bail bondsman a premium for a bond to bail her son out of jail. At the time she obtained the bond, she signed papers which had the legal effect of holding her responsible for the full amount of the bond, $3,500, if her son failed to appear. Plaintiff’s son failed to appear for his arraignment and he bond was revoked. Thereafter, the Court executed a judgment against plaintiff’s son as principal and National Casualty Corporation as surety for $3,500. However, plaintiff’s son eventually appeared in court and the bond forfeiture judgment was set aside. A law firm and two collection agencies sent correspondence and made telephone calls to the plaintiff claiming that she owed National Casualty Corp. $3,500.00. The law firm later sued the plaintiff on this alleged debt. Plaintiff filed suit against National Casualty, the law firm and the debt collectors for violations of the Fair Debt Collection Practices Act principally because they were trying to collect a debt that, as she alleged, did not exist. The Defendants moved to dismiss on various grounds. The Court, in denying the motions to dismiss the FDCPA claims stated that it was bound to accept as true all of the allegations in the plaintiff’s complaint and that if true, would constitute violations of the FDCPA. In its ruling, the Court stated: “An amount misstated by the debt collector need not be deliberate, reckless, or even negligent to trigger liability – it need only be false. Id. In other words, the FDCPA recognizes a strict liability approach.” Barlow v. Safety Nat’l Cas. Corp., 2012 U.S. Dist. LEXIS 75585 (decided May 30, 2012))

Can you sue for mistakes in collection letters?

The plaintiff debtor in  Jerman sued a law firm and an attorney for FDCPA violations, committed while they were acting as debt collectors. The FDCPA has a notice provision that requires debt collectors to send written notice to the debtor that the debt will be assumed valid unless the debtor disputes it.  15 U.S.C. § 1692g(a).  The collection attorney’s notice letter in  Jerman stated that the mortgage debt at issue would be assumed valid unless the debtor disputed that debt  in writing. 
The  Jerman plaintiff debtor contended that the collection attorney violated the FDCPA by imposing a requirement that the debtor dispute the debt  in writing, when the FDCPA required only that the debtor dispute the debt and did not specify that it be in writing.  Observing that authority was split on the issue, the district court ultimately agreed with the plaintiff debtor that this writing requirement in the collection attorney’s notice letter constituted an FDCPA violation. ).  In a later proceeding, however, the district court held that the collection attorney was entitled to the bona fide error defense. 

The Supreme Court ruled that the FDCPA’s bona fide error defense does not encompass mistakes of law or misinterpretations of the requirements of the Act itself.  Instead, the seven-member majority concluded that  § 1692k(c)’s requirement that debt collectors maintain procedures reasonably adapted to avoid any bona fide errors referred only to measures designed to avoid errors like clerical or factual mistakes.

Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. , 130 S. Ct. 1605, 176 L. Ed. 2d 519 (2010).