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

Debt Collectors May Seek You Out Via Facebook

Facebook is great for looking up that girl who stole your lunchbox in preschool. Being clever enough on Twitter can land you a book deal. And if you're a debt collector, social media is remarkably helpful in helping you to track down people who haven't paid their bills.

"Between Facebook and LinkedIn—a lot of people show up online in different places. They don't even realize," says Howard Beloff, president of CSRS Collections, a small collection agency in Rockville, Md.

Beloff's company collects on a variety of debts: late rent, medical companies, delinquent private school tuition. In many cases, he says, especially in those of people who have amassed rent bills, these debtors have moved and are hard to find. That's where the investigative work of debt collecting comes in. And in the arsenal of tools at their disposal, debt collectors find social media an immensely helpful addition.

A few decades ago, collectors had to rely old-school tools like the White Pages for basic information on whether a debtor had moved or changed phone numbers. The Internet changed that completely, says Mark Schiffman, spokesperson for ACA International, a trade group of credit and collection professionals.

"From a tech perspective, it's easier access to public information, versus having 50 phone books or 100 phone books in my office," Schiffman says. "Now you have the Internet and people putting information that's publicly available out there. People are putting out a little billboard" for themselves, he says.

That's not all of the help that the Internet affords collectors. Some states put their court records online, and online "skip tracing" sites help agencies find potential addresses for debtors.

It sounds like a lot of avenues to pursue, just to track down where someone lives. But all this online information can be used for much larger purposes. An up-to-date LinkedIn site can give a collector easy information on if and where that person works, says Beloff, which is valuable information for a collection agency that wants to garnish a debtor's wages. In other words, put information—a public Facebook status, a LinkedIn update, a tweet—about getting hired at a new job onto the internet and collectors get a signal that you might have money available.

Simply reading what a debtor has made public on social media is not illegal, and it's hard to argue it's unethical; collectors are simply using available information. Still, there are strict laws ensuring that the investigation goes little further. While a debt collector can look at a debtor's Facebook page, Twitter feed, or LinkedIn listing for information, for example, she can't tweet, message, or even E-mail the debtor with information about outstanding balances.

One collector talks about the difference between acceptable tactics and those that venture into deceptive territory.

"If I were to be a bit surreptitious and if I were to actually try to become your friend on Facebook and you were to accept me as a friend on Facebook, I would get access to all kinds of really, really good information on you," says Bill Bartmann, CEO of Oklahoma-based debt collection company CFS II. That kind of deception, he says, is different from simply Googling or Facebook-searching a debtor.

Schiffman says that while complaints have been filed with the government over the use of social media in collections, he does not believe that the use of social media has led to a spike in complaints. Still, debt collection complaints have risen in recent years, from 128,000 in 2009 to nearly 152,000 in 2010, and again to nearly 181,000 in 2011.

According to data supplied by ACA, debt collections have also grown recently. Collections at third-party debt collectors totaled $44.6 billion in 2010 , up more than $4 billion from 2007, before the crisis, though employment at those firms was down slightly over the same period.

However, the population of debtors to pursue is growing: Roughly one in seven Americans—slightly more than 14 percent—is being pursued by a debt collector, according to the Federal Reserve Bank of New York. That's up substantially from mid 2003, when the figure was around 9 percent. The amount available to collect is up, too, from around $900 per debtor then to over $1,500 now.

While a certain, small percentage of debtors habitually run up bills and neglect to pay them, says Bartmann. the recent economic downturn brought a new population onto the debtor rolls: people not used to being pursued. While some may be facing financial hardship and be unable to pay, there are many others who want to get their debts discharged quickly.

He feels that this new population has, in some ways, made collections easier.

"Are customers more apt to pay now than in previous economic cycles? That answer is yes," Bartmann says.

Still, he advises caution to anyone making too much of their lives public online. His word of advice to debtors: "Be careful what you put out there."

That, he says, or just pay your bills as best you can. Neglecting to pay altogether can make prices higher and credit tougher to get for everyone.

Beloff agrees: "The thing is, is that for anybody who pays their bills, they should hate people who don't."

U.S. News & World Report

By Danielle Kurtzleben

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

Settlement Offer Does Not Moot FDCPA Claims

Plaintiffs alleged claims under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.S. § 1692 et seq.  In each case, defendant/debt collectors sent emails offering to settle the case for $1,001 – an amount exceeding by $1.00 the maximum that each plaintiff could recover, plus legal fees and costs.  The offers were not accepted. The  District Court granted the defendants’ motions to dismiss, holding the offers left the consumers with "no remaining stake" in the litigation and that the cases were moot.

The Eleventh Circuit reversed the trial courts holding that the defendants s did not offer judgment as part of the settlement, an important distinction in the mootness analysis. It was error to have found the settlement offers rendered the FDCPA claims moot because the offers did not offer to have judgment entered against them.  The Court went on to state that because the settlement offers were not for the full relief requested, a live controversy remained over the issue of a judgment, and the cases were not moot.  Furthermore, the Court stated, a judgment was important to the consumers because the district court could enforce it. Instead, with no offer of judgment accompanying the settlement offers, the consumers were left with a mere promise to pay.  If payment was not made, the consumers faced the prospect of filing a breach of contract suit in state court with its attendant filing fees — resulting in two lawsuits instead of just one.

Zinni v. ER Solutions, Inc., 2012 U.S. App. LEXIS 18163 (11th Cir. Fla. Aug. 27, 2012)

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

Offer of Judgment Halts FDCPA Lawsuit

Federal Rule of Civil Procedure 68 provides that, at least fourteen days before trial, a defending party may serve a plaintiff with an offer to allow a judgment on specified terms.   Several recent district court opinions have rules that an offer of judgment providing the plaintiff with the maximum allowable relief will moot the plaintiff’s  FDCPA claim.  Moten v. Broward Cnty., No. 10-62398-CIV, 2012 U.S. Dist. LEXIS 19332, 2012 WL 526790, at 2 (S.D. Fla. Feb. 16, 2012); see also  Mackenzie v. Kindred Hosp. E., LLC, 276 F. Supp. 2d 1211, 1218-19 (M.D. Fla. 2003) (dismissing FLSA claim as moot after plaintiff rejected  Rule 68 offer where offer exceeded amount plaintiff could have received at trial).

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In Young v. AmeriFinancial Solutions, LLC, 2012 U.S. Dist. LEXIS 125661 (S.D. Fla. Sept. 5,2012), plaintiff filed an action against defendant under the Fair Debt Collection Practices Act which provides that damages in an action brought by an individual shall not exceed $1,000.00. Defendant served an Offer of Judgment proposing to have judgment entered in the about of $1,001, plus attorney's fees incurred prior to the date of the offer. Defendant then moved the trial court to dismiss the action for lack of subject matter jurisdiction contending that the action is moot because the Offer would grant Plaintiff more than the full amount of relief that Plaintiff could obtain under the FDCPA. The Court granted the defendant’s motion to dismiss for lack of subject matter jurisdiction because the offer of  judgment would provide plaintiff with the maximum allowable relief on her claims.  Therefore, the court concluded, that the action was moot and the Court would no longer have subject matter jurisdiction over the suit. 

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

Frequently Asked Questions about the FDCPA

Frequently Asked Questions

Q. What is the Fair Debt Collection Practices Act?

A. The Fair Debt Collection Practices Act ("FDCPA") requires that debt collectors treat you fairly by prohibiting certain methods of debt collection.

Q. What debts are covered?

A. Personal, family, and household debts are covered under the Act.  This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.

Q. Who is a debt collector under the FDCPA?

A. A debt collector is any person, other than the creditor, who regularly collects debts owed to others. Under a 1986 amendment to the Fair Debt Collection Practices Act, this includes attorneys who collect debts on a regular basis.

Q. Who is a debt collector under the Florida Consumer Collection Practices Act?

A. Under Florida law, the definition of a "debt collector" is much broader than under its federal counterpart. Under the Florida Consumer Collection Practices Act (“FCCPA”), a “debt collector” is defined as: “any person who uses any instrumentality of commerce within this state, . . . in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. The term ’debt collector’ includes any creditor who, in the process of collecting her or his own debts, uses any name other than her or his own which would indicate that a third person is collecting or attempting to collect such debts.”

So, the FCCPA applies to any person or persons, collecting his/her own debts. Under that broad definition, the FCCPA would apply to a law or accounting firm attempting to collect its own fees, as well as the employees engaged in such collection activity on the law firm's behalf.

Q. How may a debt collector contact you?

A.  A collector may contact you in person, by mail, telephone, telegram, or FAX. However, a debt collector may not contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves.

Q. Can you stop a debt collector from contacting you?

A. You may stop a collector from contacting you by writing a letter to the collection agency telling them to stop.  Once the agency receives your letter, they may not contact you again except to say there will be no further contact. Another exception is that the agency may notify you if the debt collector or creditor intends to take some specific action.

Q. May a debt collector contact any person other than you concerning your debt?

A. If you have an attorney, the debt collector may not contact anyone other than your attorney. If you do not have an attorney, a collector may contact other people, but only to find out where you live and work. Collectors usually are prohibited from contacting such permissible third parties more than one. In most cases, the collector is not permitted to tell anyone other than you and your attorney that you owe money.

Q. What is the debt collector required to tell you about the debt?

A.  Within five days after you are first contacted, the collector must send you a written notice telling you the money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money.

Q. May a debt collector continue to contact you if you believe you do not owe money?

A.  A debt collector may not contact you if, within 30 days after you are first contacted, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.

Q.  What control do you have over payment of debts?

A.  If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe.

Q.  What can you do if you believe a debt collector violated the law?

A.  You have the right to sue a collector in a state or federal court within one year from the date you believe the law was violated. If your win, you may recover money for the damages you suffered. Court costs and attorney's fees also can be recovered.

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

Eleventh Circuit reaffirms application of FDCPA to mortgage foreclosure actions

Since 2009, debt collectors in the Eleventh Circuit (Florida, Georgia and Alabama) who were contacting consumers in connection with mortgage foreclosure actions relied on the decision of Warren v. Countrywide Home Loans, Inc. , 342 F. App’x 458 (11th Cir. 2009) for protection from suit because that decision held that enforcement of a security interest through the foreclosure process is not debt collection for purposes of the FDCPA.  However, creditors can no longer seek refuge in Warren v. Countrywide Home Loans, supra, since publication of the opinion in Reese v. Ellis, Painter, Ratterree & Adams, LLP , 678 F.3d 1211 (11th Cir. 2012).  Reese held that an entity that regularly attempts to collect debts can be a “debt collector” under the FDCPA even when that entity is also enforcing a security interest. 


The Reese holding was recently reaffirmed in Birster v. Am. Home Mortg. Servicing, 2012 U.S. App. LEXIS 14660 (11th Cir. Fla. July 18, 2012).  In this recent case, the Birsters owned a home in Jupiter, Florida which they refinanced through Option One.  The Birsters ceased making mortgage payments on or around June 1, 2008.  The promissory note and mortgage provided that any missed payment by the Birsters places the loan into a default status.  On July 30, 2008, AHMSI began servicing the loan and initiating collection activities.  On February 2, 2009, U.S. Bank, N.A., as the trustee for the lienholder, initiated foreclosure proceedings against the Birsters. In their FDCPA lawsuit, the Birsters alleged that AHMSI began its relentless assault on them in 2008.  According to the Birsters, AHMSI called them multiple times on a daily basis to collect the past due amounts.  The Birsters further alleged that most of these calls occurred after AHMSI knew that Angela suffered from an inoperable glioma (brain tumor) that cannot be diagnosed as cancerous or non-cancerous.  As early as April 16, 2009, the Birsters informed AHMSI that they were represented by an attorney, and provided AHMSI with the attorney’s name and phone number.  The Birsters advised AHMSI to contact their attorney and to cease contacting them directly.  AHMSI nevertheless continued its direct communications with the Birsters.  The Complaint further alleged that during these calls, AHMSI used offensive and abusive language towards Mrs. Birster and made false representations that the Birsters’ home was scheduled for a foreclosure sale.  Mrs. Birster also alleged that after a particularly abusive call on May 5, 2009, she collapsed in her front yard and was rushed to a nearby hospital.  Once the calls ceased, the Birsters claim AHMSI then began intimidating and harassing them at their home.  AHMSI sent agents to “inspect” the property, despite knowing the Birsters resided there.  Although AHMSI was initially inspecting the property on a monthly basis, AHMSI soon began visiting the Birsters’ home every day or every other day.  AHMSI’s home inspections even occurred on Thanksgiving and Christmas days. The Birsters alleged AHMSI’s actions caused Angela to suffer a deep depression and anxiety, resulting in her attempted suicide. 


The district court granted summary judgment to AHMSI after concluding the Birsters’ allegations related solely to efforts by AHMSI to enforce a security interest, rather than to collect a debt. Thus, the district judge concluded that the actions of AHMSI were not covered by the FDCPA.  Based on the holding in Reese, supra, the Eleventh Circuit reversed the order granting summary judgment.

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