Tread carefully as a debt collection attorney [MCLE]
Enacted in 1977 as an amendment to the Consumer Credit Protection Act, the Fair Debt Collection Practices Act (FDCPA) regulates debt collectors' practices for collecting debts. The act is intended to promote fair debt collection and to eliminate abusive practices by those who collect consumer debts.
A recent trend in FDCPA jurisprudence suggests that debt collection attorneys may be liable under the act for work submitted in court. While the 9th U.S. Circuit Court of Appeals has indicated its reluctance to find any FDCPA violation for communications only to the debtor's counsel, the 11th U.S. Circuit Court of Appeals has ruled to the contrary. This split indicates potential risk for attorneys in this practice area.
Conduct Prohibited under the FDCPA
The FDCPA bans a range of conduct in debt collection practices, including the use of violence, obscene or profane language, and phone calls intended to annoy or harass any person at the called number. Other less severe conduct can also be interpreted as abusive and thus prohibited under the FDCPA.
The most frequent violation consists of threatening to take or taking an action that cannot be legally taken or is not permitted to be taken. For example, some debt collectors send collection letters attempting to collect debts beyond the statute of limitations or threatening to contact third parties like the debtor's employer.
In adjudicating claims under the FDCPA, courts generally view claims from the perspective of the consumers, whose circumstances may make them vulnerable to harassment, oppression or abuse. Attorneys who assist debt collectors with recovering their funds should be aware of the possibility of increased risk.
FDCPA Applies to Debt Collection Lawyers
Under the FDCPA, a "debt collector" is any person who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another. The FDCPA has been amended since its inception to provide broader protection to consumers.
Many recent appellate court decisions under the FDCPA rely heavily on Heintz v. Jenkins, in which the U.S. Supreme Court held that the FDCPA "applies to the litigating activities of [debt-collector] lawyers." 514 U.S. 291, 294 (1995). In reaching this decision, the Supreme Court considered a prior version of the FDCPA, which contained an express exemption for lawyers.
Under the old version, the exemption stated 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." Congress later repealed this exemption, which the Supreme Court interpreted to mean that Congress intended for lawyers to be subject to the act whenever they meet the general "debt collector" definition. This expansive reading of the term "debt collector" places attorneys and law firms who engage in debt collection squarely within the purview of the FDCPA.
9th Circuit Limits FDCPA Application
Attorneys and law practices who regularly engage in debt collection activity can learn some valuable lessons from appellate decisions concerning the FDCPA. The 9th Circuit held in Guerrero v. RJM Acquisitions LLC that "communications directed only to a debtor's counsel, and unaccompanied by any threat to contact the debtor, are not actionable under the Act." 499 F.3d 926, 936 (9th Cir. 2007). There, the plaintiff consumer alleged violations of both the FDCPA and state consumer protection laws. After receiving two collection letters from the defendant, the plaintiff retained counsel. The plaintiff's counsel then wrote a letter to the defendant alleging legal violations, seeking a settlement of the debt, and threatening suit.
The defendant then ceased direct communications with the plaintiff, as the FDCPA requires. However, the defendant responded to the plaintiff's counsel, providing more specific information about the outstanding debt and again asserting rights to collect it. Six months later, the plaintiff filed suit, alleging that the defendant's letter to counsel constituted a prohibited collection effort. The district court agreed and granted summary judgment. The 9th Circuit reversed and found that the defendant's letter did not violate the FDCPA because it was directed only to plaintiff's counsel and not the plaintiff.
11th Circuit's Converse Rulings
In 2015, the 11th Circuit issued a decision that some read as contrary to Guerrero. The court ruled that court filings by a debt collection attorney in litigation of a debt are actionable under the FDCPA, even if those filings are directed to the debtor's attorney. Miljkovic v. Shafritz, 791 F.3d 1291 (11th Cir. 2015). The court reasoned that the purpose underlying the FDCPA mandates a finding that the act applies even when the attorney's conduct is directed at someone other than the consumer.
Miljkovic arose out of an automobile loan that the plaintiff failed to repay. The defendant obtained a judgment in its favor and obtained a writ of garnishment against the plaintiff's wages to recover the unpaid balance. The plaintiff filed a sworn affidavit that, under state law, he was exempt from garnishment because he was the primary source of income in his household. The defendant filed a sworn reply disputing that the plaintiff was a "head of household" under Florida law. After conducting discovery, the defendant filed a motion to dissolve the writ of garnishment, which the court granted.
The plaintiff then sued the defendant in federal court, claiming that by filing the sworn reply after obtaining actual knowledge of the plaintiff's exemption, the defendant engaged in deceptive, harassing behavior in violation of the FDCPA. The defendant filed a motion to dismiss, claiming that it had just following procedural requirements under the Florida garnishment statute.
The 11th Circuit reversed the trial court and found that the plain language of the FDCPA prohibits abusive conduct even when the debt-collecting activity is directed at someone other than the consumer. According to the appellate court, prohibitions of the FDCPA apply to all litigation activities of debt-collecting attorneys except for pleadings, which the law specifically exempts. Though the court found that the FDCPA did apply, the court affirmed dismissal of the plaintiff's complaint under the facts at hand, finding that the reply had not been abusive, deceptive, or unfair.
Last March, the 11th Circuit expanded the Miljkovic decision, holding that a debt-collection notice sent to a consumer's attorney is an "indirect" communication. Bishop v. Ross Earle & Bonan, P.A., 817 F.3d 1268, 1272 (11th Cir. 2016). The court noted that its ruling comports with those issued by the 3rd, 4th and 7th Circuits, signaling a trend toward broad interpretation of the FDCPA's applicability to attorney debt collector correspondence.
While Miljkovic speaks to a court filing, both Guerrero and Bishop speak to debt collection notices. These decisions, including those issued by other circuit courts of appeal, create a potential conflict regarding whether debt collection attorneys can be subject to FDCPA liability when engaging in procedural filings or when communicating with a debtor's counsel.
No matter the jurisdiction, debt collection attorneys should be aware of this circuit split and look out for any U.S. Supreme Court decisions on the FDCPA that could resolve this apparent conflict.
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