Update #2 (August 29, 2011): Debts collectors are apparently “damned if you do, damned if you don’t” as far as leaving voice-mails on answer machines in which they identify themselves as debt collectors (or fail to identify themselves as debt collectors). Compare the rulings below with Chief Judge Michael J. Davis‘s certification of a class action against a debt collector earlier this month…
Update #1 (June 9, 2011): If anyone thought Judge Ericksen’s decision in Zortman (discussed below) was a “one-off,” forget about it. Sr. U.S. District Court Judge Richard H. Kyle (D. Minn.) adds another decision this week, again increasing the the burden on debt collectors. Leave a voice-mail about debt collection at your risk (that a third-party hears the message and the debt collector is liable under the FDCPA as a result). Also, a law firm letterhead better be more than a paper tiger…
Original Post (May 10, 2011): While the focus of Minnesota Litigator is news and commentary about Minnesota litigation, the concurrency of state and federal law necessitates that Minnesotans and Minnesota lawyers must spend more than a little time paying attention to federal law.
This is no more true than in the area of the law governing debt collection. A debt collector, whether in Minnesota or nationwide, who does not pay attention to the federal Fair Debt Collection Practices Act, of FDCPA, is not one that is likely to stay in business very long. And even if a debt collector does try to adhere to the FDCPA, it is not as straight-forward as you might think…
The FDCPA is not a new law. It was passed in 1978. Still, every year since there have been hundreds of “FDCPA lawsuits” brought in Minnesota federal court against debt collectors that are alleged to have violated one part or another of the statute (which provides for the award of a prevailing party’s attorneys’ fees).
Taking a step back, the debt collection industry itself presents an obvious commercial challenge on its face. Debt collectors are companies whose entire business is premised on collecting money due and owing from people who, for whatever reason, have refused or are unable to pay the debt. How are debt collectors to have any better luck than the underlying debt holders — the businesses to whom the debts were originally owed (whether they are credit card companies, retail stores, small business owners, etc.) getting paid? The advantages that debt collectors have are: (1) debt collection is their “raison d’etre” so they presumably can hone and refine related strategies to a degree of sophistication that the underlying debt-holders, who are in other lines of business, simply cannot match; (2) they have no reputational concerns, at least as compared to the underlying debt-holders like Wells Fargo (“Checking and Much More“), State Farm Insurance (“Like a Good Neighbor, State Farm is There“), Kohl’s Department Store (“Expect Great Things“), myriad medical service providers (medical bills are often the origin of unpaid debt), or any business that sells a service or product to the public and would prefer not to be associated with the collection of debt.
The inherent challenge of the debt collector’s business and the combination of advantages held by successful debt collectors is arguably a recipe for “abusive, deceptive, and unfair debt collection practices…[that] contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy…” (to quote the FDCPA statute (15 U.S.C. 1692)).
In short, the realities of the industry arguably create a strong justification for government regulation. On the other hand, debt collectors are often put in some pretty difficult situations in order to adhere to the statute.
For example, can a debt collector leave a voice-mail for a debtor on his home answering machine? If the debt collector leaves a simple message saying, “Hi, this is Eva, can Joe please call me at 708-292-7454?” this will violate the FDCPA by the failure of the debt collector to make clear that the purpose of the call is for the collection of a debt. Let’s say, on the other hand, the message says, “Hi, this is Eva. I am calling from CCC Corporation, a debt collector, and I am calling in connection with the collection of a debt. Can Joe please call me at 708-292-7454?” this also will violate the FDCPA if a third-party, such as the debtor’s children, overhear the voice-mail.
So held U.S. District Court Judge Joan Ericksen (D. Minn.) in Zortman v. JC Christenson at the end of last month, in which the debt collector, mindful of facing FDCPA liability for a “quasi anonymous message,” went for the “self-identification” as a debt collector, for which it is now being sued. Judge Ericksen denied the debt collector’s motion to dismiss the debtor’s FDCPA action. It seems, then, that debt collectors will leave voice-mail messages to debtors at their peril and their challenging business model becomes that much more difficult…