John K. Rossman is a shareholder and Chair of the Creditors' Remedies Practice Group at Moss & Barnett, P.A. Mr. Rossman is a nationally acclaimed authority on the Fair Debt Collection Practices Act and the labyrinth of laws that impact the debt industry. He is a counselor and advisor to national and international companies and noted for his intelligent, creative and successful representation of collection agencies, debt buyers, creditors and fellow attorneys in cases across the country.
Most consumer advocates and collectors agree that the validation language required by the Fair Debt Collection Practices Act (FDCPA) is stilted and obscure. Two recent cases in different Federal Courts of Appeal examined questions about the wording of specific validation notices and have caused concern for collectors about the language used.
Two substantial debt collector victories in FDCPA cases at the end of 2013 may set the tone for many lawsuits in 2014, especially as they relate to the “least sophisticated consumer” standard. In both cases, Courts rejected claims by the consumers and found that the collection agency had acted within the scope of the law.
Recent regulation of the debt collection industry is apparently aimed at aiding consumers. However, a recent study published by the Federal Reserve Bank of Philadelphia empirically established that stricter debt laws actually harm consumers by reducing their access to credit.
There are a number of Congressional efforts underway to amend the Fair Debt Collection Practices Act (FDCPA). But the first changes in the rules governing debt collectors are not likely to come from legislative fixes. The CFPB, with the release of its advance notice of proposed rulemaking, will probably beat lawmakers to the punch. What changes are probably coming?
Creditors seeking to reduce collection costs often ask collection agencies for “precollect” efforts at a discount from normal contingent fee rates. Some collection agencies provide lettering services — with all calls and payments directed to the creditor — at a flat rate per letter or account. Unfortunately, the FDCPA prohibits such flat fee arrangements in some circumstances.
In Nelson v. Santander, a Court held that preview dialing (using a dialer with human intervention) violated the TCPA due to the capacity of the telephone system used. That order was subsequently vacated, leaving debt collectors to question the efficacy of preview dialing.
However, a recent Federal case held that a phone system that does not have the “present capacity” to store or produce numbers is not an automated telephone dialing system subject to the TCPA.
With the CFPB scheduled to commence exercise of its rule-making authority later this year, many debt collection industry experts were surprised by a joint amicus brief filed by the FTC and the CFPB that stated in part, “…in some circumstances, a debt collector may seek voluntary payment of a time-barred debt without violating the FDCPA, even if the communication is silent as to the statute of limitations.”
But with no additional guidance, the way forward for compliant ARM operations is unclear.
Lawsuits alleging that debt collection letters violate the FDCPA decreased over the past few years as consumer attorneys focused litigation on Foti and TCPA claims. Recently, letter violation lawsuits spiked with novel claims that are gaining traction in some Courts. Attorneys John Rossman and Mike Poncin discuss three new letter violation claims that are being used to challenge collection letters across the country in the latest episode of The Debt Collection Drill. Check inside for the listening link!
A recent Federal regulator’s statement of stringent “best practices” for all debt sales by banks is the likely cause for the purported pullback in account sales by two major credit card issuers. These new best practices for debt sales promise to radically redefine debt buying forever.
Last week, a $3.2 million consent order between the FTC and a major debt collector shook collection industry to its core. Not only was the amount of the fine unprecedented, but the subsequent restrictions placed on the debt collector by the FTC have broad implications.
Importantly, the consent order apparently prohibits the use of the widely accepted Foti phone message in certain circumstances.