Getting it Almost Right Still Puts Collection Agencies on the Wrong Side of the FDCPA

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The Fair Debt Collection Practices Act is a “strict liability statute.” Or, put another way: getting close won’t cut it.

Which brings us to the unfortunate case of Kucker & Bruh, a Manhattan collection agency that learned a painful lesson.

In 2012, Mall Properties Inc. hired Kucker and Bruh to collect on past due accounts. One of those accounts, according to Mall Properties, was Rafael Lee, a senior citizen who lived in a rent-controlled apartment managed by Mall Properties. (Here’s some background on Rafael Lee’s situation: “Since at least 1995, Lee has had a Senior Citizen Rent Increase Exemption, a benefit under which he pays a portion of the rent and the landlord gets a real estate tax credit equal to the balance. Consequently, while the legally collectible rent for the apartment is $790, Lee is responsible for only $401.”)

Kucker & Bruh began its proceedings: it issued Lee a a “three day notice” advising of impending eviction unless the past-due rent was paid ($1,125). After the three day notice, Kucker & Bruh moved on to its next step.

Meanwhile, Rafael Lee hired an attorney, who advised Kucker & Bruh of the aforementioned Senior Citizen Rent Increase Exemption. The collection agency immediately checked with Mall Properties, who said, essentially, “Whoops, our bad,” and Kucker ceased all eviction proceedings against Lee.

Lee still sued Kucker & Bruh under the FDCPA.

The lesson in all of this? Let’s hear from the judge on the FDCPA case first: Judge Lorna Schofield said Kucker & Bruh’s “sole procedure was to rely blindly on their client’s business record.” She went on to write, “While the court makes no finding of what procedures would have been sufficient, the absence of any procedures to avoid discoverable errors clearly is insufficient. No reasonable jury could conclude that Defendants’ procedures were reasonably designed to avoid the type of error that occurred in this case.”

There may be several lessons:

1) Bringing on a new client? Due diligence on those accounts can save you.

2) If you do not currently have a policy in place that demonstrates due diligence for accounts, maybe move that to the very top of your Wish List — and then ensure that it happens.

Would that have saved Kucker & Bruh? Tough to tell. A due diligence policy in place may have come in handy; at least it might have caused Kucker & Bruh to pause before beginning the eviction process. But no policy at all seems to be a guaranteed loss.

Continuing the Discussion

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  • avatar JEK7 says:

    They had to pay $130K?!?!?!?!?!? I’m guessing that would put a LOT of agencies out of business. I’m curious if their service contract with the landlord allows for indemnification if they rely on info the landlord provides. I would think that the landlord, as a client, insists on indemnification from the agency/law firm for errors on which the landlord is found liable. But does that language go both ways?

  • avatar Commercial Guy says:

    It should, but it is unlikely that it does.

  • avatar john -hilsmeyer says:

    Under what code section did they sue? Was it threatening to take an action that could not legally be taken? 1692 g for the thrity day notice? Mini-miranda?

    Where did you get the 131K? I didn’t see that anywhere, but that seems EXTREMELY excessive.

  • avatar Steve Gold says:

    Looking at it objectively, I see a careless landlord and collection agency who neglected to review the senior citizen tenant’s payment history. Had either one bothered to do so, it would have seen 82-year old Mr. Lee paid what he owed and was not at all delinquent. Kucker & Bruh, a landlord and tenant mill, had no case whatsoever yet tried to evict the poor old guy. Compounding their error, Kucker & Bruh reportedly attempted to disparage Mr. Lee’s lawyer which led to attorney’s fees alone of $108k (Lee received $22k). Can’t feel sorry for negligent parties.

  • avatar Ameripay says:

    Seems like this should have been appealed. The courts have routinely held that agencies can rely on their client’s business records and don’t have a duty to investigate every claim placed unless a dispute is raised under 1692g.

  • avatar Ron Williams says:

    I’m not so sure, Ameripay. If a collector gets a file that says debtor owes $1 billion and a unicorn, then clearly, trying to collect on that leaves one liable because, as the court said, “blindly” relying on the client’s business record is insufficient. On the other hand, run-of-the-mill debts probably don’t need additional verification absent unusual circumstances. But in this case, the agency knew (or should have known) based on their files that 1) this guy was 82, 2) that senior citizen exemptions exist in NYC, and thus 3) the debt very probably could have been in error.

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