Federal Ruling Against Law Firm Sets New Precedent for Debt Collection Letters
A recent court ruling that centered around attorney review in debt collection matters sets another precedent for collection letter practices, especially at law firms.
A federal judge ruled at the end of September that a law firm that had mass produced collection letters and legal documents violated the Fair Debt Collection Practice Act (FDCPA).
According to the New York Law Journal, Eastern District of New York Judge Roslynn R. Mauskopf held in Miller v. Upton, Cohen & Slamowitz, that the “attorney review practices prior to both the issuance of the debt-collection letter signed by Slamowitz and the commencement of legal action were inadequate for [FDCPA] purposes, thus rendering misleading these communications with Miller.”
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The ruling stems from a case in which the plaintiff, Arthur Miller, didn’t respond to a collection letter signed by collection attorney Michael Slamowitz. The letter gave Miller 30 days to contest a $1,678 balance that he owed Lord & Taylor in 2000. He failed to respond in that time frame, but eventually settled with the retailer before suing Upton Cohen & Slamowitz, the National Attorney Network and a third party information exchange service that made the referral between the firms, citing the attorney review section of FDCPA.
According to the Journal, the firm issued “no fewer than 211 debt collection letters” on the date of Miller’s. That volume, “coupled with practices followed in the Miller matter supports the conclusion that the debt collection letter and litigation were regularly mass-produced by non-lawyers at the push of a button.”
“In my analysis, the Miller Court brought the discussion of meaningful involvement to a new level of ‘there is no such thing as imputed meaningful involvement,’” Barbara Sinsley, counsel to DBA International, an association for debt buying professionals, told insideARM. “More importantly, the Court indicated that where no meaningful review is made by an attorney, that the failure to disclaim that fact, runs afoul of the [FDCPA].”
Sinsley noted that the Miller case provides additional direction for accounts receivable management companies with a new precedent on the matter of collection letters.
“In the case of Greco v. Trauner, Cohen, and Thomas, the Second Circuit held that an attorney could disclaim meaningful involvement by placing the following in their letters: ‘At this time, no attorney with this firm has personally reviewed the particular circumstances of your account.’”
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Comments
Comment from TX Debt Atty on October 14, 2009 at 10:25AM EST
The meaningful involvement issue has been around for quite some time . . . it should be no shock to the attys in this case that it was expected of them . . . it should be no shock to them that they got hammered for it. It's not like it's rocket science.
Comment from MJ on October 14, 2009 at 11:07AM EST
Even if they could have easily avoided the issue, it is still upsetting that "liberal judges in Ohio" would routinely rule against an industry. A debtor didn't pay his bill and, as a result, got sent to a collection agency/attorney...something is wrong with our judicial system if that results in a win for the debtor due to a non-heinous act of the attorney.
Comment from Illlinois on October 14, 2009 at 11:54AM EST
The issue is not that "debtor didn't pay his bill." The issue is the way to common one, that being the attorney in question did not really know if a debt existed or not; the attorney's staff simply send out a mass mailing. To do so is clearly inappropriate, now clarified to be illegal, and most certainly a shameful practice that should lead to sanctions against the attorney by their state regulators.
Comment from DONALD DALY on October 14, 2009 at 12:04PM EST
DEBTOR IGNORED STATEMENTS - DEBTOR IGNORED LETTERS - DEBTOR IGNORED PAYING - DEBTOR DIDN'T IGNOR AN OPPORTUNITY TO BACK DOOR THE COLLECTOR. IT IS A SAD STATE OF AFFAIRS WHEN ANYONE CAN INTENTIONALLY BREAK A CONTRACT AND THEN BE REWARDED FOR IT BASED ON "MEANINGFUL INVOLVEMENT"..
Comment from C Graham on October 15, 2009 at 11:04AM EST
American attorneys presumably act on their client's instructions as we lawyers in Scotland do too. Is the attorney supposed to have his client prove every debt (and to what standard of proof, pray?)before he issues a letter or writ on his behalf? It is an absurd decision.
Comment from CaliEsq on October 15, 2009 at 1:52PM EST
I don't yet know the evidence on the file, but I do know the attorney in the case sought atty fees which were precluded and contravened the debt contract's venue provision. Which means he never read the underlying contract: I think that was the tipping point there.
Comment from David Mertz on October 15, 2009 at 2:29PM EST
There is a very common thread to responses to articles like this by ARM industry members. Blame the judge and the debtor.
Until there is a shift by many members of the ARM industry from blaming others to recognizing there are problems which need to be addressed, industry members should expect these rulings - as well as recent regulatory changes in NYC, North Carolina, Mass, etc. - to not only continue but accelerate. There is a responsiblity by the owner of debt to perform their own due diligence before bringing legal/collection action against a debtor. This should include being able to demonstrate they have the right debtor, the right amount to collect (balances, interest, interest rate, attorney fees, etc.), and standing before the court.
Just check out the complaint filed by the FTC against Bear Stearns EMC/Mortgage last year. This very "due diligence" requirement was the very first issue addressed in the complaint. The FTC's Peggy Twohig said at the DBA convention earlier this year it was the most important regulatory action taken by the FTC last year toward the industry.
Adequately address these three issues - proof of debt, proof of debtor, and proof of ownership, before initiating litigation or collection - and many of the problems the industry has with "liberal courts in ohio", state attorney generals, the FTC, and other state and federal courts go away. Further, it will strengthen the industry's position when sending a collection letter, making a collection call, or seeking a judgement, it should reduce the overall cost of collection, and support portfolio valuations.
Comment from A Smith on October 15, 2009 at 3:22PM EST
Simple solution: Eliminate consumer credit! No one will be able to spend beyond their means and we will not need the consumer credit industry, especially the attorneys on both sides that are the only ones who come out ahead in these cases.
Comment from SpyBoy on October 21, 2009 at 1:02PM EST
A less drastic solution; prohibit the assigning or selling of creditor - debtor contracts. That would still permit third party collectors to collect on behalf of the original creditor, working as an independent contractor, or agent of that creditor.
Thats the way it was done in the vast majority of instances, not too long ago, before the recent, somewhat incredible, expansion of the securitization market of debt contracts as security instruments.