As seen often in this industry, there are two sides to every FDCPA litigation coin. When a debt collector starts seeing one type of claim, it is expected that it will also be sued for the exact opposite as well. The current state of FDCPA litigation, the lack of repercussions to consumers and their attorneys for filing hyper-technical claims (which, according to some judges in New York, actually harm consumers), and the inability of debt collectors to recover their defense fees even if they prevail have all led to a “damned if you do, damned if you don’t” situation for debt collectors.

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One example of this is the meaningful attorney involvement claim that is frequently filed against collection law firms. Cases revolving around meaningful attorney involvement in collection lawsuits have become frequent lately. So, naturally, collection firms also see claims that they allegedly misrepresent that attorneys were involved in the matter. [Editor’s Note: Is your head spinning yet? Mine sure is.]

Fortunately, these firms seem to be prevailing on these claims in court. For example, Weltman Weinberg & Reis prevailed against the Consumer Financial Protection Bureau (CFPB) in a case where the judge found that attorneys were meaningfully involved in the firm’s collection litigation practices. An example of a collection law firm prevailing against the other-side-of-the-coin argument is a decision released yesterday out of the Eastern District of Wisconsin.

In Bencomo v. Forster & Garbus LLP, et al., No. 18-cv-1259 (E.D. Wis. July 15, 2019), the court dismissed a case where the collection firm was accused of misrepresenting attorney involvement in its collection letter. The letter contained:

  • The firm’s name in the letterhead, including that it is a New York law firm.
  • Wording that the account was placed with the firm for collection.
  • A disclosure stating, “At this time we are only acting as a debt collector. Attorneys may act as debt collectors. Our firm will not commence a suit against you. However, if we are not able to resolve this account with you, our client may consider additional remedies to recover the balance due. . . . Please note that we are required, under federal law to advise you that we are debt collectors and any information we obtain will be used in attempting to collect this debt.”

Plaintiff alleged that the letter could mislead a least sophisticated consumer into thinking that an attorney exercised professional judgment to determine whether the account was delinquent and whether it was suitable for legal action.

The court unequivocally disagreed, finding that the letter contained sufficient disclosures to disclaim attorney involvement. The disclosure explicitly states that the firm was only acting as a debt collector at the time and that it will not commence a lawsuit against plaintiff. Plaintiff’s argument that consumers somehow think that the terms law firm and attorney are distinct fell on deaf ears. The court found reading the letter the way plaintiff suggests—that even if the law firm states it won’t sue, it doesn’t mean that the attorneys within the law firm won’t sue either—is idiosyncratic and frivolous.

In addition to its finding on the attorney involvement issue, the court also dismissed several other claims. Specifically:

  • The claim that the letter threatened litigation, finding that there was an express disclaimer that the firm would not sue. The court was not swayed by plaintiff’s argument that the disclaimer could be interpreted to mean the firm would seek local counsel to sue, mainly because there was no reference to local counsel in the letter.
  • The claim that the due date of the minimum payment, which fell within the validation window, overshadows plaintiff’s validation rights. Once again, the court found that the letter included a sufficient disclaimer to prevent any misunderstanding by stating that “Your right to dispute the validity of this debt or any portion thereof, or to seek verification of the debt as stated in the above paragraph, is not affected by the minimum payment due date.”
  • The claim that there was confusion about the amount due under the letter due to it listing both the account balance and the minimum amount due. The court found the amounts to be consistent with plaintiff’s account statements and that the plaintiff’s “confusion is strained and disingenuous.”

Ultimately, the court granted defendant’s motion to dismiss and denied plaintiff’s motion for leave to amend the complaint.

insideARM Perspective

One of the frustrating things about this case is the end: the dismissal of all non-attorney involvement claims. Don't get me wrong, it’s good news that the court dismissed them—but why did these claims need to be defended in the first place? The policy behind the FDCPA allowing plaintiffs to bring claims without fear of how they will cover their legal fees is sound, but the way it's been put into practice is not. It’s led to cases such as the above, which throw good faith in filing claims out the window. Instead, plaintiffs seem encouraged to throw anything and everything on the wall, including the kitchen sink, to see if it sticks. Does arguing whether an explicit statement that the law firm will not sue the consumer really means that the law firm will not sue the consumer provide any benefit? Does “kitchen sink” litigation further the policy of the FDCPA and help protect consumers? I think we all know the answer to that question.

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