Collection Settlements Are Dead: The Sequel

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Just in time for the summer movie season, one court has given debt collection litigation lawyers yet another reason to disconnect the telephone and computer. Now identifying yourself as a lawyer or a law firm on a voice mail or telephone message is sufficient facts to state a claim for a Fair Debt Collection Practices Act (FDCPA) violation.

This summer sequel is delivered in the recent decision Bard v. The Law Offices of Howard E. Scherr, P.C. Case No. 13-cv-1411 (E.D. N.Y.).  Here the law firm left a voice mail message identifying who they were, advising that their firm engages in debt collection and requesting a call back.  Plaintiff asserted that such a message falsely represented the fact that it was from an attorney and thus violated §§ 1692e(3) and §1692e(10) of the FDCPA. The district court agreed that sufficient facts were pled to state a claim for a class action complaint.

I don’t have to be reminded that our sequel takes place in the land of Grecco v. Trauner, where the Second Circuit held that attorneys could otherwise disclaim their status as attorneys when sending a collection letter, and that making such a disclaimer would not confuse the otherwise “least sophisticated consumer.” Despite the Second Circuit’s desire to make a happy ending from a weak screenplay, meaningful involvement is simply bad jurisprudence.

For one, nowhere does the FDCPA even speak of the term meaningful involvement. One state ethics board took great exception with such a disclaimer, because of course, you are certainly practicing law when you are communicating on your firm’s letterhead. Nonetheless, some federal courts continue to impose “meaningful involvement” upon debt collection attorneys; passing judgment for their conduct just because of their chosen practice area.

Even Judge Sotomayor warned against this kind of interpretation of the FDCPA in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, stating that certain “provisions should not be assumed to compel absurd results when applied to debt collection attorneys.”  Yet this is exactly what the district court did here.

In McMahon v. LVNV Funding et al, the 7th Circuit concluded that uttering the dirty word “settlement” in a letter was an implied threat of litigation. Here, leaving a polite voice mail message and a truthful identification that you are a law firm results in the same implied threat.

So just like the original, the moral of our sequel is simply… do not communicate at all, especially if you are an attorney. The credits are now rolling. The villainous attorney has been stabbed in the heart and lies bleeding in the field, never to call and leave a message for a consumer again. Sorry Dorothy we are not in Kansas anymore.

This post originally appeared on the Consumer Financial Services Blog, run by ARM defense firm Maurice & Needleman.

Joann Needleman is Vice President of Maurice & Needleman, P.C., where she is the Managing Attorney of the firm’s Pennsylvania office. Joann has extensive litigation experience in state and federal courts, successfully defending creditors against claims brought under the Fair Debt Collection Practices Act, Fair Credit Reporting Act and, in Pennsylvania, under the Fair Credit Extension Uniformity Act. She provides counsel, consultation and litigation services to financial institutions, law firms and debt buyers throughout the country. Needleman also currently serves as the elected President of the National Association of Retail Collection Attorneys (NARCA).

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Posted in Collection Law Firms, Collection Laws and Regulations, Debt Collection, FDCPA, Featured Post .

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Continuing the Discussion

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  • avatar ryon gambill says:

    Debtors will lose their salt when attorneys just file suit first.

  • avatar todd bean says:

    Oh come on, you really think an attorney was leaving those messages. There is only reason that a law firm letterhead and name is used when 99% of the time the attorney never touches or looks at the file, and everybody knows it is for intimidation.

    The reason debtors are not worried about just going straight to suit is because there is no way any agency could afford to just sue on every account they get right off the bat with no communication attempts prior to suing.

    It’s why you are so mad, because everybody knows you are not going to get 20,000 accounts and then file 20,000 lawsuits right off the bat.

    You’d get sued out of business anyway, since under the FDCPA you have to sue in the debtors jurisdiction, and what are the odds all 20,000 debtors are going to be at the last address you have on file.

    So then you get to explain why you did not do due diligence prior to suing and “we were worried about getting sued for leaving a voice message” won’t cut it.

    It all comes back to the fact that before all the technology and the widespread use of the internet, collectors did whatever they wanted and consumers had no way to get educated, so now you are guys get to lie in those beds you made, enjoy.

  • avatar Charles Goodwin says:

    I think the article is a bit alarmist.

    The simple solution for any law office worth its weight in salt is to form an LLC to handle the Pre-Litigation collection effort. Once the lawsuit is filed then the Law Firm name is invoked.

    We are all aware that the use of a Law Firms name is to nudge the consumer to do something about this before a lawsuit is filed. But we all know the courts have been marching down this road for a while now, that the use of attorney’s letters and law firms names in an attempt to collect where the is no intent to file a lawsuit is frowned upon.

    The bottom line is it is not the end of debt settlements, it is the end of attorney’s sidelining as debt collectors without taking the time to structure the two businesses are distinctly separate.

  • avatar BHA LLC says:

    it seems reasonable to me that if the name of your company is the law office of BLANK you ought to be able to leave it on a machine.
    I also think that clearly explaining that they are not being sued at this stage, just calling to see if it can be resolved and noting could be further action (IF THEY ARE GOING TO FOLLOW THROUGH) if they do not sue anyone, well they should not state there may be further action.

  • avatar Commercial Guy says:

    I have to agree with Charles on this one. Think it through, and make a business decision after you have looked at all of the ramifications. It’s really not rocket science.

    It is, however, yet another reason I am glad I only deal with commercial debt.

  • avatar Skip Foster says:

    I am at a loss as to how you tie your story into debt settlement. You talk about attorneys leaving messages using their name in same but what does that has to do with debt settlement? Your reference to using the word settlement in a letter and the ruling from a case does not signal the end of settlements. They continue to be completed everyday. My take away from your article is you think attorneys should vacate the collection space based on the case decisions you reference.

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