Legal Ruling Further Muddies Waters on Third-Party Disclosure vs. Mini-Miranda

Correction: In an earlier version of this story, we incorrectly stated that the case before the U.S. District Court of the Southern District of Florida was Berg v. Penn Credit Corp. The case in question is Berg v. Merchants Association Collection Division, as stated below in the corrected version of the article.

A recent case heard in U.S. District Court – Southern District of Florida again highlights the Catch-22 of using the Mini-Miranda warning in automated voice messages when placing calls to collect a debt.

The warning, which states, “This is an attempt to collect a debt…,” is one that debt collectors must give at the beginning of each communication, whether by voice or in print.

In an earlier case, Foti v. NCO, the automated voice system left a message on Paul S. Foti’s answering machine that said the collector was calling “requiring a personal business matter that requires your immediate attention….”

The message was deemed to be a violation of Fair Debt Collection Practices Act (FDCPA) Section 1692e(11) because the simple identification of the caller at the beginning of the message “did not adequately disclose that the caller was attempting to collect the debt.”

However, the FDCPA also prohibits debt collectors from disclosing information about a debt to third parties. This was the central issue of the case, Berg v. Merchants Association Collection Division, before the Court of the Southern District of Florida.

“The Berg decision amplifies this catch-22 problem,” said Valerie Hayes, Corporate Counsel and Vice President of Legal and Government Affairs for ACA International. “In that case, the debt collector left pre-recorded messages with the consumer. The messages informed the consumer the caller was a debt collector, that the message was an attempt to collect a debt, and attempted to confirm that the listener of the message was in fact the consumer.”

The consumer sued the debt collector claiming the debt collector violated the FDCPA by disclosing information about the debt to third parties because third parties heard the messages left by the debt collector and the debt collector knew or had reason to know that people other than the consumer might hear the messages, Hayes continued. The debt collector filed a motion to dismiss, meaning the debt collector argued the lawsuit must fail under the law even if all of the facts alleged by the consumer in his complaint are true.

The court recently denied the debt collector’s motion to dismiss, finding that the law allows the consumer to continue with his claim, according to Hayes. The court concluded the messages were communications under the FDCPA, and that although the messages tried to make sure the listener of the message was the consumer, the messages did not inform the consumer to disconnect if listening to the message in the presence of others.

“Importantly, the court also stated that while it is aware its decision makes it difficult to comply with all relevant provisions of the FDCPA when leaving messages for consumers, debt collectors are not entitled to leave messages for consumers as a way to collect a debt,” Hayes said. “The court stated: ‘Debt collectors have other methods to reach debtors including postal mail, in-person contact and speaking directly by telephone.’”

The case is still ongoing, Hayes said. The case is not concluded just because the debt collector’s motion to dismiss is denied; rather, this is only one step in the litigation process whereby a defendant can try to defeat the plaintiff’s claim.

Despite what could be some legal risks, Hayes expects collection firms to continue to rely on automated systems to aid with collection efforts.

“Debt collectors must undertake a risk management analysis, including consultation with legal counsel, of their collection practices to determine whether to leave messages and how to do so,” Hayes advised.

Mark Neeb, president and CEO of The Affiliated Group, a Rochester, Minn.-based debt collection firm that employs 110 people, said his firm will continue to follow ACA’s recommendation when leaving the message, which in Affiliated’s case asks “Is this (debtor’s name)? If not, please hang up.”

Then there is a five-second pause before identifying the call as an attempt to collect a debt.

This message, “hasn’t caused us any difficulty; we believe that it’s the right disclosure to make,” Neeb said, adding that Florida has become a hot bed for litigation over collection matters in the last few years.

Hayes added: “ACA believes this contradiction in the law must be addressed legislatively. Adopted over 30 years ago, the FDCPA simply does take into consideration the technological advances in the way we communicate with each other.”

ACA is attempting to craft amendments to the FDCPA to attempt to solve this catch-22, Hayes said.