The Florida Bar

Florida Bar Journal

What You Should Know About the Federal Fair Debt Collection Practices Act

Featured Article

Until recently, most lawyers had never heard of the Federal Fair Debt Collection Practices Act1 and had certainly never had occasion to review the Florida Consumer Protection Practices Act.2 Then in April of 1995, the U.S. Supreme Court handed down an eye-opening decision in Heintz v. Jenkins, 115 S.Ct. 1489 (1995), and lawyers around the country began to contact their malpractice carriers and review their United States Code Annotated. There remain, however, those attorneys, either oblivious to the federal and state “Debt Collection Acts,” or who simply surmise the acts do not apply to them. This article is intended not only for those who assume they are in an elite class to whom the acts do not apply, but also for those who are familiar with the acts. This article focuses on the federal act as the state act essentially mirrors the federal act.

Attorneys as Debt Collectors
The Federal Fair Debt Collection Practices Act, 15 U.S.C. §§1692 et seq. (FDCPA), was enacted in 1977 in an effort to curb the abusive practices by third party debt collectors.3

In 1986, the FDCPA was amended to include attorneys under the definition of “debt collectors” covered by the Act.4 Before this amendment, the FDCPA contained an express exemption for lawyers that indicated that the term “debt collector” did not include “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.” In 1995, the Supreme Court in Heintz v. Jenkins held that the FDCPA applied to attorneys who “regularly” engaged in consumer-debt-collection activities, even when that activity consists of litigation.5

The problem with Heintz is that it never explains how the FDCPA applies to litigation. For instance: Why would you have to attach the FDCPA notification required by 15 U.S.C. §1692g to a lawsuit giving the debtor 30 days to verify the debt when the rules of civil procedure require a response within 20 days? Do you have to repeat the “mini-Miranda” notice required by 15 U.S.C. §1692e(11) on all succeeding documents sent to the debtor, including court-issued documents? Do you have to give the debtor the “mini-miranda” at hearings? What about statutory notice letters such as the 3-day eviction letter, is the state statute pre-empted? You get the idea.

Clearly, the Supreme Court was not aware of the confusion that would be caused by the brevity of its decision. Fortunately, prior to and after the Heintz ruling, the circuit courts, as well as the Federal Trade Commission (FTC), have attempted to give guidelines to attorneys involved in debt collection.

What Is a Consumer Debt?
As an initial matter, the FDCPA applies only to “consumer debts.” A “consumer” is defined by 15 U.S.C. §1692a(3) as “any natural person obligated or allegedly obligated to pay any debt.” Further, the FDCPA defines a “debt” under 15 U.S.C. §1692a(5) as “any obligation or alleged obligation of consumer to pay money arising out of transactions in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family or household purposes whether or not such obligation has been reduced to a judgment.” A “debt collector” is defined in 15 U.S.C. §1692a(6) as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose is to collect debts or who regularly attempts to collect debts.”

The FTC, in its Statements of General Policy or Interpretation of Staff Commentary of the Fair Debt Collection Practices Act, issued a list of certain examples of what the word “debt” was intended to define.6 This term included:

1) overdue obligations such as medical bills;

2) a dishonored check that was tendered in payment for goods or services acquired which were used primarily for personal, family or household purposes; and

3) a student loan because the consumer is purchasing “services.”

Under the definition of “debt,” this author believes that included as “consumer” debt collection activities are evictions on residential properties and the replevin of a personal automobile or household items as both involve “personal, family or household” interests. The collection of child support, however, has been specifically exempted from the FDCPA as a “debt.”7 The FDCPA has also been interpreted as not covering the collection of taxes,8 student loans,9 and obligations for a civil liability.10

The FTC also has excluded “tort claims” from its interpretation of a “debt” covered by the FDCPA. In a formal staff opinion dated May 22, 1987, the FTC stated, “Tort claims are not transactions contemplated under the definition of a debt. This is true no matter who is attempting to collect the debt on those (tort) claims or the nature of the torts involved.”11

The main function of the FDCPA is to give guidance on how to conduct yourself as a “debt collector.” Most importantly, a “debt collector” may not use any false, deceptive, or misleading representations or means in connection with the collection of a debt.12 The FDCPA includes a laundry list of activities which are viewed as “false, deceptive, or misleading” representations including, the false representation that an individual is an attorney when that individual is not an attorney, threatening legal action that is not intended to be taken, and falsely representing the character of a debt.13 Further, the courts have attempted to develop standards by which to measure whether particular conduct is “deceptive” or “misleading” and the majority of the courts, in evaluating whether debt collection actions were “false, deceptive or misleading,” have applied a “least sophisticated consumer” test.14 The same courts which have used the “least sophisticated consumer” test have also held that actual consumer testimony is not necessary in evaluating the tendency of the language to deceive, but rather, the courts have used whether “it is more likely than not that debtors on the low side of reasonable capacity who read a given notice or hear a given statement, will read into that message, oppressiveness, falsehood or threat.”15

This author is not convinced that the “least sophisticated consumer” gives a fair interpretation of the actions of the debt collector. The Seventh Circuit has adopted an “unsophisticated consumer” test, which strikes this author as a more reasonable test.16 Currently, however, the 11th Circuit follows the “least sophisticated consumer” test.17

Restrictions on Contacting Consumers
The FDCPA also outlines the general requirements for communications with the consumer, which include no communications with a third party unless you have the consent of the debtor and no calls before 8 a.m. or after 9 p.m.18 Further, the FDCPA requires the debt collector to include the “mini-miranda” in all communications to collect a debt or to obtain information about a consumer, that the “debt collector is attempting to collect a debt and any information obtained will be used for that purpose.”19 Moreover, specific language giving the consumer information regarding his or her rights under the FDCPA, including the right to request a verification of the debt, must be sent to the consumer within five days after the initial communication with the consumer, unless the debt is paid in full.20 However, since the initial communication with the consumer is oftentimes a telephone call, it is important to immediately send out the notification after speaking with the consumer to comply with the FDCPA. The notice should be clearly visible and in a type size that is clearly clear and conspicuous to the consumer.21

The question has arisen as to whether an attorney can file suit within the 30-day notice period required by the FDCPA. According to the FTC, a lawsuit may be instituted within the 30-day time period.22 However, if a lawsuit is the first communication by a debt collector (attorney) with the debtor, the attorney must give the notification information required by 15 U.S.C. §1692g within the lawsuit itself.

Once a “debt collector” attorney has established contact with the debtor, it is very important that no wording or language within the attorney’s communications “overshadow” the initial notification information so that the least sophisticated consumer might be confused. A debt collector’s letter should not lead a consumer to ignore the right to take 30 days for the verification of the debt by putting conflicting language within the letter that would lead the consumer to believe that he or she must act within a different time period. In 1988, the Ninth Circuit held that where a collection letter stated “if the debt was paid within 10 days, it would not be reported in the master files as an unpaid collection item” that a reasonable consumer would believe that he or she would have less than 30 days to verify the debt.23 However, the use of the words “IMMEDIATE SETTLEMENT NOTICE” and “your account must be settled now” has been held not to violate the Act.24

What Constitutes Harassment or Abuse?
The FDCPA also outlines, without limitation, conduct that constitutes harassment or abuse, including the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person; the use of obscene or profane language; causing a telephone to ring continuously; and calling the consumer without disclosure of the caller’s identity. An interesting Florida case regarding harassment is Story v. Fields. 343 So. 2d 675 (Fla. 1st DCA 1977). In Story, the debt collector, in an effort to collect a consumer debt, made telephone calls almost daily, sometimes two or three times a day, which amounted to at least 100 calls over five months. The court in Story indicated that communications of this frequency that continue after all such information has been communicated and reasonable efforts of persuasion and negotiation have failed, can be “reasonably expected to harass the debtor and his family,” because it tends only to exhaust the resisting debtor’s will. However, one court has noted that the FDCPA prohibits only “oppressive and outrageous conduct,” and that “some inconvenience or embarrassment to the debtor is the natural consequence of debt collection.”25

The damage provision for violations of the FDCPA is of special concern to most practitioners. The FDCPA provides that a debt collector may be liable for damages for violation of the FDCPA for actual damages; additional damages for each violation not exceeding $1,000; or in the of case of a class action, for an amount not to exceed the lesser of $500,000 or one percent of the net worth of the debt collector; and attorneys’ fees.26 On March 8, 1995, Payco American Corporation, one of the nation’s largest debt collection firms, agreed to pay a civil penalty of $500,000 to resolve federal charges that it violated the FDCPA.27 The FDCPA is a strict liability statute28 and only a few defenses are applicable.

However, a debt collector may, in certain situations, minimize or completely eradicate liability under the FDCPA for violations that were not intentional and resulted from a “bona fide” error notwithstanding the maintenance of procedures recently adapted to avoid such error.29 The burden of proving evidence of procedures reasonably adapted to avoid an error is on the debt collector.30

Another avenue for defense is the statute of limitations, as suits brought for a violation of the FDCPA must be brought within one year of the date on which the violation occurs.31 In Maloy v. Phillips, 197 B.R. 721 (M.D. Ga. 1996), the court held that in computing the limitations period, the date of mailing is excluded as the triggering date in accordance with the Federal Rule of Civil Procedure 6(a). Maloy followed Mattson v. U.S. West Communication, 967 F.2d 259, 261 (8th Cir. 1992), reasoning that the statute of limitations begins to run on the date the letter was mailed because it is the debt collector’s last “opportunity” to comply with the FDCPA.32

Attorneys’ Fees Under the FDCPA
Of critical concern to an attorney debt collector faced with a FDCPA suit is the statutory provision for attorneys’ fees.33 Attorneys’ fees in a federal case can often surpass any actual damages or fine assessed by the court. This has lead attorneys to settle FDCPA cases quickly or, if prosecuting the case, overwork the case in the quest for a larger fee award. Recently, however, the Fifth Circuit, in an attempt to curb escalating fee awards, held that plaintiffs are not entitled to a large attorneys’ fee award when a mere technical violation of the FDCPA has occurred.34

Threat of Class Actions
Of possibly greater concern to Florida attorneys should be a threat of a class action lawsuit under the Florida Consumer Collection Practices Act.35 The Florida Consumer Collection Practices Act indicates that liability for its violation may be actual damages or $500 whichever is greater, together with reasonable attorneys’ fees. The problem that exists is that there is no state “cap” on class actions as with the FDCPA, which limits the fine in class actions to $500,000 or one percent of the net worth of the collector.36 Potentially, in a class action brought under the Florida Consumer Protection Practices Act, the debt collector could have unlimited liability and, depending on the size of the class, could be subject to significant exposure.

Form Debt-Collection Letters
Attorneys should actually act like attorneys. In this automated time, it is common for the practitioner to delegate responsibilities to a paralegal or a collector without any oversight by the attorney. Attorneys with this type of practice should be aware of the recent ruling in the Seventh Circuit in Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996), wherein the court held that where an attorney authorized sending mass-produced debt collection letters bearing a mechanically reproduced signature that he “never considered the particular circumstances of (the debtor’s) case prior to the mailing of the letters and never participated personally in the mailing” and, therefore, had violated the FDCPA by giving the false impression that the communication was from the attorney.37

Is a Bad Check a Debt?
One of the more recent hot beds for dispute between consumer counsel and debt collector defense counsel is whether a worthless check is considered a “debt” covered by the FDCPA. Currently, this issue is pending before the Seventh and the Ninth circuits.38 The argument propounded by defense counsel is that a worthless check is not “an offer or extension of credit”39 and is, therefore, not a debt covered by the FDCPA.40

Recent Amendments
Congress recently passed legislation modifying the “mini-Miranda” requirement of the Federal Fair Debt Collection Practices Act.41 The amendment, which was effective on December 31, 1996, provides that debt collectors will no longer have to give the “mini-Miranda” of “this is an attempt to collect a debt, and any information obtained will be used for that purpose” on legal pleadings. However, the amendment never defines a “pleading,” and no doubt there will be litigation filed by the consumer counsel as to what constitutes a “pleading.” The second change made by the amendment is that within initial communications debt collectors are required to disclose that the communication is from a “debt collector.”

Where does this all leave the ordinary practitioner who only sends an occasional demand letter? Quite simply, the Federal Fair Debt Collection Practices Act and the Florida Consumer Collection Practices Act are laws that should be understood by all attorneys regardless of the volume of consumer collection.

1 15 U.S.C. §§1692 et seq.
2 Fla. Stat. §§559.72 et seq.
3 15 U.S.C. §1692e.
4 Pub. L. No. 90-321, Title VIII §802-817 (codified at 15 U.S.C. §1692).
5 115 S.Ct. at 1490.
6 53 Fed. Reg. 50,097-50,100-02 (1988).
7 Mabe v. GC Services Limited Partnership, 32 F.3d 86 (4th Cir. 1994).
8 Starb v. Harris, 626 F.2d 275 (3d Cir. 1980).
9 Carrigan v. Central Adjustment Bureau, Inc., 494 F. Supp. 824 (N.D. Ga. 1980).
10 Shorts v. Palmer, 155 F.R.D. 172 (S.D. Oh. 1994).
11 FTC Informal Staff Opinion, May 22, 1987.
12 15 U.S.C. §1692e.
13 15 U.S.C. §§1692e(2)(A), 1692c(3).
14 Gloman v. Jackson, 988 F.2d 1314 (2d Cir. 1993); Bingham v. Collection Bureau, Inc., 508 F. Supp. 84 (D. N.D. 1981).
15 Gloman, 988 F.2d at 1319.
16 Gammon v. GC Services Ltd. Partnership, 27 F.3d 1254 (7th Cir. 1994).
17 Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir. 1985).
18 15 U.S.C. §1692c.
19 15 U.S.C. §1692e(11).
20 See 15 U.S.C. §1692g for full notice.
21 Rabideau v. Management Adjustment Bureau, 805 F. Supp. 1086 (W.D. N.Y. 1992).
22 FTC unofficial letter dated Nov. 1, 1986.
23 Swanson v. Southern Oregon Credit Services, Inc., 869 F.2d 1222 (9th Cir. 1988).
24 Higgins v. Capital Credit Services, Inc., 762 F. Supp. 1128 (D. Del. 1991).
25 Bieber v. Associated Collection Services, Inc., 631 F. Supp. 1410, 1417 (D. Kan. 1986).
26 15 U.S.C. §1692k.
27 U.S. v. Payco American Corp., No. 93-C-0801 (E. D. Wis. Aug. 8, 1995).
28 Bentley v. Great Lakes Collection Bureau, Inc., 6 F.3d 60 (2d Cir. 1993); Russell v. Equifax, 74 F.3d 30 (2d Cir. 1996).
29 15 U.S.C. §1692k(c); see also Carrigan v. Central Adjustment Bureau, Inc., 494 F. Supp. 824 (N.D. Ga. 198).
30 15 U.S.C. §1692k(c).
31 15 U.S.C. §1692k(a).
32 Mattson, 967 F.2d at 261.
33 15 U.S.C. §1692k(a)(3).
34 Johnson v. Eaton, 80 F.3d 148 (5th Cir. 1996).
35 Fla. Stat. §§559.72 et. seq.
36 15 U.S.C. §1692k(a)(2)(B).
37 Avila, 84 F.3d at 228.
38 See Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., Appellate Court No. 96-2113,
7th Circuit; Charles v. Check Rite, Ltd., No. 96-15995, 9th Circuit.
39 Zimmerman v. HBO Affiliate Group, 834 F.2d 1163 (3d Cir. 1987).
40 See Bradley T. Ryan v. Wexler & Wexler, Docket No. 96 C 1806 (N.D. Ill. June 19, 1996); Perez v. Slutsky, 1994 WL 698519 (N.D. Ill. Dec. 12, 1994); Vosatka v. Wolin-Levin, Inc., 1995 WL 443950 (N.D. Ill. July 21, 1995).
41 H.R. 3610/ H.R. Rep. 104-863.

Barbara A. Sinsley is an attorney with the firm of Harris, Barrett, Mann & Dew in Tampa. Ms. Sinsley practices in the areas of commercial litigation, creditors’ rights, and fair debt plaintiff and defense work.