Fair Debt Collection Practices Act NAA Legal Symposium Florida 2018 Mark N. Tschetter, Tschetter Hamrick Sulzer Presented by Kirk A. Cullimore, The Law Offices of Kirk A. Cullimore
Applicability of the FDCPA The Fair Debt Collection Practices Act Applies to Debt Collectors 1
Debt Collector 15 U.S.C.A. § 1692a(6) The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. 2
Owners & Third Party Fee Managers Are Exempt from FDCPA 15 U.S.C.A. § 1692a(F) (F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such a person; (iii) concerns a debt which was not in default at the time it was obtained by such person; (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor. 3
Courts Have Routinely Upheld This Exemption The Act excludes not only the original creditor but also any person who tries to collect a debt that “was not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F)(iii) Carter v. AMC, LLC, 645 F.3d 840, 843 (7 th Cir. 2011) 4
Law firms that regularly collect money are subject to the Fair Debt Collection Practices Act 5
The Exemption Can Be Lost, If: Owner/Management Company - Uses Another Name (. . . Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. . .) 15 U.S.C.A. § 1692a(6) (in pertinent part) 6
The Exemption Can Be Lost, If: Management Attempts to Collect Debt that was already in Default before management begins. 7
FDCPA Required Disclosures 15 U.S.C.A. § 1692g “Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice” 8
FDCPA Required Disclosures (Cont’d) 15 U.S.C.A. § 1692g(a)(1)(2)(3) (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; 9
FDCPA Required Disclosures (Cont’d) 15 U.S.C.A. § 1692g(a)(4) (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and 10
FDCPA Required Disclosures (Cont’d) 15 U.S.C.A. § 1692g(a)(5) (5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. 11
FDCPA Required Disclosures (Cont’d) 15 U.S.C.A. § 1692e(11) Specific Legally Required Disclosures are also contained in §1692(e), and must be made in the initial written or oral communication that the debt collector is attempting to collect a debt • any information obtained will be used for that purpose • Subsequent communications must indicate that they are from a • debt collector But formal pleading made in connection with a legal action are • not considered a “communications” 12
FDCPA Requirements When Debts Are Disputed 15 U.S.C.A. § 1692g(b)(in part) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. 13
A History of FDCPA Case Law Application of the FDCPA to Eviction Cases has been Inconsistent and Problematic 14
Romea v. Heiberger & Associates, 163 F.3d 111 (2d Cir. 1998) • Back rent is debt • Rent demands are a communication triggering FDCPA • Attorneys who are debt collectors & sign rent demands are subject to FDCPA 15
Cook v. Hamrick, 278 F. Supp. 2d 1202 (D. Colo. 2003) • Back Rent is Not Debt (clear minority position now) • FDCPA only applies to lawyers regularly engaged in debt collection • Eviction complaint in non-compliance case is not a “communication” 16
Eina Realty v. Calixte, 679 N.Y.S.2d 796 (N.Y. Civ. Ct. 1998) • Reaffirmed that attorneys are liable under FDCPA if they sign rent demand • FDCPA violation makes the eviction notice defective • But the defective holding turns out to be short lived 17
Missionary Sisters of Sacred Heart, Inc. v. Dowling, 703 N.Y.S.2d 362 (N.Y. Civ. Ct. 1999) • FDCPA violation is not a defense to eviction (doesn’t make notice defective) • If attorney drafts or advises client regarding rent demand not FDCPA violation • Pleading is not a communication 18
Hodges v. Feinstein, Raiss, Kelin & Booker, LLC, 893 A.2d 21, 23 (N.J. Super. Ct. App. Div. 2006) The narrow question before us in this appeal is whether a law firm representing a landlord in a summary dispossess action is a “debt collector” subject to the FDCPA. We find that it is if the firm regularly engages in a practice prosecuting summary dispossess actions. 19
Lee v. Kucker & Bruh, LLP , 958 F. Supp. 2d 524 (S.D.N.Y. 2013) • Debt collectors (Eviction Law Firm) found liable for making false representation of character, amount, and legal status of consumer's debt, in violation of FDCPA • The eviction law firm was deemed to have made the false representation because the amount of the rent demand was incorrect. 20
Lipscomb v. The Raddatz Law Firm, P .L.L.C., 109 F. Supp. 3d 251, 260 (D.D.C. 2015) • Possession Action Subject To FDCPA • Except for §1692e(11) & §1692g(d), the FDCPA applies to all litigation activities including formal pleadings • Misrepresentations made in eviction pleadings created FDCPA liability 21
Best Practices • Comply with FDCPA if obtaining money judgments in evictions • Evaluate if obtaining partial money judgments in evictions • Evaluate if just obtaining possession 22
Potential Move-Out Statement/ Balance Liability • Falsely representing character, amount, or legal status • Communicating credit information which is known or which should be known to be false • Collection of any amount unless such amount is expressly authorized by agreement 23
Problematic Items on Move-Out Statements • Eviction Attorneys’ Fees • Collection Fees • Liquidated Damage (Lease Break Not Supported by Lease) • Piling on of Notice and Breakers 24
Partial Money Judgments • Not being addressed • Creates significant FDCPA exposure 25
Presentation Materials Download the Presentation: tinyurl.com/THSFDCPA Download the Presentation Package: tinyurl.com/FDCPA 26
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