Letter Asking Consumer to Consider Payment Arrangements and Requiring Signed Consent Judgment Deemed FDCPA Violation

A United States District Court in Louisiana has determined that a letter from a collection law firm that invites a consumer to consider voluntary repayment, but also includes a requirement that the consumer sign a Consent Judgment, violates the Fair Debt Collection Practices Act (FDCPA). The case is Brandon v. Eaton Group Attorneys, LLC, Case No. 16-13747, 2017 WL 345864 (United States District Court, Eastern District, Louisiana, Jan. 24, 2017).

A copy of the opinion can be found here.

Background

On May 6, 2016, Eaton Group Attorneys, LLC (Eaton), as the representative of National Collegiate Student Loan Trust 2007-1, filed a petition against Dr. Brandon (Brandon) in the 24th Judicial District Court for the Parish of Jefferson.  In its petition, the Student Loan Trust alleged that defendant had defaulted on a debt, and sought $41,115.13, plus accrued interest of $4,998.37, additional interest at the rate of 4% from the date of judgment, and costs.

On or around June 3, 2016, Brandon received a letter from concerning the lawsuit and her alleged debt. The subject line of the letter described it as a “REQUEST FOR PAYMENT ARRANGEMENTS.” 

The letter stated:

If you would like to explore a voluntary repayment plan, then please provide the requested information. The debt will need to be acknowledged through the attached consent judgment. Please return these forms as soon as possible. This is a communication from a debt collector. This is an attempt to collect a debt. Any information obtained will be used for that purpose. 

The letter also included a form for Brandon to provide information— including address, social security number, and employer’s contact information—for both Brandon and her spouse.

Attached to the letter was a partially completed consent judgment and a copy of the petition in the Jefferson Parish case. The consent judgment stated:

IT IS ORDERED, ADJUDGED, AND DECREED that judgment be rendered in favor of the Plaintiff, NATIONAL COLLEGIATE LOAN TRUST 2007-1, and against the defendant, CASSANDRA PLUMMER (SSN []), in the full sum of $41,115.13, together with accrued interest of $4,998.37, and additional interest of 4% from date of judgment, and for all costs of these proceedings, subject to a credit of $.00.

The consent judgment had already been signed by a representative of the Eaton Group.

Brandon sued Eaton, alleging that the debt collection letter violated the FDCPA, 15 U.S.C. § 1692, et seq., and the Louisiana Unfair Trade Practice and Consumer Protection Act, LA. Rev. Stat. § 51:1401-18.

In her complaint, Brandon alleges that the letter “was deceptive and misleading as it attempted to trick [her] into signing a consent judgment by promising a voluntary repayment plan.”

The Eaton Group moved for summary judgment, arguing that the letter it sent to Dr. Brandon was non-deceitful as a matter of law. The court denied the motion. 

The Court’s Decision 

The decision was written by the Honorable Sarah S. Vance, United States District Court Judge.  Judge Vance wrote: 

“The Court finds that the letter plaintiff received was misleading because an unsuspecting debtor, seeking only to “explore a voluntary repayment plan,” could be fooled into executing the consent judgment without knowledge of the consequences. Specifically, an unsophisticated debtor may not know that the consent judgment will serve to waive potentially valid defenses and may facilitate a wage garnishment order.

Plaintiff alleges that defendant did not intend to use the consent judgment for a voluntary repayment plan, but rather to enforce involuntary repayment. If a repayment plan is “explore[d],” but no repayment plan is actually agreed to, the debtor is still bound by the acknowledgement and consent judgment. This follows because the letter could be read to mean the debtor is receiving only the right to “explore” an unspecified repayment plan by signing the acknowledgment and consent judgment. Under these circumstances, the debtor has to sign the consent judgment and acknowledge the debt before he even knows the terms of the payment plan to be “explore[d].” Unsophisticated consumers may be unaware that they will have no leverage to negotiate a payment plan because they will be bound by the acknowledgement and consent judgment even if the plan offered is never agreed to. Defendants’ argument that the letter expresses their purpose not to enforce the consent judgment if plaintiff adheres to an agreed payment plan is not supported by the language of the letter.”

insideARM Perspective 

insideARM encourages readers to review the full opinion in this case. In Judge Vance’s discussion she references cases regarding settlement offers on time-barred debt and views the letter in this case as similar. Judge Vance found persuasive the argument that time barred debt letters could fool an unsuspecting debtor into reviving the barred debt—and thereby place the debtor in a worse position; letters containing such offers and no disclosure of the associated risk may be misleading. She felt the letter is this case could have the same impact.

insideARM has previously written about time barred debt settlement offers in the past. See our September 14, 2016 article here.