FDCPA Case Law Review for June and July 2017

insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (“FDCPA”). This page is generously supported by TransUnion. See the page here or find it in our main navigation bar from any page on insideARM under Compliance Resources.

The centerpiece of the page is a chart of significant FDCPA cases. Case information and analysis is provided by Joann Needleman, a Clark Hill attorney and leader of the firm’s Consumer Financial Services Regulatory & Compliance Group. Click on the link in the chart for the complete text of the decision. Where insideARM has already published a story on the case, we provide a link to the story.

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Here’s a rundown of just some of the FDCPA Cases in the spotlight the last 30 days: 

Cameau v. National Recovery Agency, Inc.

The gist: Summary judgment granted in favor of defendant National Recovery Agency. Plaintiff alleged violation of FDCPA § 1692d(6), § 1692e as well as § 1692e(10)—essentially accusing the collection agency of failing to provide the company name via its employee agent, which plaintiff characterized as a deceptive refusal, and alleged that the agency used unfair means to collect a debt. All claims were dismissed due to lack of evidence. In fact, the plaintiff contradicted the claims in the complaint during deposition. Significantly, plaintiff’s attorney failed to respond to the defendant’s motion for summary judgment.  

Infante v. Portfolio Recovery Associates, LLC

The gist: Plaintiff claimed defendant did not report a disputed debt to CRAs. In discovery, defendant produced evidence that it did report to all three credit reporting agencies (CRAs) at once, and could not control the response of the CRA that delayed in reporting the dispute on the plaintiff’s credit file. This evidence could have caused plaintiff to dismiss the case, but did not. Defendant moved for sanctions against plaintiff, which the court denied. “Plaintiff and her counsel acted reasonably in relying on the Experian report to pursue her claim through discovery, even if discovery revealed evidence undermining her claim.” 

Huffmann v. BC Services, Inc.

The gist: Having received a collection letter stating a zero balance, plaintiff alleged the letter in question was both harassing and misleading and violated the FDCPA. Defendant’s Motion to Dismiss was granted: “Because actions taken after the termination of a debt “by former debt-collectors . . . could not be deemed to be ‘in connection’ with a present debt collection proceeding,” the defendant’s conduct could not constitute a violation of the FDCPA.”

Gebhardt v. LJ Ross Associates

The gist: Defendant collection agency was not held responsible for having placed a call to a debtor while a letter from that debtor’s attorney was being processed in the agency’s mail room. FDCPA requires the debt collector to have actual knowledge of an individual's legal representation prior to making a communication. The mailroom employee only signed for the letter and did not read it or have knowledge of its contents. 

Cottle v. Associated Credit Service, Inc.

The gist: The court found no FDCPA violation when a demand letter referred to original and current creditor as the same entity. Court found claims to be meritless. 

Feldheim v. Financial Recovery Services, Inc.

The gist: Case dismissed when the court found that a settlement letter that stated “As of this date you owe____" did not infer or imply that the stated balance would necessarily change.

insideARM Perspective: FDCPA Claims or Theater of the Absurd? 

It’s hard to miss the theme in a good batch of this summer’s FDCPA cases of far: Quick wins went to defendants facing baseless claims. Where the courts are meant to grapple with the interpretation of law, they frequently also become the backdrop for the theater of the absurd, where plaintiff’s bar is willing to drag just about any case beyond discovery, regardless of what it reveals. This is partly due to the fact that the FDCPA allows for the plaintiff to recover fees if they are successful, but the same is not true for defendants. With the standards for sanctions set very high and a desire by the courts to avoid a chilling effect that could discourage legitimate suits, sanctions against defendants or their counsel are almost unheard of.

Will debt collectors decide, en masse, that fighting to collect fees and other costs when baseless suits are brought is worthwhile on principle?  At the moment, while there are a number of rules under which a defendant can move for sanctions after a win, they are rarely granted and they’re expensive to pursue. Even when sanctions are granted, they’re notoriously difficult to collect on. Rule 11 sanctions, for example, require a warning letter to opposing counsel, a 21-day safe harbor meant to encourage a “cure” or resolution, and then a motion for sanctions after the case is won. It’s costly. It’s time consuming. It’s a crap shoot. It’s no wonder motions under Rule 11 are rare. While understandable, it’s also possible that we’d see more sanctions for baseless suits if more defendants pursued them.

Ultimately, the Courts want to stay out of attorney skirmishes and focus on evaluating the merits of each case. When behavior does actually rise to the standard of sanctionable conduct, judges have an inherent power to sanction bad faith litigants on both sides of the aisle under both the FDCPA and FCRA, or under 28 U.S.C. § 1927. That statute provides that “[a]ny attorney…who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”

As usual, the cases we summarize in our chart are both positive and negative for the ARM industry. Readers should be cautious about the applicability of a particular case to their jurisdiction. There are often conflicting decisions on the same or similar issue.  A slight change in facts could dramatically impact a future decision.