Saturday, October 30, 2010

Why The "Meaningful Involvement" Doctrine Should Not Exist Under The FDCPA

Section 1692e(3) of the FDCPA contains a simple rule: collectors may not make the “false representation or implication that any individual is an attorney or that any communication is from an attorney.” 15 U.S.C. § 1692e(3). But some circuit courts have expanded this narrow prohibition far beyond the plain language of the statute. They have read section 1692e(3) to include a broader mandate that requires collection attorneys to be “meaningfully involved” in the review of a consumer’s file before a collection letter is sent. See, e.g., Clomon v. Jackson, 988 F.2d 1314, 1320-21 (2d Cir. 1993); Avila v. Rubin, 84 F.3d 222, 228-29 (7th Cir. 1996).

Using this expansive interpretation of section 1692e(3) of the FDCPA, consumer attorneys, federal judges and juries have been allowed to invade the attorney-client privilege and second-guess the amount of review performed by collection attorneys on behalf of their clients. In other words, these cases have gone wildly wrong.

Collection attorneys and their clients should not be content to live with the “meaningful involvement” doctrine. Instead, they should continue to remind courts of the important reasons why the “meaningful involvement” doctrine has to be rejected. The phrase “meaningful involvement” is not contained in the plain language of the FDCPA, and courts should not imply words where Congress decided not to use them. Nor is the “meaningful involvement” doctrine consistent with the purposes of the FDCPA. The Act is an anti-deception statute. Congress can and has properly prohibited attorneys from making false or misleading statements when they communicate with consumers. But the FDCPA does not give federal courts the power to regulate the private interactions between a collection attorney and his client. Nor does the Act define the level of care that an attorney must use when handling a collection matter. A collection lawyer, working in conjunction with his client, has the right to decide the appropriate level of attorney “involvement” – if any – that is warranted by the circumstances.

Nothing in the plain language of section 1692e(3) of the FDCPA - or in any other provision of the FDCPA – refers to “meaningful involvement” by attorneys. See 15 U.S.C. §§ 1692-1692o. Courts should not read new requirements into the FDCPA beyond those specified by the Act’s plain language. See, e.g., Camacho v. Bridgeport Fin., Inc., 430 F.3d 1078, 1081 (9th Cir. 2005) (“‘[W]hen the statute’s language is plain, the sole function of the courts – at least where the disposition required by the text is not absurd – is to enforce it according to its terms.’”); Dutton v. Wolpoff and Abramson, 5 F.3d 649, 654 (3d Cir. 1993) (“It is beyond our power to deviate from the text of the statute unless its literal application would lead either to an absurd or futile result or one plainly at odds with the policy of the whole legislation.”).

Congress never intended to use the FDCPA to regulate the level of attorney “involvement” with a client’s files. The judiciary, not Congress, establishes professional standards for the bar and oversees the conduct of attorneys. See Paul E. Iacono Structural Eng’r, Inc. v. Humphrey, 772 F.2d 435, 439 (9th Cir. 1983) (“[T]he regulation of lawyer conduct is the province of the courts, not Congress.”); see also ABA v. FTC, 430 F.3d 457, 467 (D.C. Cir. 2005) (rejecting argument that Congress wanted the FTC to regulate attorneys under the Gramm-Leach Bliley Act: “[Congress] does not ... hide elephants in mouseholes. (citation)”).

Even the decisions in Clomon and Avila – the leading “meaningful involvement” cases – do not suggest otherwise. Read closely, Clomon and Avila stand for nothing more than the notion that attorneys, like other collectors, may not send letters that contain false statements or threats.

In Clomon, the debtor received collection letters sent on attorney letterhead and which “bore a mechanically reproduced signature” of an attorney. See 988 F.2d at 1316-17. The letters falsely suggested that the attorney had personally reviewed Clomon’s case and that litigation was a real possibility. See id. at 1317. It was undisputed, however, that the attorney never advised his client “about how to address particular circumstances of Clomon’s case” and “never received any instructions from [his client] about what steps to take against Clomon.” Id. It was not surprising that the Clomon found that the letters violated the Act because they explicitly – and falsely – suggested the attorney had conducted an individualized review of the debtor’s file.

Similarly, the debtor in Avila received three letters sent on attorney letterhead “‘signed’ with a mechanically reproduced facsimile” of the attorney’s signature. See 84 F.3d at 225. The first letter stated that if payment was not received within ten days, “‘a civil suit may be initiated against you by your creditor for repayment of your loan.’” Id. The second and third letters demanded payment and threatened a lawsuit if payment was not made. See id. Despite these express threats of suit, the court observed that it was “unclear (but we think doubtful) whether [Rubin & Associates] litigate anywhere.” Id. at 224.

Clomon and Avila turned on their specific facts. They involved collection letters sent on attorney letterhead, “signed” by attorneys, and containing false threats of legal action and other false statements. Neither case provides support for creating a qualitative “meaningful involvement” standard under the FDCPA that applies to collection attorneys and their clients.

The FDCPA was not passed by Congress as a means to regulate the practice of law or to dictate the relationship and workflow between a client and a collection attorney. Clients and collection lawyers have the right to decide what level of attorney review or “involvement” is appropriate for collection matters, and the FDCPA must not be interpreted in a way that would interfere with the attorney-client relationship. The “meaningful involvement” doctrine should be rejected.

Readers who are interested in a more detailed critique of the "meaningful involvement" doctrine can download and read the amicus brief filed in the Third Circuit Court of Appeals by the National Association of Retail Collection Attorneys in the case of Lesher v. Mitchell N. Kay.

NARCA's Amicus Brief In Third Circuit Lesher v. Mitchell N. Kay -

Monday, October 4, 2010

A Summary Of Senator Al Franken's Bill (S. 3888) To Amend The FDCPA

It is widely anticipated that Congress will amend the FDCPA in the near future, perhaps as soon as next year. Exactly how the Act will be amended, however, is still an open question.

On September 29, 2010, Senator Al Franken (D-MN) introduced a bill to amend the FDCPA, S.3888, which he styled as the "End Debt Collector Abuse Act of 2010." The most widely-publicized portion of the proposed bill is the section that prohibits collectors from seeking a warrant for the arrest of a debtor. But the real teeth in the bill can be found in its proposals to 1) expand the duties of collectors to provide information with the initial validation notice and in response to disputes received from consumers, 2) significantly increase statutory damages, and 3) allow courts to issue injunctive relief for violations of the Act.

A copy of the text of the bill appears in the window below.

S.3888 Al Franken Bill To Amend The FDCPA -

It seems highly unlikely that Congress will take any action on Senator Franken's bill this year, but it may become the starting point in the drive to amend the Act in the coming year. If S. 3888 were adopted into law without any changes, it would amend the FDCPA as follows:

1. Add a new subsection, 1692f(9), providing that "unfair or unconscionable means to collect or attempt to collect any debt" would include: "(9) A request by a debt collector to a court or any law enforcement agency for the issuance of a warrant for the arrest of a debtor or any other similar request that a debt collector knows or should know would lead to the issuance of an arrest warrant, in relation to collection of a debt."

2. Add new required language and new obligations for debt collectors in subsection 1692g(a), by requiring that the initial validation notice include:

"(5) the date of the last payment to the creditor on the subject debt by the consumer and the amount of the debt at the time of default;

(6) the name and address of the last person to extend credit with respect to the debt;

(7) an itemization of the principal, fees and interest that make up the debt and any other charges added after the date of the last payment to the creditor;

(8) a description of the rights of the consumer – (A) to request that the debt collector cease communication with the consumer under section 805(c); and (B) to have collection efforts stopped under subsection (b); and

(9) the name and contact information of the person who is responsible for handling complaints on behalf of the debt collector.”

3. Add new language to subsection 1692g(b)(2) which provides: "(2) Reasonable investigation and verification required. Upon receipt of a notification under paragraph (1) that a debt is disputed by the consumer, the debt collector shall undertake a thorough investigation of the substance of the dispute, and shall timely provide to the consumer specific responsive information and verification of the disputed debt."

4. Add a new remedy for injunctive relief to section 1692k(d) as follows: "In a civil action alleging a violation of this title, the court may award appropriate relief, including injunctive relief."

5. Add a new subsection 1692k(f) that would provide an increase in the amount of statutory damages the can be awarded under the FDCPA, and would then allow for subsequent annual increases in statutory damages, adjusted based upon the Consumer Price Index, as follows:

"(f) Adjustment for inflation.

(1) initial adjustment - Not later than 90 days after the date of the enactment of this subsection, the Commission shall provide a percentage increase (rounded to the nearest multiple of $100 or $1,000, as applicable) in the amounts set forth in such section equal to the percentage by which - (A) the Consumer Price Index for All Urban Consumers (all items, United States city average) for the 12-month period ending on the June 30 preceding the date on which the percentage increase is provided, exceeds (B) the Consumer Price Index for the 12-month period preceding January 1, 1978.

(2) Annual adjustments - With respect to any fiscal year beginning after the date of the increase provided under paragraph (1), the Commission shall provide a percentage increase (rounded to the nearest multiple of $100 or $1,000, as applicable) in the amounts set forth in this section equal to the percentage by which - (A) the Consumer Price Index for All Urban Consumers (all items, United States city average) for the 12-month period ending on the June 30 preceding the beginning of the fiscal year for which the increase is made, exceeds (B) the Consumer Price Index for the 12-month period preceding the 12-month period described in subparagraph (A).

When he introduced the bill, Senator Franken explained that there were "big problems in the debt collection industry that are long overdue in being addressed" and that he had learned of these problems as a result of a series of articles about collectors featured in his local newspaper, the Minneapolis Star Tribune.

You can watch Senator Franken's Senate Floor Statement introducing the bill here: