Debt collectors are being sued in courts across the country for allegedly violating the FDCPA by making harassing and abusive phone calls to consumers. No clear rules exist on what constitutes harassing or abusive language, however, and the language of the FDCPA does not shed much light on this subject.
Section 1692d provides that collectors may not engage in “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” See 15 U.S.C. § 1692d. In addition, section 1692d(2) of the Act prohibits debt collectors from using “obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.” Id. at § 1692d(2). But what exactly does this mean? When has a collector stepped over the line from making an appropriate demand for payment into harassing or abusive conduct?
Surprisingly few circuit courts have interpreted section 1692d of the FDCPA, but the courts that have done so have construed it very narrowly. The leading case is Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (7th Cir. 1985), where the Seventh Circuit held that a letter stating that an account would be referred for legal action, and that this “may cause you embarrassment, inconvenience and further expense,” did not violate section 1692d. Id. at 1178-79. The description of the potential impact of a lawsuit was a “true statement” and did not create a “tone of intimidation.” Id. at 1179. The statement did not violate section 1692d(2), because that subsection was “meant to deter offensive language which is at least akin to profanity or obscenity. Such offensive language might encompass name-calling, racial or ethnic slurs, and other derogatory remarks which are similar in their offensiveness to obscene or profane remarks.” Id. at 1178. It was no surprise, therefore, in Horkey v. J.V.D.B. & Associates, Inc., 333 F. 3d 769 (7th Cir. 2003), when the Seventh Circuit affirmed a trial court ruling that section 1692d(2) was violated. There, after the debtor explained she could not discuss the debt a work, the collector called back and left a message with a coworker stating “tell Amanda to stop being such a [expletive] bitch.” Id. at 773.
More recently, the Sixth Circuit held in Harvey v. Great Seneca Fin. Corp., 453 F.3d 324 (6th Cir. 2006), that “the filing of a debt-collection lawsuit without the immediate means of proving the debt does not have the natural consequence of harassing, abusing, or oppressing a debtor” and thus does not violate section 1692d. Id. at 330. As the Harvey Court observed: “Any attempt to collect a defaulted debt will be unwanted by a debtor, but employing the court system in the way alleged by Harvey cannot be said to be an abusive tactic under the FDCPA.” Id. at. 330-31.
District courts have also read section 1692d narrowly, recognizing that it prohibits “only oppressive and outrageous conduct,” and that it was “not intended to shield even the least sophisticated recipients of debt collection activities from the inconvenience and embarrassment that are natural consequences of debt collection.” Beattie v. D.M. Collections, Inc., 754 F. Supp. 383, 394 (D. Del. 1991) (attempts to collect debt from wrong individuals did not violate section 1692d); see also Bieber v. Associated Collection Servs., Inc., 631 F. Supp. 1410, 1471 (D. Kan. 1986) (asking if debtor had hired a bankruptcy attorney did not violate section 1692d: “[Section 1692d] prohibits a debtor's tender sensibilities only from oppressive and outrageous conduct. Some inconvenience to the debtor is a natural consequence of debt collection.”); Shuler v. Ingram & Assocs., 710 F. Supp. 2d 1213, 1222 (N.D. Ala. 2010) ( references to potential garnishment and liens were “probably unpleasant” but were not sufficient to support a claim: “Courts have construed narrowly the type of conduct that violates § 1692d( 2).”)).
Given that section 1692d only prohibits outrageous language and conduct, courts have held that laughing at a debtor during a collection call is not sufficient to support a section 1692d claim. See, e.g., Bassett v. I.C. Sys., Inc., 715 F. Supp. 2d 803, 809 (N.D. Ill. 2010) (laughing may be “rude” but does not amount to a section 1692d violation); Gallagher v. Gurstel, Staloch & Chargo, P.A., 645 F. Supp. 2d 795, 799 (D. Minn. 2009) (laughing is not even “remotely comparable” to type of conduct that violates section 1692d).
In addition, courts have held that calling a debtor a “liar” does not violate section 1692d. See, e.g., Bassett, 715 F. Supp. 2d at 809 (calling debtor “liar” and accusing him of making excuses to avoid payment did not violate section 1692d(2)); Guarjardo v. GC Servs., LP, 2009 WL 3715603 (S.D. Tex. Nov. 3, 2009) (calling debtor “liar,” demanding “payment in full within 24 hours or else,” and saying “I can tell the kind of life you live by the fact that you don’t pay your bills on time” not enough to prove section 1692d claim); Mammen v. Bronson & Migliacco, LLP, 715 F. Supp. 2d 1210, 1218 (M.D. Fla. 2009) (telling debtor “You’re lying, this is your account and you have to pay it” and hanging up not sufficient to prove a section 1692d claim); Montgomery v. Florida First Financial Group, Inc., 2008 WL 3540374 (M.D. Fla. Aug. 12, 2008) (calling debtor a “liar” and her mother a liar not enough to prove section 1692d claim).
Some courts have held that yelling at a debtor is not a violation of section 1692d. See, e.g., Kelemen v. Professional Collection Sys., 2011 WL 31396 (M.D. Fla. Jan. 4, 2011) (telling debtor to “pay your damn bills” was rude but not obscene or profane under section 1692d(2); noting that profane means “importing an imprecation of divine vengeance or implying divine condemnation or irreverence toward God or holy things.”); Unterreiner v. Stoneleigh Recovery Assocs., LLC, 2010 WL 2523257, *1 (N.D. Ill. June 17, 2010) (screaming at debtor, saying you owe “all kinds of money” and asking “how could you go and max out a card like that?” was “rude and unpleasant” but did not state a section 1692d claim); Thomas v. LDG Fin. Servs. LLC, 463 F. Supp. 2d 1370, 1373 (N.D. Ga. 2006) (yelling at debtor “Georgia is a garnishable state” and hanging up did not violate section 1692d).
Debt collectors should always treat consumers with dignity and respect during the collection process. As courts throughout the country have recognized, however, section 1692d of the FDCPA is narrow in scope, and only prohibits the use of truly outrageous language – such as profanity, racial or ethnic slurs or other derogatory remarks – which has the natural tendency to harass, oppress or abuse the listener.
Monday, April 4, 2011
Sunday, February 20, 2011
Caveat Creditor: Why Creditors Must Be Wary Of California’s Rosenthal Act And The FDCPA
Should creditors care about the FDCPA? For the most part, original creditors – including banks, credit card issuers, finance companies, telecommunications companies, payday lenders, and other entities that extend credit directly to consumers – do not operate as “debt collectors” as defined by the FDCPA. For this reason, when creditors are trying to collect money from their own customers, they may not pay much attention to the requirements of the FDCPA, or the myriad of cases that have interpreted the statute. But ignoring the FDCPA is not a good idea for creditors who want to collect money from customers located in California.
Any creditor who attempts to collect a consumer debt from a California consumer likely qualifies as a “debt collector” under California’s debt collection statute – the Rosenthal Act. See Cal. Civ. Code § 1788.2(c) (“debt collector” includes anyone “who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection.”). The Rosenthal Act not only includes its own set of requirements regulating debt collection, but also incorporates by reference most of the requirements of the FDCPA. See Cal. Civ. Code §1788.17. Thus, a creditor who fails to comply with the FDCPA while collecting from a California resident may be violating California law.
There are two significant exceptions to section 1788.17 of the Rosenthal Act: creditors do not need to provide consumers with the “mini-Miranda” notice required by section 1692e(11) of the FDCPA, nor must creditors send consumers the validation notice mandated by section 1692g of the FDCPA. See Cal. Civ. Code § 1788.17. But the remaining substantive provisions of the FDCPA, as well as the remedies provided by section 1692k(a)(3) of the Act, apply to creditors who collect in California. Id.
The FDCPA can be an awkward fit when it is applied to creditors collecting from their own customers. Despite this, courts will often rely on the reasoning employed by FDCPA decisions when evaluating Rosenthal Act claims filed against creditors. See, e.g., Reyes v. Wells Fargo Bank, N.A., 2011 WL 30759 (N.D. Cal. Jan. 3, 2011) (using “least sophisticated debtor” standard to evaluate Rosenthal Act claims against creditor); Thompson v. Chase Bank, N.A., 2010 WL 1329061, at *3 (S.D. Cal. March 30, 2010) (refusing to dismiss Rosenthal Act claims alleging that collection calls made on Easter Sunday, Memorial Day and Mothers’ Day were at “inconvenient” or “unusual” times).
Creditors, like traditional debt collectors, must be aware of the volume and pattern of their collection phone calls. Creditors obviously have a legitimate need to contact their delinquent customers by phone to make payment arrangements. But the Rosenthal Act, like the FDCPA, prohibits creditors from placing telephone calls repeatedly or continuously with the intent to annoy the person called. See Cal. Civ. Code §§ 1788.11(d), 1788.11(e). Is there a limit on how many call attempts a creditor can make?
To date, there are no clear answers, because the reported decisions have involved calls placed by traditional debt collectors, not by creditors. But we can expect that the courts will be guided by the reasoning used in FDCPA cases, considering not only the volume of the calls, but also the calling pattern and the individual facts of the case. See e.g., Arteaga v. Asset Acceptance, 733 F. Supp. 2d 1218, 1229 (E.D. Cal. 2010) (summary judgment for debt collector; evidence of “daily” calls not sufficient to support claim for intent to harass under FDCPA or section 1788.11 of the Rosenthal Act); Rucker v. Nationwide Credit, Inc., 2011 WL 25300 (E.D. Cal. Jan. 5, 2011) (refusing to dismiss claims under FDCPA or sections 1788.11(d), (e) of Rosenthal Act where collector allegedly placed 80 calls to consumer in one year).
Will courts utilize the Foti line of cases when evaluating the content of voice mail messages left by creditors? The reasoning of the Foti decisions likely will not make sense when applied to a creditor’s voice mails messages, and to date, there are no published decisions on the issue. But creditors should consider that California courts have held that a debt collector’s failure to properly identify itself in a voice mail message can violate both the FDCPA and the Rosenthal Act. See, e.g., Hosseinzadeh v. M.R.S. Associates, Inc., 387 F. Supp. 2d 1104,1117-18 (N.D. Cal. 2005) (collector’s failure to properly identify itself in voice mail messages violated FDCPA and Rosenthal Act); Joseph v. J.J. Mac Intyre, L.L.C., 238 F. Supp. 2d. 1158, 1168 (N.D. Cal. 2002) (same, denying motion to dismiss).
Most creditors have procedures in place for dealing with consumers who are represented by attorneys. When a consumer notifies the creditor in writing that she has retained an attorney, the Rosenthal Act prohibits the creditor from initiating communications directly with the consumer – “other than statements of account” – in an attempt to collect the debt. See Cal. Civ. Code § 1788.14(c). But what if the creditor mails a monthly statement directly to a represented consumer, and the statement includes language noting that the account is delinquent? Unfortunately, the Rosenthal Act does not define the term “statements of account” and the courts in California are split on this issue. See, e.g., Marcotte v. GE Capital Services, 709 F. Supp. 2d 994 (S.D. Cal. 2010) (granting judgment on the pleadings; monthly billing statements sent directly to represented consumer did not violate section 1788.17 of Rosenthal Act); Moya v. Chase Cardmember Service, 661 F. Supp. 2d 1129 (N.D. Cal. 2009) (denying motion to dismiss claim that monthly statements sent to represented consumer violated section 1788.14 of Rosenthal Act).
Should creditors be concerned about facing Rosenthal Act class actions? Section 1788.30 of the Rosenthal Act does not allow for class actions, and in fact, it specifically limits consumers to pursuing claims “only in an individual action.” See Cal. Civ. Code §§ 1788.30(a), 1788.30(b). Under section 1788.17 of the Rosenthal Act, however, creditors are “subject to the remedies” of section 1692k of the FDCPA. A number of courts have held that consumers may pursue class actions under the Rosenthal Act. See, e.g. Abels v. JBC Legal Group, P.C., 227 F.R.D. 541 (N.D. Cal. 2005) (granting motion to certify Rosenthal Act class action); Gonzalez v. Arrow Financial Services LLC, 489 F. Supp. 2d 1140 (S.D. Cal. 2007) (denying motion to decertify Rosenthal Act class action).
The Rosenthal Act allows consumers to recover any actual damages they sustain by reason of the violation. See Cal. Civ. Code § 1788.30(a). Unlike the FDCPA, however, the Rosenthal Act is not a strict liability statute. Statutory penalties ranging from $100 to $1000 may be recovered, but only where the consumer demonstrates the defendant “willfully and knowingly” violated the Rosenthal Act. See Cal. Civ Code § 1788.30(b).
If a willful and knowing violation is shown, are the statutory damages limited to $1000 per action, as in FDCPA cases, or may the consumer recover $1000 per violation? The better-reasoned decisions hold that the consumer is limited to $1000 per action. See, e.g., Scott v. Federal Bond and Collection Service, Inc., 2011 WL 176846, at *3 (N.D. Cal. Jan 19, 2011) (Rosenthal Act statutory damages limited to $1000 per action); Marseglia v. JP Morgan Chase Bank, 2010 WL 4595549 (S.D. Cal. Nov. 12, 2010) (same). One California court, however, refused to grant a creditor’s motion to strike portions of a Rosenthal Act complaint that sought $1000 per violation. See Hamberg v. JP Morgan Chase Bank, 2010 WL 2523947 (S.D. Cal. June 22, 2010).
What about defenses? Like the FDCPA, the Rosenthal Act includes a “bona fide error” defense, which allows a creditor to prove that any violation was not intentional, and occurred notwithstanding maintenance of procedures reasonably adapted to avoid the violation. See Cal. Civ. Code § 1788.30(e). The Rosenthal Act also has a “right to cure” defense, which permits a creditor, within 15 days of discovering any violation which is “able to be cured” or after written notice of any such violation, to notify the debtor of the violation and to make any adjustments or corrections necessary to cure the violation. See Cal. Civil Code § 1788.30(d).
The Rosenthal Act has been around for decades, and the statute has always applied to creditors. During the past few years, however, the Rosenthal Act has become a favorite of consumer attorneys, and the trend appears likely to continue. Creditors with customers in California must be aware that, in light of section 1788.17 of the Rosenthal Act, any attempts to collect in California must comply with the Rosenthal Act and the FDCPA.
Any creditor who attempts to collect a consumer debt from a California consumer likely qualifies as a “debt collector” under California’s debt collection statute – the Rosenthal Act. See Cal. Civ. Code § 1788.2(c) (“debt collector” includes anyone “who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection.”). The Rosenthal Act not only includes its own set of requirements regulating debt collection, but also incorporates by reference most of the requirements of the FDCPA. See Cal. Civ. Code §1788.17. Thus, a creditor who fails to comply with the FDCPA while collecting from a California resident may be violating California law.
There are two significant exceptions to section 1788.17 of the Rosenthal Act: creditors do not need to provide consumers with the “mini-Miranda” notice required by section 1692e(11) of the FDCPA, nor must creditors send consumers the validation notice mandated by section 1692g of the FDCPA. See Cal. Civ. Code § 1788.17. But the remaining substantive provisions of the FDCPA, as well as the remedies provided by section 1692k(a)(3) of the Act, apply to creditors who collect in California. Id.
The FDCPA can be an awkward fit when it is applied to creditors collecting from their own customers. Despite this, courts will often rely on the reasoning employed by FDCPA decisions when evaluating Rosenthal Act claims filed against creditors. See, e.g., Reyes v. Wells Fargo Bank, N.A., 2011 WL 30759 (N.D. Cal. Jan. 3, 2011) (using “least sophisticated debtor” standard to evaluate Rosenthal Act claims against creditor); Thompson v. Chase Bank, N.A., 2010 WL 1329061, at *3 (S.D. Cal. March 30, 2010) (refusing to dismiss Rosenthal Act claims alleging that collection calls made on Easter Sunday, Memorial Day and Mothers’ Day were at “inconvenient” or “unusual” times).
Creditors, like traditional debt collectors, must be aware of the volume and pattern of their collection phone calls. Creditors obviously have a legitimate need to contact their delinquent customers by phone to make payment arrangements. But the Rosenthal Act, like the FDCPA, prohibits creditors from placing telephone calls repeatedly or continuously with the intent to annoy the person called. See Cal. Civ. Code §§ 1788.11(d), 1788.11(e). Is there a limit on how many call attempts a creditor can make?
To date, there are no clear answers, because the reported decisions have involved calls placed by traditional debt collectors, not by creditors. But we can expect that the courts will be guided by the reasoning used in FDCPA cases, considering not only the volume of the calls, but also the calling pattern and the individual facts of the case. See e.g., Arteaga v. Asset Acceptance, 733 F. Supp. 2d 1218, 1229 (E.D. Cal. 2010) (summary judgment for debt collector; evidence of “daily” calls not sufficient to support claim for intent to harass under FDCPA or section 1788.11 of the Rosenthal Act); Rucker v. Nationwide Credit, Inc., 2011 WL 25300 (E.D. Cal. Jan. 5, 2011) (refusing to dismiss claims under FDCPA or sections 1788.11(d), (e) of Rosenthal Act where collector allegedly placed 80 calls to consumer in one year).
Will courts utilize the Foti line of cases when evaluating the content of voice mail messages left by creditors? The reasoning of the Foti decisions likely will not make sense when applied to a creditor’s voice mails messages, and to date, there are no published decisions on the issue. But creditors should consider that California courts have held that a debt collector’s failure to properly identify itself in a voice mail message can violate both the FDCPA and the Rosenthal Act. See, e.g., Hosseinzadeh v. M.R.S. Associates, Inc., 387 F. Supp. 2d 1104,1117-18 (N.D. Cal. 2005) (collector’s failure to properly identify itself in voice mail messages violated FDCPA and Rosenthal Act); Joseph v. J.J. Mac Intyre, L.L.C., 238 F. Supp. 2d. 1158, 1168 (N.D. Cal. 2002) (same, denying motion to dismiss).
Most creditors have procedures in place for dealing with consumers who are represented by attorneys. When a consumer notifies the creditor in writing that she has retained an attorney, the Rosenthal Act prohibits the creditor from initiating communications directly with the consumer – “other than statements of account” – in an attempt to collect the debt. See Cal. Civ. Code § 1788.14(c). But what if the creditor mails a monthly statement directly to a represented consumer, and the statement includes language noting that the account is delinquent? Unfortunately, the Rosenthal Act does not define the term “statements of account” and the courts in California are split on this issue. See, e.g., Marcotte v. GE Capital Services, 709 F. Supp. 2d 994 (S.D. Cal. 2010) (granting judgment on the pleadings; monthly billing statements sent directly to represented consumer did not violate section 1788.17 of Rosenthal Act); Moya v. Chase Cardmember Service, 661 F. Supp. 2d 1129 (N.D. Cal. 2009) (denying motion to dismiss claim that monthly statements sent to represented consumer violated section 1788.14 of Rosenthal Act).
Should creditors be concerned about facing Rosenthal Act class actions? Section 1788.30 of the Rosenthal Act does not allow for class actions, and in fact, it specifically limits consumers to pursuing claims “only in an individual action.” See Cal. Civ. Code §§ 1788.30(a), 1788.30(b). Under section 1788.17 of the Rosenthal Act, however, creditors are “subject to the remedies” of section 1692k of the FDCPA. A number of courts have held that consumers may pursue class actions under the Rosenthal Act. See, e.g. Abels v. JBC Legal Group, P.C., 227 F.R.D. 541 (N.D. Cal. 2005) (granting motion to certify Rosenthal Act class action); Gonzalez v. Arrow Financial Services LLC, 489 F. Supp. 2d 1140 (S.D. Cal. 2007) (denying motion to decertify Rosenthal Act class action).
The Rosenthal Act allows consumers to recover any actual damages they sustain by reason of the violation. See Cal. Civ. Code § 1788.30(a). Unlike the FDCPA, however, the Rosenthal Act is not a strict liability statute. Statutory penalties ranging from $100 to $1000 may be recovered, but only where the consumer demonstrates the defendant “willfully and knowingly” violated the Rosenthal Act. See Cal. Civ Code § 1788.30(b).
If a willful and knowing violation is shown, are the statutory damages limited to $1000 per action, as in FDCPA cases, or may the consumer recover $1000 per violation? The better-reasoned decisions hold that the consumer is limited to $1000 per action. See, e.g., Scott v. Federal Bond and Collection Service, Inc., 2011 WL 176846, at *3 (N.D. Cal. Jan 19, 2011) (Rosenthal Act statutory damages limited to $1000 per action); Marseglia v. JP Morgan Chase Bank, 2010 WL 4595549 (S.D. Cal. Nov. 12, 2010) (same). One California court, however, refused to grant a creditor’s motion to strike portions of a Rosenthal Act complaint that sought $1000 per violation. See Hamberg v. JP Morgan Chase Bank, 2010 WL 2523947 (S.D. Cal. June 22, 2010).
What about defenses? Like the FDCPA, the Rosenthal Act includes a “bona fide error” defense, which allows a creditor to prove that any violation was not intentional, and occurred notwithstanding maintenance of procedures reasonably adapted to avoid the violation. See Cal. Civ. Code § 1788.30(e). The Rosenthal Act also has a “right to cure” defense, which permits a creditor, within 15 days of discovering any violation which is “able to be cured” or after written notice of any such violation, to notify the debtor of the violation and to make any adjustments or corrections necessary to cure the violation. See Cal. Civil Code § 1788.30(d).
The Rosenthal Act has been around for decades, and the statute has always applied to creditors. During the past few years, however, the Rosenthal Act has become a favorite of consumer attorneys, and the trend appears likely to continue. Creditors with customers in California must be aware that, in light of section 1788.17 of the Rosenthal Act, any attempts to collect in California must comply with the Rosenthal Act and the FDCPA.
Saturday, December 4, 2010
Getting FDCPA Complaints Dismissed Using Twombly and Iqbal
FDCPA lawsuits are being filed by the thousands in federal courts across the country, and a lot of the complaints look strangely similar. These complaints are long on legal conclusions, but short on facts describing what allegedly happened to the consumer and when. Many complaints do little more than identify the parties and assert that various sections of the Act have been violated. Is this enough state a valid FDCPA claim? Not anymore.
For years, the conventional wisdom was that filing motions to dismiss in federal court was usually a waste of time and money, because the notice pleading standards were so liberal. More recently, however, collectors have successfully obtained dismissals of formulaic FDCPA claims, relying on the Supreme Court’s decisions in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (“Twombly”) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (“Iqbal”). Armed with the more exacting analytical framework established Twombly and Iqbal, district courts across the country have been taking a closer look at the FDCPA complaints that are flooding their courthouses. The courts appear to be granting motions to dismiss with increasing regularity.
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint may be dismissed if it fails “to state a claim upon which relief can be granted.” Fed. R. Civ. Proc. 12(b)(6). The Federal Rules of Civil Procedure provide little guidance on what a plaintiff must do to “state a claim” for relief, other than Rule 8, which says that a complaint must set forth a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. Proc. 8(a)(2). For years, federal courts emphasized that this was an extremely “liberal” pleading standard, and until recently, the leading Supreme Court case on the subject, Conley v. Gibson, 355 U.S. 41, 45-46 (1957), was repeatedly cited for proposition that no motion to dismiss should be granted “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id.
All of this changed recently, however, beginning with the Supreme Court’s decision in Twombly, which expressly rejected the “no set of facts” language used in Conley. See Twombly, 550 U.S. at 562-63. The Court clarified that although “detailed factual allegations” are not required at the pleading stage, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 550 U.S. at 555. The complaint must contain factual allegations, and they “must be enough to raise a right to relief above the speculative level.” Id. There must be sufficient facts plead to state a claim to relief that is “plausible on its face.” Id. at 570.
The Court refined its analysis even further in Iqbal, where it reiterated that Rule 8 of the Federal Rules of Civil Procedure requires “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” See Iqbal, 129 S. Ct. at 1949. Only a complaint that states “a plausible claim for relief” can survive a motion to dismiss. Id. “A claim has facial plausability when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. . . . The plausability standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint that contains facts which are “merely consistent with” defendant’s liability is not sufficient, because it “stops short of the line between possibility and the plausibility of entitlement to relief. Id. (citations and quotation marks omitted).
The court should not assume the truth of legal conclusions in the complaint. See Iqbal at 1949. Thus, the first step when evaluating a motion to dismiss is to identify the legal conclusions, because they “are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 1950. Next, with respect to any “well-pleaded factual allegations” in the complaint “a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. The determination of whether a plausible claim for relief has been stated is “a context-specific task” that requires a court to “draw on its judicial experience and common sense.” Id. The Ninth Circuit recently observed: “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks omitted).
District courts located across the country have used Twombly and Iqbal to dismiss FDCPA claims that merely contain formulatic allegations commonly used by consumer attorneys. See, e.g., Jackson v. ASA Holdings, LLC, _ F.Supp.2d _, 2010 WL 4449367, *6 (D.D.C. Nov. 8, 2010) (dismissing section 1692d claim where complaint “does little more than parrot the language of the statute in conclusory fashion”); Brown v. Hosto & Buchan, PLLC, _ F.Supp.2d _, 2010 WL 4352932, *5 (W.D. Tenn. Nov. 2, 2010) (dismissing section 1692c(a)(2) claim that merely recited “the statutory language almost word for word.”); Franke v. Global Credit and Collection Corp., 2010 WL 4449373 (D. Conn. Nov. 1, 2010) (dismissing complaint that was “bare of any specific facts that would support a claim” under sections 1692d, 1692e, 1692f or 1692g); Sierra v. Rubin & Debski, P.A., 2010 WL 4384216, *2-3 (S.D. Fla. Oct. 28, 2010) (allegations that collector filed suit with proper documentation to support the debt did not state a claim under section 1692d or 1692f); Lopez v. Rash Curtis & Assoc., 2010 WL 3505079, *2-3 (E.D. Cal. Sept. 3, 2010) (allegations that defendant was a “debt collector” who falsely threatened to sue, garnish the plaintiff’s wages and add $10,000 in legal fees to the debt did not state a claim under section 1692e or 1692f of the FDCPA); Clemente v. IC Systems, Inc., 2010 WL 3855522, *1-2 (E.D. Cal. Sept. 29, 2010) (allegations that Plaintiff does not owe the money, yet Defendant “constantly and continuously places collection calls seeking and demanding payment” and “hangs up before Plaintiff or Plaintiff’s voicemail answers” failed to state a claim under section 1692d(5) of the FDCPA: “defendants cannot be expected to craft a responsive pleading when plaintiff fails to allege the date or contents of even one call that defendant allegedly made. ) (citation and quotation marks omitted); Velazquez v. Arrow Financial Services LLC, 2009 WL 2780372, *1-3 (S.D. Cal. Aug. 31, 2009) (allegations that defendant filed suit on a debt that was not owed, without reasonable investigation into debt, and knowing it would be unable to prove its case, did not state claim under section 1692e(2), e(5) or e(10) of FDCPA); Dokumaci v. MAF Collection Services, 2010 WL 1507014, *1 (M.D. Fla. April 14, 2010) (dismissing complaint that failed to plead sufficient facts suggesting plaintiff was a “debtor” and that defendant was a “debt collector”); see also Zigdon v. LVNV Funding, LLC, 2010 WL 1838637, *12 (N.D. Ohio April 23, 2010) (under Iqbal, FDCPA class action complaint contained insufficient factual allegations to support equitable tolling or fraudulent concealment).
The Eastern District of California has repeatedly refused to enter default judgments in favor a well-known consumer law firm, because under Twombly and Iqbal, that firm’s FDCPA complaints have not met the minimum pleading requirements. See Johnson v. National Recovery Group, LLC, 2010 WL 1992636, *2 (E.D. Cal. May 14, 2010) (“the Court finds that the merits and sufficiency of the Complaint are severely lacking. This is a recurring issue with Plaintiff's counsel. Indeed, the Court recently and repeatedly cautioned Plaintiff's counsel about insufficient, conclusory allegations in similar FDCPA actions. . . . It is apparent that the Court's previous admonitions have gone unheeded, because the Complaint and claims in this action suffer from even greater deficiencies.”). The court in Johnson held, for example, that an allegation that “Defendant constantly and continuously placed collection calls to Plaintiff seeking and demanding payment for an alleged debt” was insufficient to state a claim under section 1692d(5) of the FDCPA, because “the factual allegations fail to identify (1) the ‘called number,’ (2) the number of calls made to demonstrate repeated, constant and/or continuous calls, (3) when the calls were made and over what period of time, (4) the content of the conversations, if any, (5) the alleged debt, and (6) the link between the caller and the Defendant debt collector.” Id. at *3.
The Supreme Court’s decisions in Twombly and Iqbal provide district court judges with a powerful screening device to help weed out FDCPA claims that lack facial plausibility. Collectors should consider filing motions to dismiss when they are served with FDCPA complaints that do little more than track the language of the Act and claim that the collector violated it.
For years, the conventional wisdom was that filing motions to dismiss in federal court was usually a waste of time and money, because the notice pleading standards were so liberal. More recently, however, collectors have successfully obtained dismissals of formulaic FDCPA claims, relying on the Supreme Court’s decisions in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (“Twombly”) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (“Iqbal”). Armed with the more exacting analytical framework established Twombly and Iqbal, district courts across the country have been taking a closer look at the FDCPA complaints that are flooding their courthouses. The courts appear to be granting motions to dismiss with increasing regularity.
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint may be dismissed if it fails “to state a claim upon which relief can be granted.” Fed. R. Civ. Proc. 12(b)(6). The Federal Rules of Civil Procedure provide little guidance on what a plaintiff must do to “state a claim” for relief, other than Rule 8, which says that a complaint must set forth a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. Proc. 8(a)(2). For years, federal courts emphasized that this was an extremely “liberal” pleading standard, and until recently, the leading Supreme Court case on the subject, Conley v. Gibson, 355 U.S. 41, 45-46 (1957), was repeatedly cited for proposition that no motion to dismiss should be granted “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id.
All of this changed recently, however, beginning with the Supreme Court’s decision in Twombly, which expressly rejected the “no set of facts” language used in Conley. See Twombly, 550 U.S. at 562-63. The Court clarified that although “detailed factual allegations” are not required at the pleading stage, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 550 U.S. at 555. The complaint must contain factual allegations, and they “must be enough to raise a right to relief above the speculative level.” Id. There must be sufficient facts plead to state a claim to relief that is “plausible on its face.” Id. at 570.
The Court refined its analysis even further in Iqbal, where it reiterated that Rule 8 of the Federal Rules of Civil Procedure requires “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” See Iqbal, 129 S. Ct. at 1949. Only a complaint that states “a plausible claim for relief” can survive a motion to dismiss. Id. “A claim has facial plausability when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. . . . The plausability standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint that contains facts which are “merely consistent with” defendant’s liability is not sufficient, because it “stops short of the line between possibility and the plausibility of entitlement to relief. Id. (citations and quotation marks omitted).
The court should not assume the truth of legal conclusions in the complaint. See Iqbal at 1949. Thus, the first step when evaluating a motion to dismiss is to identify the legal conclusions, because they “are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 1950. Next, with respect to any “well-pleaded factual allegations” in the complaint “a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. The determination of whether a plausible claim for relief has been stated is “a context-specific task” that requires a court to “draw on its judicial experience and common sense.” Id. The Ninth Circuit recently observed: “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks omitted).
District courts located across the country have used Twombly and Iqbal to dismiss FDCPA claims that merely contain formulatic allegations commonly used by consumer attorneys. See, e.g., Jackson v. ASA Holdings, LLC, _ F.Supp.2d _, 2010 WL 4449367, *6 (D.D.C. Nov. 8, 2010) (dismissing section 1692d claim where complaint “does little more than parrot the language of the statute in conclusory fashion”); Brown v. Hosto & Buchan, PLLC, _ F.Supp.2d _, 2010 WL 4352932, *5 (W.D. Tenn. Nov. 2, 2010) (dismissing section 1692c(a)(2) claim that merely recited “the statutory language almost word for word.”); Franke v. Global Credit and Collection Corp., 2010 WL 4449373 (D. Conn. Nov. 1, 2010) (dismissing complaint that was “bare of any specific facts that would support a claim” under sections 1692d, 1692e, 1692f or 1692g); Sierra v. Rubin & Debski, P.A., 2010 WL 4384216, *2-3 (S.D. Fla. Oct. 28, 2010) (allegations that collector filed suit with proper documentation to support the debt did not state a claim under section 1692d or 1692f); Lopez v. Rash Curtis & Assoc., 2010 WL 3505079, *2-3 (E.D. Cal. Sept. 3, 2010) (allegations that defendant was a “debt collector” who falsely threatened to sue, garnish the plaintiff’s wages and add $10,000 in legal fees to the debt did not state a claim under section 1692e or 1692f of the FDCPA); Clemente v. IC Systems, Inc., 2010 WL 3855522, *1-2 (E.D. Cal. Sept. 29, 2010) (allegations that Plaintiff does not owe the money, yet Defendant “constantly and continuously places collection calls seeking and demanding payment” and “hangs up before Plaintiff or Plaintiff’s voicemail answers” failed to state a claim under section 1692d(5) of the FDCPA: “defendants cannot be expected to craft a responsive pleading when plaintiff fails to allege the date or contents of even one call that defendant allegedly made. ) (citation and quotation marks omitted); Velazquez v. Arrow Financial Services LLC, 2009 WL 2780372, *1-3 (S.D. Cal. Aug. 31, 2009) (allegations that defendant filed suit on a debt that was not owed, without reasonable investigation into debt, and knowing it would be unable to prove its case, did not state claim under section 1692e(2), e(5) or e(10) of FDCPA); Dokumaci v. MAF Collection Services, 2010 WL 1507014, *1 (M.D. Fla. April 14, 2010) (dismissing complaint that failed to plead sufficient facts suggesting plaintiff was a “debtor” and that defendant was a “debt collector”); see also Zigdon v. LVNV Funding, LLC, 2010 WL 1838637, *12 (N.D. Ohio April 23, 2010) (under Iqbal, FDCPA class action complaint contained insufficient factual allegations to support equitable tolling or fraudulent concealment).
The Eastern District of California has repeatedly refused to enter default judgments in favor a well-known consumer law firm, because under Twombly and Iqbal, that firm’s FDCPA complaints have not met the minimum pleading requirements. See Johnson v. National Recovery Group, LLC, 2010 WL 1992636, *2 (E.D. Cal. May 14, 2010) (“the Court finds that the merits and sufficiency of the Complaint are severely lacking. This is a recurring issue with Plaintiff's counsel. Indeed, the Court recently and repeatedly cautioned Plaintiff's counsel about insufficient, conclusory allegations in similar FDCPA actions. . . . It is apparent that the Court's previous admonitions have gone unheeded, because the Complaint and claims in this action suffer from even greater deficiencies.”). The court in Johnson held, for example, that an allegation that “Defendant constantly and continuously placed collection calls to Plaintiff seeking and demanding payment for an alleged debt” was insufficient to state a claim under section 1692d(5) of the FDCPA, because “the factual allegations fail to identify (1) the ‘called number,’ (2) the number of calls made to demonstrate repeated, constant and/or continuous calls, (3) when the calls were made and over what period of time, (4) the content of the conversations, if any, (5) the alleged debt, and (6) the link between the caller and the Defendant debt collector.” Id. at *3.
The Supreme Court’s decisions in Twombly and Iqbal provide district court judges with a powerful screening device to help weed out FDCPA claims that lack facial plausibility. Collectors should consider filing motions to dismiss when they are served with FDCPA complaints that do little more than track the language of the Act and claim that the collector violated it.
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 -
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:
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:
Sunday, August 22, 2010
Defending “Call Volume” Claims: How Many Calls Are Too Many Under Section 1692d(5) Of The FDCPA?
Collectors cannot collect money if they cannot make contact with consumers. The primary way collectors do this is by phone, and it is often necessary to make multiple call attempts before a consumer is reached. But how many call attempts are too many? When will a collector cross the line between diligently trying to make contact, and calling so many times that a court will conclude the collector was trying to harass the consumer? Is there a magic number of calls?
There are no hard and fast rules on how many times a collector can call a consumer, and decisions of the district courts have been all over the map. Call volume claims are generally fact-intensive and can be expensive to defend, and this may explain why these cases are favored by consumer lawyers. Fortunately for collectors, however, there is an emerging trend among the district courts to reject FDCPA claims that are based solely upon counting up the number of call attempts made by the collector. These decisions reflect an appreciation of the basic fact that collectors often must make multiple attempts before the can make contact with the debtor. These call attempts reflect an attempt to start a dialogue about the debt – not an intent to harass or annoy.
Section 1692d(5) of the FDCPA prohibits collectors “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” 15 U.S.C. § 1692d(5) (emphasis added). The FDCPA is often described as a “strict liability” statute, but this is not true for a section 1692d(5) claim. The plaintiff must plead and prove that the collector intended to annoy, abuse or harass in order to prevail. See, e.g., Clark v. Capital Credit & Collection Servs, Inc., 460 F. 3d 1162, 1176, n.11 (9th Cir. 2006) (identifying sections 1692d(5), 1692f(3) and 1692c(a)(1) of the FDCPA as exceptions to strict liability); Kaplan v. Assetcare, Inc., 88 F. Supp. 2d 1355, 1362 (S.D. Fla. 2000)(same: “Congress took care to require an element of knowledge or intent in certain portions of the FDCPA where it deemed such a requirement necessary.”).
Thus, to establish a violation of section 1692d(5), the consumer must show that the calls were made “repeatedly or continuously” and that they were made with the intent to annoy, abuse, or harass. Although the FDCPA does not define “repeatedly or continuously,” the FTC has opined that "continuously" means “making a series of telephone calls, one right after the other” and has said that “repeatedly means “calling with excessive frequency under the circumstances.” See Statements of General Policy or Interpretation Staff Commentary On the Fair Debt Collection Practices Act, 53 Fed.Reg. 50,097, 50,105 (Fed. Trade Comm’n Dec. 13, 1988).
The FDCPA does not contain any bright-line rules setting forth the permissible number of calls a collector can place in a day, week, month or year without violating section 1692d(5). When deciding if a collector has violated section 1692d(5), courts consider both the volume and the pattern of the calls. See Katz v. Capital One, 2010 WL 1039850, *3 (E.D. Va. Mar. 18, 2010); Saltzman v. I.C. Sys., Inc., 2009 WL 2190359, *7 (E.D. Mich. Sept. 30, 2009); see also Martin v. Select Portfolio Serving Holding Corp., 2008 WL 618788, *6 (S.D. Ohio Mar. 3, 2008) (“In determining whether the debt collector intended to annoy, abuse and harass the consumer, the Court may consider frequency, persistence, and volume of the telephone calls.”); Sanchez v. Client Services, Inc., 520 F. Supp. 2d 1149 (N.D. Cal. 2007) (summary judgment for consumer on section 1692d(5) claim where collector placed 54 telephone calls to debtor's place of employment during six month period, including 17 calls in one month and six on one day); Akalwadi v. Risk Management Alternatives, Inc.,336 F. Supp. 2d 492, 505-06 (D. Maryland 2004) (summary judgment denied on section 1692d(5) claim; 28 calls in two month period, including periods of daily calls, and three calls on one day); Kuhn v. Account Control Tech., Inc., 865 F. Supp. 1443, 1453 (D. Nev.1994) (six calls to consumer’s place of employment within twenty-four minutes constituted harassment under section 1692d(5)).
Recent decisions by district courts around the country reflect an encouraging trend for collectors facing call volume claims. A district court in Florida recently granted summary judgment for a collector who called plaintiff (a non-debtor) fifty-seven times, including seven times in a single day. See Tucker v. CBE Group, Inc., _ F. Supp. 2d _, 2010 WL 1849034, *1, 3 (M.D. Fla. May 5, 2010). Despite the relatively high number of calls, there was no evidence the collector had repeatedly placed calls after being asked to cease communication, or that it had called back on the same day it left a message. See id. at *3. The court held the “evidence demonstrates that CBE placed each of its telephone calls with an intent to reach [plaintiff’s daughter] rather than an intent to harass Plaintiff.” Id.
In Katz v. Capital One, the collector allegedly called the consumer “fifteen to seventeen times” after her attorney sent a letter instructing the collector to cease contact. The letter was sent to the original creditor, however, not to the collector. See 2010 WL 1039850 at **1-2. The court granted summary judgment for the collector, concluding there was no evidence to establish “that the phone calls were intended to be annoying, abusive, or harassing. Instead, the records shows that Allied, believing the debt to be valid, attempted to take steps to collect that debt.” Id. at *3. The collector never called more than twice in one day, none of its calls “were made back-to-back, at inconvenient times, after plaintiff had asked [the collector] to stop calling, or immediately after plaintiff hung up.” Id.
In Saltzman v. I.C. Systems, Inc., the court granted summary judgment for a collector who placed “somewhere between twenty and fifty unsuccessful telephone calls and between two and ten successful telephone calls” to the consumer in just over one month. See Saltzman, 2009 WL 2190359 at *6 n.4. While number of call attempts was relatively high, the court observed that the disparity between the large number of calls placed by the collector, and low number of actual conversations with the consumer, suggested a “difficulty of reaching Plaintiff, rather than an intent to harass.” Id. at *7 (citation omitted).
In Arteaga v. Asset Acceptance, LLC, _ F. Supp. 2d _, 2010 WL 3310259 (E.D. Cal. Aug. 23, 2010), the court granted summary judgment for a collector on a section 1692d(5) claim, despite testimony from the consumer that the collector called her “daily” or “almost daily.” Id. at *7. The court held that “even if Ms. Arteaga’s allegations are believed true, and considered under the ‘least sophisticated debtor’ standard, the conduct does not constitute harassment as a matter of law.” Id.
There is no circuit level authority on section 1692d(5) claims, and no precise guidelines regarding the permissible number of call attempts have been established. Some cases appear to reflect ad hoc reasoning based solely on number of attempts made to reach the consumer. See, e.g., Bassett v. I.C. System, Inc., _ F.Supp.2d _, 2010 WL 2179175 at *4 (N.D. Ill. June 1, 2010) (denying summary judgment where collector made thirty-one call attempts during a twelve day period); Krapf v. Nationwide Credit Inc., 2010 WL 2025323, *4 (C. D. Cal. May 21, 2010) (denying summary judgment where collector placed over 180 calls in a single month, with an average of six calls per day). The trend in the case law is encouraging for collectors, however, with courts using a more holistic, analytical approach to section 1692d(5) claims, rather than just blindly counting up the number of call attempts.
There are no hard and fast rules on how many times a collector can call a consumer, and decisions of the district courts have been all over the map. Call volume claims are generally fact-intensive and can be expensive to defend, and this may explain why these cases are favored by consumer lawyers. Fortunately for collectors, however, there is an emerging trend among the district courts to reject FDCPA claims that are based solely upon counting up the number of call attempts made by the collector. These decisions reflect an appreciation of the basic fact that collectors often must make multiple attempts before the can make contact with the debtor. These call attempts reflect an attempt to start a dialogue about the debt – not an intent to harass or annoy.
Section 1692d(5) of the FDCPA prohibits collectors “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” 15 U.S.C. § 1692d(5) (emphasis added). The FDCPA is often described as a “strict liability” statute, but this is not true for a section 1692d(5) claim. The plaintiff must plead and prove that the collector intended to annoy, abuse or harass in order to prevail. See, e.g., Clark v. Capital Credit & Collection Servs, Inc., 460 F. 3d 1162, 1176, n.11 (9th Cir. 2006) (identifying sections 1692d(5), 1692f(3) and 1692c(a)(1) of the FDCPA as exceptions to strict liability); Kaplan v. Assetcare, Inc., 88 F. Supp. 2d 1355, 1362 (S.D. Fla. 2000)(same: “Congress took care to require an element of knowledge or intent in certain portions of the FDCPA where it deemed such a requirement necessary.”).
Thus, to establish a violation of section 1692d(5), the consumer must show that the calls were made “repeatedly or continuously” and that they were made with the intent to annoy, abuse, or harass. Although the FDCPA does not define “repeatedly or continuously,” the FTC has opined that "continuously" means “making a series of telephone calls, one right after the other” and has said that “repeatedly means “calling with excessive frequency under the circumstances.” See Statements of General Policy or Interpretation Staff Commentary On the Fair Debt Collection Practices Act, 53 Fed.Reg. 50,097, 50,105 (Fed. Trade Comm’n Dec. 13, 1988).
The FDCPA does not contain any bright-line rules setting forth the permissible number of calls a collector can place in a day, week, month or year without violating section 1692d(5). When deciding if a collector has violated section 1692d(5), courts consider both the volume and the pattern of the calls. See Katz v. Capital One, 2010 WL 1039850, *3 (E.D. Va. Mar. 18, 2010); Saltzman v. I.C. Sys., Inc., 2009 WL 2190359, *7 (E.D. Mich. Sept. 30, 2009); see also Martin v. Select Portfolio Serving Holding Corp., 2008 WL 618788, *6 (S.D. Ohio Mar. 3, 2008) (“In determining whether the debt collector intended to annoy, abuse and harass the consumer, the Court may consider frequency, persistence, and volume of the telephone calls.”); Sanchez v. Client Services, Inc., 520 F. Supp. 2d 1149 (N.D. Cal. 2007) (summary judgment for consumer on section 1692d(5) claim where collector placed 54 telephone calls to debtor's place of employment during six month period, including 17 calls in one month and six on one day); Akalwadi v. Risk Management Alternatives, Inc.,336 F. Supp. 2d 492, 505-06 (D. Maryland 2004) (summary judgment denied on section 1692d(5) claim; 28 calls in two month period, including periods of daily calls, and three calls on one day); Kuhn v. Account Control Tech., Inc., 865 F. Supp. 1443, 1453 (D. Nev.1994) (six calls to consumer’s place of employment within twenty-four minutes constituted harassment under section 1692d(5)).
Recent decisions by district courts around the country reflect an encouraging trend for collectors facing call volume claims. A district court in Florida recently granted summary judgment for a collector who called plaintiff (a non-debtor) fifty-seven times, including seven times in a single day. See Tucker v. CBE Group, Inc., _ F. Supp. 2d _, 2010 WL 1849034, *1, 3 (M.D. Fla. May 5, 2010). Despite the relatively high number of calls, there was no evidence the collector had repeatedly placed calls after being asked to cease communication, or that it had called back on the same day it left a message. See id. at *3. The court held the “evidence demonstrates that CBE placed each of its telephone calls with an intent to reach [plaintiff’s daughter] rather than an intent to harass Plaintiff.” Id.
In Katz v. Capital One, the collector allegedly called the consumer “fifteen to seventeen times” after her attorney sent a letter instructing the collector to cease contact. The letter was sent to the original creditor, however, not to the collector. See 2010 WL 1039850 at **1-2. The court granted summary judgment for the collector, concluding there was no evidence to establish “that the phone calls were intended to be annoying, abusive, or harassing. Instead, the records shows that Allied, believing the debt to be valid, attempted to take steps to collect that debt.” Id. at *3. The collector never called more than twice in one day, none of its calls “were made back-to-back, at inconvenient times, after plaintiff had asked [the collector] to stop calling, or immediately after plaintiff hung up.” Id.
In Saltzman v. I.C. Systems, Inc., the court granted summary judgment for a collector who placed “somewhere between twenty and fifty unsuccessful telephone calls and between two and ten successful telephone calls” to the consumer in just over one month. See Saltzman, 2009 WL 2190359 at *6 n.4. While number of call attempts was relatively high, the court observed that the disparity between the large number of calls placed by the collector, and low number of actual conversations with the consumer, suggested a “difficulty of reaching Plaintiff, rather than an intent to harass.” Id. at *7 (citation omitted).
In Arteaga v. Asset Acceptance, LLC, _ F. Supp. 2d _, 2010 WL 3310259 (E.D. Cal. Aug. 23, 2010), the court granted summary judgment for a collector on a section 1692d(5) claim, despite testimony from the consumer that the collector called her “daily” or “almost daily.” Id. at *7. The court held that “even if Ms. Arteaga’s allegations are believed true, and considered under the ‘least sophisticated debtor’ standard, the conduct does not constitute harassment as a matter of law.” Id.
There is no circuit level authority on section 1692d(5) claims, and no precise guidelines regarding the permissible number of call attempts have been established. Some cases appear to reflect ad hoc reasoning based solely on number of attempts made to reach the consumer. See, e.g., Bassett v. I.C. System, Inc., _ F.Supp.2d _, 2010 WL 2179175 at *4 (N.D. Ill. June 1, 2010) (denying summary judgment where collector made thirty-one call attempts during a twelve day period); Krapf v. Nationwide Credit Inc., 2010 WL 2025323, *4 (C. D. Cal. May 21, 2010) (denying summary judgment where collector placed over 180 calls in a single month, with an average of six calls per day). The trend in the case law is encouraging for collectors, however, with courts using a more holistic, analytical approach to section 1692d(5) claims, rather than just blindly counting up the number of call attempts.
Monday, August 9, 2010
Leaving Voicemail Messages - Ninth Circuit May Resolve The Foti Issue
Debt collectors who have struggled to formulate what voicemail message, if any, to leave for consumers may be receiving guidance on the issue if the Ninth Circuit Court of Appeals decides to grant the petition that was filed on December 29, 2010, pursuant to 28 U.S.C. § 1292(b), in the case of Koby v. ARS National Service, Inc, 2010 WL 1438763 (S.D. Cal. March 29, 2010). A copy of the petition filed with the Court by defendant ARS National Services, Inc. can be read and downloaded here:
Koby v. ARS National Services, Inc. Section 1292(b) Petition To Ninth Circuit -
In Koby, the United States District Court for the Southern District of California found that the following voice mail message left for one of the plaintiffs, Michael Simmons, was NOT a “communication” within the meaning of the FDCPA, and, therefore, when defendant left the message it had NOT violated section 1692e(11) of the Act:
“This is Brian Cooper. This call is for Mike Simmons, I need you to return this call as soon as you get this message 877-333-3880, extension 2571.”
Regarding this message, the court held: “The Court, however, finds the message left for Plaintiff Simmons, which merely included the caller's name and asked for a return call, does not convey, directly or even indirectly, any information regarding the debt owed. As such, the claim based upon the voicemail message left with Plaintiff Simmons would not permit recovery under section 1692e(11) and Defendant is entitled to judgment as to this claim.” This portion of the Koby opinion is very similar to the case of Biggs v. Credit Collections Inc., 2007 WL 4034997 *4 (W.D. Okla. Nov.15, 2007).
Having made this ruling, however, the district court also held that the same message, and two other similar messages, left for plaintiffs Koby and Supler, violated section 1692d(6) of the FDCPA, by failing to “meaningfully disclose” the identity of the collector. The court also found that the Koby and Supler messages did constitute “communications” under the FDCPA, and therefore the complaint had stated a section 1692e(11) claim with respect to those messages. The Koby and Supler messages were alleged to state the following:
“This is Robin calling for Michael Koby, if you could please return my call at 800-440-6613. My direct extension is 3171. Please refer to your Reference Number as 15983225.”
“Hey John, uh, it's Mike Mazzouli with ARS National. Umm, there appears to be some documents here in my office, uh, John at this point your [sic] involved. Call me as soon as you can. My direct number and direct extension is 800-440-6613; I'm at extension 3697. Thank you.”
Recently, the district court held, consistent with the requirements of 28 U.S.C. § 1292(b), that its ruling “involves controlling questions of law as to which there is substantial ground for difference of opinion, and that an immediate appeal from the Order may materially advance the ultimate termination of the litigation” and the district court therefore certified the following two questions to the Ninth Circuit:
1. Do each of the voice mail messages as alleged in the complaint in this action constitute a ‘communication’ within the meaning of section 1692a(2) of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et. seq., (the “FDCPA”), 15 U.S.C. § 1692, et seq.;” and
2. Do the voice mail messages as alleged in the complaint violate section 1692e(11) and/or section 1692d(6) of the FDCPA?
The principal reasons raised by ARS in the petition explaining why the Ninth Circuit should take the appeal are:
• The messages are not “communications” under the plain language of the FDCPA. They did not disclose any information “regarding a debt,” such as the amount due, the name of the creditor or the applicable interest rate. By omitting this information, ARS respected the consumer’s right to privacy.
• The messages did meaningfully disclose the “caller’s identity,” because each message stated the name of the caller and provided the consumer with a toll-free number to return the call. In the context of a voice mail message, this is sufficiently meaningful disclosure.
• The district court correctly held that the message left for Plaintiff Simmons – “which merely included the caller’s name and asked for a return call” – was not a “communication” under the FDCPA, and therefore did not violate section 1692e(11) of the Act. This is consistent with the holding of the district court of Oklahoma in Biggs v. Credit Collections, Inc., 2007 WL 4034997, *4 (W.D. Okla. Nov. 15, 2007).
• The district court erred, however, when it held that the messages left for Plaintiffs Koby and Supler stated a viable claim under section 1692e(11), as this cannot be reconciled with the ruling on the message left for Plaintiff Simmons. The only differences are that the message for Koby also mentioned a “reference number” and the message for Supler also mentioned “documents” in the caller’s office.
• The district court erred when it held that all three messages stated a viable claim under section 1692d(6) for failure to provide meaningful disclosure of the caller’s identity. The court reasoned that a collector can avoid liability under 1692d(6) by not leaving any message at all, but this directly conflicts with a ruling issued by the Northern District of California, which effectively held that a collector must leave a voice mail message in order to avoid liability.
• The logic of the district court is internally inconsistent, since it found that ARS did not “communicate” with Simmons when ruling on the section 1692e(11) claim, but also found that ARS was required to state it was a “debt collector” attempting to collect a debt in order to comply with section 1692d(6).
• There are serious constitutional issues raised by the district court’s interpretation of the FDCPA, because the messages are a valid form of commercial speech. The ruling, read in conjunction with other district court cases, would expose collectors to strict liability every time they place a call, deterring calls to consumers, and silencing an entire channel of commercial speech. This violates the canon of “constitutional avoidance” which prohibits courts from interpreting statutes in a way that raises serious constitutional issues.
The Ninth Circuit should rule on the petition within the next few months and, if it is granted, the matter will then proceed as a normal appeal.
Koby v. ARS National Services, Inc. Section 1292(b) Petition To Ninth Circuit -
In Koby, the United States District Court for the Southern District of California found that the following voice mail message left for one of the plaintiffs, Michael Simmons, was NOT a “communication” within the meaning of the FDCPA, and, therefore, when defendant left the message it had NOT violated section 1692e(11) of the Act:
“This is Brian Cooper. This call is for Mike Simmons, I need you to return this call as soon as you get this message 877-333-3880, extension 2571.”
Regarding this message, the court held: “The Court, however, finds the message left for Plaintiff Simmons, which merely included the caller's name and asked for a return call, does not convey, directly or even indirectly, any information regarding the debt owed. As such, the claim based upon the voicemail message left with Plaintiff Simmons would not permit recovery under section 1692e(11) and Defendant is entitled to judgment as to this claim.” This portion of the Koby opinion is very similar to the case of Biggs v. Credit Collections Inc., 2007 WL 4034997 *4 (W.D. Okla. Nov.15, 2007).
Having made this ruling, however, the district court also held that the same message, and two other similar messages, left for plaintiffs Koby and Supler, violated section 1692d(6) of the FDCPA, by failing to “meaningfully disclose” the identity of the collector. The court also found that the Koby and Supler messages did constitute “communications” under the FDCPA, and therefore the complaint had stated a section 1692e(11) claim with respect to those messages. The Koby and Supler messages were alleged to state the following:
“This is Robin calling for Michael Koby, if you could please return my call at 800-440-6613. My direct extension is 3171. Please refer to your Reference Number as 15983225.”
“Hey John, uh, it's Mike Mazzouli with ARS National. Umm, there appears to be some documents here in my office, uh, John at this point your [sic] involved. Call me as soon as you can. My direct number and direct extension is 800-440-6613; I'm at extension 3697. Thank you.”
Recently, the district court held, consistent with the requirements of 28 U.S.C. § 1292(b), that its ruling “involves controlling questions of law as to which there is substantial ground for difference of opinion, and that an immediate appeal from the Order may materially advance the ultimate termination of the litigation” and the district court therefore certified the following two questions to the Ninth Circuit:
1. Do each of the voice mail messages as alleged in the complaint in this action constitute a ‘communication’ within the meaning of section 1692a(2) of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et. seq., (the “FDCPA”), 15 U.S.C. § 1692, et seq.;” and
2. Do the voice mail messages as alleged in the complaint violate section 1692e(11) and/or section 1692d(6) of the FDCPA?
The principal reasons raised by ARS in the petition explaining why the Ninth Circuit should take the appeal are:
• The messages are not “communications” under the plain language of the FDCPA. They did not disclose any information “regarding a debt,” such as the amount due, the name of the creditor or the applicable interest rate. By omitting this information, ARS respected the consumer’s right to privacy.
• The messages did meaningfully disclose the “caller’s identity,” because each message stated the name of the caller and provided the consumer with a toll-free number to return the call. In the context of a voice mail message, this is sufficiently meaningful disclosure.
• The district court correctly held that the message left for Plaintiff Simmons – “which merely included the caller’s name and asked for a return call” – was not a “communication” under the FDCPA, and therefore did not violate section 1692e(11) of the Act. This is consistent with the holding of the district court of Oklahoma in Biggs v. Credit Collections, Inc., 2007 WL 4034997, *4 (W.D. Okla. Nov. 15, 2007).
• The district court erred, however, when it held that the messages left for Plaintiffs Koby and Supler stated a viable claim under section 1692e(11), as this cannot be reconciled with the ruling on the message left for Plaintiff Simmons. The only differences are that the message for Koby also mentioned a “reference number” and the message for Supler also mentioned “documents” in the caller’s office.
• The district court erred when it held that all three messages stated a viable claim under section 1692d(6) for failure to provide meaningful disclosure of the caller’s identity. The court reasoned that a collector can avoid liability under 1692d(6) by not leaving any message at all, but this directly conflicts with a ruling issued by the Northern District of California, which effectively held that a collector must leave a voice mail message in order to avoid liability.
• The logic of the district court is internally inconsistent, since it found that ARS did not “communicate” with Simmons when ruling on the section 1692e(11) claim, but also found that ARS was required to state it was a “debt collector” attempting to collect a debt in order to comply with section 1692d(6).
• There are serious constitutional issues raised by the district court’s interpretation of the FDCPA, because the messages are a valid form of commercial speech. The ruling, read in conjunction with other district court cases, would expose collectors to strict liability every time they place a call, deterring calls to consumers, and silencing an entire channel of commercial speech. This violates the canon of “constitutional avoidance” which prohibits courts from interpreting statutes in a way that raises serious constitutional issues.
The Ninth Circuit should rule on the petition within the next few months and, if it is granted, the matter will then proceed as a normal appeal.
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