High Volume Debt Collectors…BEWARE…

Law.com, one of my favorite blogs reports about a Federal District court case In July 2000, Upton Cohen & Slamowitz in Woodbury, N.Y., had sent a letter to plaintiff Arthur Miller seeking payment of $1,676 he had charged to a Lord & Taylor credit card. The letter, signed by Mitchell Slamowitz, stated that the firm represented Lord and Taylor and that the matter had been forwarded to them for collection. The firm proceeded to file a collection action against Miller in August 2000, and he subsequently paid $1,200 to settle the suit.
Miller sued over the letter in February 2001, claiming that it violated the Fair Debt Collection Practices Act (FDCPA) by being written in a manner designed to confuse the “least sophisticated consumer” and by purporting to be by an attorney who was not meaningfully involved in the matter.
In denying Upton’s Motion for Summary Disposition, the court held that a jury could find that Upton was not familiar with its client’s collection policies and procedures. In short, the court found that the defendant law firm had a duty to conduct an independent investigation into the debtor’s file. Upton was not entitled to simply rely upon Lord and Taylor’s collection department as verification of the debt. Most shocking about the court’s decision is that it held that because Upton is a high volume debt collection law firm, it is unlikely that it had any “meaningful involvement” with Mr. Miller’s file. So what does this mean to the high volume debt collector?
1. Meaningful involvement with a debtor’s file may mean that a collector has to have some familiarity with a client’s collection procedures. It would appear that simply relying upon the client’s affidavit is not enough. For a high volume debt collector, this can be a monumental task. The attorney who signs the collection letter to the debtor must have some familiarity with the debtor’s account beyond the client’s notes, records and affidavit.
2. Note that the collection law firm was sued in this case AFTER it had settled the underlying debt with the consumer. Does this suggest that every debt collector, when settling or compromising a debt should get a settlement agreement and mutual release of claims with the debtor? Getting such a document may not have necessarily been beneficial to Upton in this case. After all, one may only waive a right to a claim if they knew of those rights. If Mr. Miller was unaware of his FDCPA claim, he may argue that he did not intend to waive that right. Secondly, the debt collector was not a privy to the original debt claim. Hence when it settled Lord and Taylor’s claim against Miller, Upton gave no consideration for being released from any liability. Nevertheless, I think it is always a good practice to get a release of all claims from a debtor when settling a debt. It could never hurt.

This entry was posted on Thursday, February 1st, 2007 and is filed under Collection Law Firms in the News . You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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