The 7th Circuit gives major clarification to collectors under the Fair Debt Collection Practices Act.

Many commentators believe that the Fair Debt Collection Practices Act creates more questions than it solved when it was passed into law. Kudos to the Seventh Circuit for taking a number of these issues in the case of Evory v RJM Acquistions Funding, LLC decided on October 23, 2007. Evroy is actually a number of cases that were consolidated that answered the following questions:
1. If the consumer is represented by a lawyer, whether debt collector must give the same written notice to the lawyer that section 1692g requires were the consumer unrepresented and the notice sent directly to him.

HOLDING – YES. Section 1692g of the FDCPA requires a debt collector to send a validation notice to the consumer within 5 days of initial contact. The statute requires that a validation notice be sent to the consumer. If the consumer is represented by counsel, then the debt collector may only communicate with counsel. Send the notice to the consumer’s attorney.

2. Whether communications to lawyers are subject to sections 1692d through 1692f, which forbid harassing, deceptive, and unfair practices in debt collection.

HOLDING – MAYBE. Remember, the usual standard for determining whether a communication is deceptive is the “least sophisticated consumer (e.g. “not very bright”).” Since lawyers are usually pretty bright and know how to find the law, they are less likely to be deceived by debt collectors. In fact, lawyers can look up the FDCPA and see if a communication is required to be disclosed in the initial communication. In these cases, if a lawyer is unlikely to be deceived by a communication that might confuse the least sophisticated consumer, then there is violation of the FDCPA. However, if the debt collector make a misrepresentation that likely to deceive anyone (for example, as to the amount of the debt that is claimed to be owed), then there would be a violation of the FDCPA no matter to whom the communication is directed.

3. Whether, if the answer to question 2 is yes, the standard applicable to determining whether a representation is false, deceptive, or misleading under section 1692e is the same whether the representation is made to the lawyer or to his client.

HOLDING – Sometimes, but not always. See above.

4. Whether a settlement offer contained in a letter from the debt collector to a consumer is lawful per se under section 1692f.

HOLDING – NO…But see below…

5. If it (a settlement offer directed to a consumer) is not per se lawful, whether its lawfulness should be affected by whether it is addressed to a lawyer, rather than to the consumer directly.

HOLDING - Strangely, the court did not address is this issue directly. Rather, the court talked about safe harbor language that if included in settlement offers would obviate a distinction between whether such offer was received by an attorney or an unsophisticated consumer. The safe harbor language (may be the new “Mini-Miranda” for settlement offers) is “We are not obligated to renew this offer.” The court concluded this discussion with the idea that it would have to decide such violations on a case by case basis. Its interesting that the court would have pointedly held that this case addresses this specific issue just to issue a “lets just see on a case by case” holding.

6. Whether there should be a safe harbor for a debt collector accused of violating section 1692e by making such an offer.

HOLDING – YES. The new mini-miranda for settlment offers that should appear on every such settlement offer is…”We are not obligated to renew this offer.” In my opinion, that language should now appear not only on settlement offers sent to consumers, but to counsel as well. Why not?

7. Again, if such a letter is not per se lawful, what type of evidence a plaintiff must present to prove that a settlement offer violates section 1692e.

HOLDING - The court held that whether a settlement offer violates the FDCPA will be decided on a case by case basis. Its a question of fact and not a question of law.

8. Whether the determination that a representation is or is not false, deceptive, or misleading under section 1692 is always to be treated as a matter of law.

HOLDING – NO. Representations should be a question of fact.

9. Whether, if that determination is not always a matter of law, nevertheless a charge under section 1692e can sometimes be dismissed on the pleadings on the ground that the challenged representation was, as a matter of law, not false or misleading.

HOLDING -…The court, in a rather humorous dissertation, held that most debt collectors and attorneys know that when a debt collector makes a deep discount offer to a consumer to pay a debt by a certain date, that the debt collector will most likely accept that offer at a later time. A least sophisticated consumer might complain that he was deceived into believing that if he did not accept the offer by that deadline, that he lost out a valuable opportunity for life. The court recognized this potential deception and gave the following safe harbor language that all collectors should use when communicating offers of settlement to consumers: ” We are not obligated to renew this offer.”

BIG STORY OF THE CASE...This case is really very good news for collectors, agencies and collection law firms. The Court decided this case quite pragmatically. The court refused to give the FDCPA a mechanical reading and interpretation and instead looked at both the offending correspondence and its recipient. Instead of laying down a blanket rule of holding that a correspondence violates FDCPA if it would tend to deceive the least sophisticated consumer, the Court actually looked at who was receiving the letter. Attorneys are not likely to be deceived by something that might tend to mislead a least sophisticated consumer. This is an excellent application and interpretation of the FDCPA. After all, the FDCPA was intended to curb abuses by debt collectors; a shield if you will. The FDCPA was not intended to be a sword by which to catch debt collectors off guard and impale them with sanctions. Kudos the Seventh Circuit. Debt collectors now have a new Mini-Miranda for Settlement Offers. “We are not obligated to renew this offer.” Put it on every settlement offer communicated to consumers and attorneys alike. This language will remove the question of whether a settlement offer is a per se violation of the FDCPA in the Seventh Circuit. I think this well crafted opinion will hold sway over the other circuits as well.

This entry was posted on Monday, October 29th, 2007 and is filed under Debt Collection Laws - Federal . 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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