WHAT IS THE FDCPA?

The Fair Debt Collection Practices Act (FDCPA) (15 USC 1692, et seq.) is a federal law enacted in 1978 to curb abusive, deceptive, and unfair debt collection practices. The protections afforded by the FDCPA apply only to the collection of consumer debts and claims alleging FDCPA violations may only be filed against “debt collectors.” The FDCPA defines a “debt collector” at 15 USC 1692a(6) as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” A debt collector’s violation of the FDCPA authorizes the recovery of statutory and actual damages, attorney’s fees and litigation costs, and injunctive relief under 15 USC 1692k.

FDCPA PREEMPTS STATE LAW PLEADING PRIVILEGE

Actionable conduct under the FDCPA is not limited to extrajudicial communications. Under Georgia law, at OCGA § 51-5-8, “(a)ll charges, allegations, and averments contained in regular pleadings filed in a court of competent jurisdiction, which are pertinent and material to the relief sought, whether legally sufficient to obtain it or not, are privileged.” However, this “pleading privilege” provides no defense to debt collectors and collection attorneys whose court filings and related communications violate the FDCPA, which preempts inconsistent state law.

FDCPA APPLIES TO COLLECTION LAWYERS & THEIR CLIENTS

In Heintz v. Jenkins, 514 U.S. 291 (1995), the U.S. Supreme Court held that the FDCPA “applies to a lawyer who ‘regularly,’ through litigation, tries to collect consumer debts.” Twenty years later, in Miljkovic v. Shafritz & Dinkin, P.A., 791 F.3d 1291 (2015), the 11th Circuit reiterated the holding in Heintz and expanded the scope of the FDCPA’s application to consumer litigation, holding that “the FDCPA applies to attorneys, like Appellees, who regularly engage in debt collection activity, even when that activity includes litigation and even when the attorneys' conduct is directed at someone other than the consumer.”

FDCPA VIOLATIONS IN PLEADINGS ARE OFTEN SUBTLE

FDCPA claims based on communications in court filings or correspondence during litigation often sound in fraud and allege omissions or active concealment of material facts or documents and/or false, deceptive, and misleading statements in pleadings, exhibits, motions, affidavits, and other written communications. In Georgia, the courts have long recognized that "(b)y its very nature, fraud is subtle and can be accomplished in an infinite number of ways including signs and tricks and even, in some instances, by silence." See Woodall v. Orkin Exterminating Co. , 175 Ga. App. 83, 84, 332 S.E.2d 173 (1985).

FACTORS PREVENTING DETECTION OF FDCPA VIOLATIONS

At first glance, a consumer collection lawsuit appears to be drafted and constructed in the same manner as any other civil lawsuit. Attorneys and judges who routinely deal with consumer collection cases are usually aware of the standardized "fill in the blank" templates used by collection attorneys and familiar with the type of documents commonly attached as exhibits to consumer collection filings. Those who have reviewed and compared the allegations in the debt collector's pleadings with the content of attached exhibits and affidavits have probably noticed factual discrepancies and questioned the authenticity or completeness of exhibits. While an attorney defending a consumer can debtor may raise defenses and/or file dispositive motions based on the insufficiency of the debt collector's pleadings, vigorous motions practice is not cost-effective in a case alleging a $5,000.00 credit card debt. Rather than litigate these issues, the collection attorney may choose to dismiss the claim without prejudice and sell to another debt buyer, or simply wait a few months and refile.

VIEWING COLLECTION LAWSUITS FROM A DIFFERENT PERSPECTIVE

The ability to "see" FDCPA violations in the pleadings and communications exchanged during a collection lawsuit requires knowledge and understanding of the debt collection industry and its use of the judicial system as one component of a larger business model. The business of debt collection is conducted primarily by multi-billion dollar entities that include private equity firms and publicly traded companies. These companies operate by making bulk purchases of debt securities comprised of many thousands of delinquent, "charged-off" consumer accounts. These large account "portfolios" are then divided up and transferred to one or more subsidiaries, affiliates, third-party debt brokers, or other purchasers. The accounts are then evaluated and vetted for pre-litigation collection. Accounts that remain uncollected are vetted and evaluated for collection through a nationwide network of collection lawyers and firms. It is important to remember that there was no contractual relationship or exchange of money between the debtor and the debt collector.

USING THE JUDICIAL SYSTEM TO SERVE A PROFIT DRIVEN BUSINESS MODEL

The clients served by these collection attorneys are not seeking "justice" or the repayment of money loaned or credited to a consumer, but profit. The debt collector's primary objective is to increase the return on its investment by converting a non-performing, charged-off consumer account to an asset receivable. The judicial system is utilized for that purpose where other collection efforts have failed for any number of reasons. The information and documents provided to the collection attorney are generally in the form of an electronic spreadsheet and contain just enough information to meet notice pleading requirements. Fortunately for collection attorneys, most of the complaints filed against consumer debtors are not defended by attorneys. Even fewer are defended by attorneys possessing a working knowledge of the FDCPA, the debt collection industry, and the procedural and evidentiary challenges faced by collection attorneys.

TRUTH & ACCURACY VS. EXPEDIENCY & COST-EFFICIENCY

If there is one thing to remember when reviewing a consumer collection lawsuit, it is that almost nothing is accidental or due to mistake. The content and phrasing of allegations and affidavits, the creation and choice of exhibits, and the description and demand for damages are intentionally drafted as standardized templates that have been carefully vetted, revised, and modified over time to produce the highest probability of settlement or judgment in exchange for the least amount of time, effort, and cost. This "assembly line" or "turnkey" approach to litigation is profitable, but its treatment of individual consumer debtors and the unique circumstances of each case as fungible, interchangeable "widgets" is antithetical to fundamental precepts of the judicial system.

COMPARING WHAT PLAINTIFFS KNOW WITH WHAT THEY CLAIM TO KNOW

When collection attorneys, their clients, and their clients' officers and employees all lack direct personal knowledge and complete account level documentation of the underlying transactions in purchased accounts, and the drafting of pleadings is accomplished by merging spreadsheet data into a standardized template, the potential for unfair, deceptive, and abusive collection practices becomes evident. Like staring at a "magic eye" illusion, viewing collection lawsuits with knowledge and understanding of these practices can allow the debtor's attorney to see FDCPA violations that may otherwise go unnoticed.

"BONA FIDE ERROR" AND INTENTIONAL IGNORANCE

When alleged FDCPA violations are based on communications in pleadings or related communications, debt collectors and their attorneys often raise the defense that their conduct was unintentional and the result of “bona fide error.” The “bona fide error” defense is described at 15 U.S.C. §1692k(c), which states that “(a) debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” In cases where the debt collector and its lawyers manage high volume caseloads using generic, automated pleadings with no meaningful review of the cases by an attorney before filing, “bona fide error” can be difficult to prove. The automated creation of pleadings based on minimal information, with little or no attorney involvement or investigation of its truth or accuracy is not a procedure that is “reasonably adapted to avoid any such error.”

THE FDCPA IS A VALUABLE TOOL FOR LAWYERS DEFENDING CONSUMER COLLECTION LAWSUITS

The ability to find FDCPA violations in consumer collection lawsuits can provide debtors with substantial leverage and bargaining power in a lawsuit. Violations arising from the pleadings are generally not isolated to one case, but systemic and present in thousands of simultaneously pending cases. This type of FDCPA violation not only gives rise to a potential class action, but when successfully argued to the court, can do irreparable damage to the credibility of the collection attorney and make the litigation process less effective and more costly and time consuming in all cases, including those with unrepresented parties. The prospect of paying an award of damages and attorney's fees to the debtor may be the least of the debt collector's concerns.

Finding FDCPA Violations in Collection Lawsuits