FDCPA Short Note: Failure To Dispute Within 30 Days Does Not Make Invalid Debts Valid

WHITAKER v. HUDSON & KEYSE, LLC, USDC-INSD No. 1:05-CV-1597-JDT-WTL, 2007 U.S.Dist. LEXIS 57706, before USDJ Tinder, filed 06 Aug 2007. Not binding anywhere but may be persuasive.

Plaintiff did not repay a Bank One, now Chase Bank, credit card debt of $3,558.96. A collection agency sent him a dunning letter seeking $4,726.89, and Plaintiff paid them about $1,200 in installments. Chase later sent him a letter stating that his account was reduced from $3,326.89 to $2,236.07, having been improperly stated before. American Coradius, another collection agency, dunned Plaintiff two months later for $2,436.07, which Plaintiff disputed and demanded cease-comm (and then American Coradius illegally sent him another dunning letter, but is not a defendant here). Finally, Defendant Hudson & Keyse, another collection agency, mailed Plaintiff a dunning letter demanding $4,802.37, which was the figure that Chase Bank had given them. Plaintiff did not dispute this amount with Defendant.

Plaintiff sued Defendant in U.S. District Court for the Southern District of Indiana per 15 U.S.C. § 1692e, alleging that Defendant had falsely represented the amount of the debt. Defendant moved for summary judgment, arguing that Plaintiff's failure to dispute the debt within 30 days allowed Defendant to assume the debt was valid per 15 U.S.C. § 1692g(a)(3), and also it was entitled to the bona fide error defense per 15 U.S.C. § 1692k(c) because its client had given it wrong information, contrary to its service agreement with its client. Plaintiff cross-moved for summary judgment.

The trial court noted that in the Seventh Circuit, collection agencies do not have to independently investigate accounts that their clients give them to collect. Also, it did not appear that Defendant had deliberately misrepresented anything to Plaintiff. However, in this case, the error was possibly due to miscalculation of interest, and Defendant had not produced enough evidence to show that its interest calculation procedures were adequate to establish a good faith error defense before trial. Defendant sent a dunning letter with an incorrect alleged amount of debt, even if not intentionally, which would be a violation absent the good faith error defense. PLAINTIFF'S SUMMARY JUDGMENT MOTION GRANTED IN PART and the jury would be instructed that the amount of debt was misstated, but DENIED in all other respects. DEFENDANT'S SUMMARY JUDGMENT MOTION DENIED, and it would have to prove its good faith error defense before the jury.

EDITORIAL: Makes sense to me. I have occasionally heard debt collector defense lawyers claim that you have to dispute the debt within 30 days or else you can never again say it was invalid. Well, if the letter already went out, the law has already been violated. Sorry, bill collectors, but the dispute thingie is NOT a tool for you to make a lie into the truth! Also, why in the doodle can't people compute interest correctly anymore? If these guys had only done so, they wouldn't have been sued. I predict this one will settle and we won't hear anything more about it.

FDCPA Short Note: Class Certified Against Encore For "HSB/" Dunning Letters

BLAREK v. ENCORE RECEIVABLE MANAGEMENT, INC., USDC-WIED No. 06-C-420, 2007 U.S.Dist. LEXIS 58182, before USMJ Callahan, filed 08 Aug 2007.

Plaintiff owed a debt to Citibank USA, N.A. that she discharged in bankruptcy. Later, she received a mass-mailed form dunning letter from Encore that attempted to collect the same debt. The letter claimed that Plaintiff owed the debt to creditor "HSB/" instead of Citibank. Plaintiff sued Encore in U.S. District Court for the Eastern District of Wisconsin per 15 U.S.C. §§ 1692e and 1692g(a)(2) for misrepresenting the name of the creditor. Plaintiff also moved to certify a class of similarly situated plaintiffs.

The trial court considered the four prerequisites of federal class certification: (1) numerosity, which Encore did not dispute, and a class of 40 or more is clearly numerous; (2) commonality, or common nucleus of operative fact, which was present because Encore sent the same "HSB/" letter to all class members; (3) typicality, which was present because each class member's claim rested on the same legal theory that Encore's "HSB/" representation was confusing and deceptive, regardless of whether Plaintiff had an additional FDCPA claim for Encore's trying to collect a bankrupted debt; and (4) adequacy of representation, which was present because Plaintiff only needed to give a deposition and did not have to know much if anything about the case, and Plaintiff's class counsel was very experienced in consumer class actions.

Then the trial court had to rule whether class action was superior to any other way of resolving the case. Statutory damages would be $100 to $1,000 for each plaintiff, probably not enough to inspire individual actions, and class actions exist primarily to enable many together to do what one or few could not. Legal and factual questions of whether "HSB/" confused an unsophisticated consumer, which did not depend on whether class members were actually confused or even if they read the letter, were common to all. CLASS CERTIFICATION GRANTED.

EDITORIAL: Another greedy junk debt buyer learns a slightly expensive lesson in compliance. Does nobody at Encore even read these stupid letters? Wouldn't it have cost less to get the name of the creditor right instead of getting sued? There are dozens of entities under the HSBC empire, some of whom lend money, but none of them is called "HSB/" and from "HSB/" it is impossible to tell which, if any, of HSBC's tentacles is supposed to be owed. Putting a nonexistent company name on dunning letters is plain premeditated carelessness. Good job to Ademi & O'Reilly LLP of Cudahy, Wisconsin for sticking a well-deserved pin into Encore Receivable Management, Inc.

Collector Suggests Profitable Group Sex

I cannot make this stuff up. Yesterday, in a case against an extremely shady and slimy agency (I have them on tape committing many violations), I was conferring with a manager who gave me a fake name and copped the usual attitude that THEIR holy firm could NEVER have done ANYthing wrong. He also said he was going to turn in a 1099-C to IRS for the amount of the (nonexistent) debt (which according to one rep was an Aspire Visa, and another rep was a College Classic Visa), whereupon I indicated that this would be illegal, and did I mention that I happen to hold a master's in taxation, so don't try that again. Eventually, it became clear to him that I was not going away, and that not only would he never collect any money from us, he would furthermore be giving up money TO us for violating about a thousand debt collection laws.

So he said, "you'd make a lot more money if you got in bed with us."

eeeeewww.

Dear readers, who doth know me so well, I leave it to you to pick which one of the following entirely appropriate responses I actually said.

(a) I just threw up in my mouth a little bit.
(b) It's very sweet of you to offer, but I'm waiting for marriage.
(c) I sleep quite well doing what I do already, thank you.
(d) Sorry, I already have numerous girlfriends, and I must stay faithful to all of them.

I think he got the message.

The call ended with my indication that there seemed to be nothing left to do but sue. He wished me good luck with the worthless default judgment I would get. As I was explaining how I collected the last default judgment from a collector--in full--after he wasted a few thousand bucks on a big stuffy law firm that never had any chance against ME--he hung up. Oh well, he'll find out all about it soon enough

Don't Lie In Court, Don't Lie To Consumers' Lawyers: Wolpoff & Abramson Gets Another Pie In The Face

SAYYED v. WOLPOFF & ABRAMSON, USCA-4 No. 06-1458, http://pacer.ca4.uscourts.gov/dailyopinions/opinion.pdf/061458.P.pdf , on appeal from USDC-DMD, before Chief USCJ Wilkins, USCJs Wilkinson, Motz, opinion by Wilkinson, filed 09 May 2007.

LONG STORY SHORT: Debt collectors' false statements in court papers and false statements to consumers' counsel are violations of FDCPA, which overrides any common-law litigation immunity. Binding in MD, NC, SC, VA, WV.

FACTS: Wolpoff & Abramson, a collection law firm [Note: NOT! They are a lawyer-owned collection agency, not a law firm as respectable folk understand the term, because most of their collectors are rude, insolent, unprofessional NONlawyers who call up and demand payment, typically violating FDCPA any way they can for a buck. This case is a relatively rare one in which Wolpoff & Abramson actually sued somebody--but as will be seen, perhaps they should not have.], sued Plaintiff in Maryland state court for an alleged Discover Bank credit card on which Plaintiff allegedly defaulted.

Wolpoff & Abramson served interrogatories on Plaintiff that failed to disclose that they were communications from a debt collector. The interrogatories also falsely stated the court date, did not inform Plaintiff that any denials had to be under oath in order to be effective, and did not disclose that the state court could default Plaintiff if he did not serve answers within 30 days. Wolpoff & Abramson moved for summary judgment against Plaintiff, who claimed that the written motion misstated the amount of the debt, and also tried to collect 15% attorney fees that Wolpoff & Abramson was not entitled to.

PROCEDURE: Plaintiff filed a counterclaim in that case [Note: it's not clear from the opinion what he was claiming], whereupon Discover Bank fired Wolpoff & Abramson from the case, obtained new counsel, and settled with Plaintiff. Plaintiff also sued Wolpoff & Abramson in U.S. District Court for the District of Maryland for violating the following provisions of the Fair Debt Collection Practices Act: 15 U.S.C. § 1692e(2)(A) forbidding false statement of the amount of the debt in Wolpoff & Abramson's summary judgment motion; §§ 1692e(2)(B) and 1692f(1) forbidding collection of unauthorized attorney fees; § 1692e(10) forbidding misrepresentations, including the false trial date, the nondisclosure that interrogatory answers had to be under oath, and the failure to warn that Plaintiff could be defaulted for not serving answers within 30 days; and § 1692e(11) requiring that the interrogatories disclose that they were communications from a debt collector.

Wolpoff & Abramson moved to dismiss for failure to state a claim per Rule 12(b)(6), arguing that attorneys enjoy absolute immunity to suit for statements made in the course of litigation; Wolpoff & Abramson served the interrogatories not on Plaintiff directly, but on Plaintiff's counsel, whom FDCPA did not protect; and that any false statements in the summary judgment motion stemmed from reasonable reliance on their clients' representations. Taking all of Plaintiff's statements as true for purposes of the motion, the trial court mentioned "witness immunity" and ruled that absolute common law immunity protected Wolpoff & Abramson from any claims based on statements made in litigation, and that a 15% attorney fee was reasonable, then went on to state that commercial litigation could not proceed if FDCPA were applicable to cases like these. MOTION TO DISMISS GRANTED; case closed. Plaintiff appealed to the U.S. Court of Appeals for the Fourth Circuit.

DECISION: Wolpoff & Abramson is definitely a "debt collector" under FDCPA and must obey it, even in the course of litigation. Wolpoff & Abramson was essentially arguing for absolute immunity in disregard of FDCPA's plain language. This the Fourth Circuit could not do. Congress wrote no blanket FDCPA exception for debt collection attorneys' litigation activities and the Supreme Court has refused to read any such exception into it. Congress did amend FDCPA to exempt formal pleadings § 1692(11), but not from the rest of FDCPA.

Neither is there any exception for communications to a consumer's counsel, because "communications" are "the conveying of information regarding a debt directly or indirectly to any person through any medium." Again, the Supreme Court has read no exception into "indirectly" that would immunize communications to counsel. Wolpoff & Abramson further argued [Note: it's not clear from the opinion whether the trial court ruled on this] that 42 U.S.C. § 1983, the civil rights statute under which people can sue government officials for violating the U.S. Constitution or federal laws, preserves common-law immunities for such officials, and therefore FDCPA does the same for debt collectors. The Fourth Circuit found flaws in that analogy, partly that Wolpoff & Abramson identified no immunity that would have protected them in this case, but mostly because § 1983 is a bare-bones paragraph from the Reconstruction era, while FDCPA is a comprehensive regulatory scheme meant to overwrite, not incorporate, the common law.

The trial court's concern that commercial litigation could not proceed if FDCPA applied to court proceedings was misplaced. This was a consumer collection case, not a commercial one. Neither did the case have anything to do with witness immunity. Plaintiff sued over false statements in Wolpoff & Abramson's summary judgment motion, not in the affidavits attached to it, and if Plaintiff could prove that violation, he could recover under FDCPA. Wolpoff & Abramson could still avoid liability by proving the statements true, or by proving the good faith error defense per § 1692k(c), but that was not a matter suitable for resolution on motion to dismiss. Lastly, neither side had fully briefed or argued two of Plaintiff's claims--unauthorized attorney fees and nondisclosure that the interrogatories were from a debt collector--so the Fourth Circuit expressed no opinion on them. The trial court needed to consider them in the light of this opinion. DISMISSAL REVERSED; cause remanded for further proceedings.

EDITORIAL: The hooligans of Wolpoff & Abramson take a well-deserved pimp-slap from Richmond! Tell the truth--what's so hard about that? Write "This is from a debt collector. This is an attempt to collect a debt." in the footer of every page--what's so hard about that? Put down the right court date--what's so hard about that? Now Wolpoff & Abramson is on notice that courts will not tolerate their shenanigans on grounds that, well, it was in court so we can do anything we want. Great decision, Fourth Circuit! Ernest P. Francis of Arlington, who won this appeal, is hereby awarded the FDCPA Blog Legion of Merit. Good show, Ernest. Wolpoff & Abramson's only comfort is, oh, the 8 kazillion dollars a day they make from unsuspecting consumers who don't know they're being illegally stomped on.

Wolpoff & Abramson: Don't lie to ME again. You are warned.

Wolpoff & Abramson Refuses To Read Law Books, Attacks FDCPA Champion, Gets Smacked

CROW v. WOLPOFF & ABRAMSON, LLP, USDC-MND Civil No. 06-3228, 2007 U.S.Dist. LEXIS 31356, before USMJ Mayeron, filed 19 Apr 2007. LONG STORY SHORT: Collection agency's self-designated affirmative defense seeking attorney fees under Rule 11, Section 1927, and FDCPA bad-faith provision was not an affirmative defense at all, and would be stricken. Not binding anywhere but may be persuasive. FACTS: Defendant, a lawyer-owned collection agency with a nationwide business, mailed a dunning letter dated 15 May 2006 to Plaintiff, who was out of town on a job site and then at his lake house, and did not receive the letter until 30 May 2006. Plaintiff mailed a validation request to Defendant on 22 June 2006, within the 30-day time limit after receiving the dunning letter. Instead of validating the alleged debt, Defendant responded only with a "Notice of Intent to Sue" letter dated 28 June 2006. PROCEDURE: Plaintiff sued Defendant in U.S. District Court for the District of Minnesota per 15 U.S.C. § 1692g for proceeding with collection efforts before validating the debt. Apparently unaware that Plaintiff had in fact requested validation within the 30-day limit, Defendant included in its answer the following, designated Sixth Affirmative Defense (hereinafter SAD): "Plaintiff and Plaintiff's counsel's pursuit of Defendant is in bad faith and solely to harass and annoy, entitling Defendant to any award of attorney's fees, as well as their costs and disbursements incurred herein as sanctions, and that if Plaintiff and Plaintiff's counsel continues to prosecute or further this litigation or fails to immediately dismiss this lawsuit, will be in violation of Fed. R. Civ. P. 11, 28 U.S.C. § 1927 and 15 U.S.C. § 1692k(a)(3) and will be liable for Defendant's attorneys fees and costs for multiplying the proceedings in this cases unreasonable and vexatiously, asserting claims solely to harass and annoy Defendant and in asserting claims contrary to the applicable law in this area." Plaintiff's counsel, well-known FDCPA consumer advocate Thomas J. Lyons Jr., emailed Defendant's in-house lawyer Jill N. Brown to explain the apparent delay in responding, and asked that Defendant withdraw SAD. Instead, Defendant chose to disbelieve Plaintiff, and refused to withdraw SAD. Plaintiff moved per Rule 12(f) to strike SAD as legally insufficient and scandalous. Defendant argued that even if SAD was not an affirmative defense, the trial court should treat SAD as a counterclaim. DECISION: Rule 12(f) motions to strike are disfavored, but are appropriate when an affirmative defense is either scandalous or legally insufficient. Affirmative defenses are supposed to raise issues outside the scope of a plaintiff's pleadings. If true, an affirmative defense will defeat a plaintiff's claim even if what the plaintiff says is also true. Instead, SAD was just a denial of Plaintiff's pleaded facts, to wit, that he did not get the letter until less than 30 days before he requested validation. Rule 11 requires a separate motion, and cannot be raised by affirmative defense or counterclaim. [Note: If W&A actually pulled out Rule 11 and read it, they would know this.] Therefore, the SAD request for Rule 11 sanctions was procedurally insufficient. 1692k(a)(3) and Section 1927 fees are not counterclaims either, because counterclaims are independent grounds for relief, whereas bad faith and vexatiousness depend on resolution of the original action. Here, facts as to when Plaintiff got Defendant's letter needed to be resolved before addressing any question of bad faith. Plaintiff's argument that SAD was scandalous, meaning that it unnecessarily reflected on the character of an individual or stated anything in repulsive language that detracted from the dignity of the court, was superfluous. SAD was legally insufficient as an affirmative defense or counterclaim, so the trial court would not address whether it was also scandalous. MOTION TO STRIKE GRANTED. EDITORIAL: Score one for the good guys against the functionally illiterate hooligans of Wolpoff & Abramson. THEY accuse Tom Lyons of harassment and annoyance? Talk about the snowflake calling the bedsheet white! Wolpoff & Abramson refers to itself as a law firm, but it is nothing better than a few hundred nonlawyer bill collectors underneath a fistful of arrogant jerks with law licenses. Naturally, the nonlawyer bill collectors take this as permission to abuse and terrorize consumers, cruelly delighting in their fraudulent power. You think I'm making this up? I've had the displeasure of negotiating the maze of Wolpoff & Abramson's massive phone system, trying to talk to a real lawyer about my clients' cases. What, real lawyers work at Wolpoff & Abramson? You'd never know it from calling them. I was handed off from one clueless cretin to another, having to re-explain myself every time. I finally arrived at some petty manager's desk, and among other things he told me "You are the debtor! You don't tell US what to do!" Hmmm ... watch me. At length, a more mild-mannered drone personally promised me that Mr. Ronald Abramson Esq. himself would be calling by the end of the day. That was last year, and I'm still waiting. We see from this case that nothing changes at Wolpoff & Abramson. How about pulling out a law book and reading it sometime? Isn't that what REAL LAWYERS do? It seems that like real men don't ask directions, real lawyers don't read statutes, rules, or cases. Well, Wolpoff & Abramson are nearly billionaires now, so I guess at some level it works. Keep up this foolishness, Wolpoff & Abramson, and I'll retire off of you.

RJM Acquisitions Escapes FDCPA Liability For Bona Fide Bankruptcy Boo-Boo

ROSS v. RJM ACQUISITIONS FUNDING LLC, USCA-7 No. 06-2059, 2007 U.S.App. LEXIS 5759, on appeal from USDC-ILND, before USCJs Posner, Ripple, Williams, opinion by Posner, filed 13 Mar 2007.

LONG STORY SHORT: Debt buyer/collector's computer bankruptcy search did not discover the consumer's bankruptcy under a different name and neither did the prior collection agency notify it; consequently, the attempt to collect the debt from the consumer in violation of FDCPA was a bona fide error. Binding in IL, IN, WI.

FACTS: Plaintiff owed $574.72 to Federated Department Stores and could not repay it. Federated sold it to RJM Acquisitions Funding LLS as part of a large portfolio of bad debt. RJM assigned its affiliate Plaza Associates to collect Plaintiff's debt from "Lisa Ross." Plaintiff petitioned for bankruptcy protection under her full name "Delisa Ross" and listed Plaza Associates on her bankruptcy schedules, but misnamed RJM as RMA; neither did she list "Lisa Ross" as an alias. Plaza learned of the BK and returned the account to RJM without correcting Plaintiff's name or notifying RJM of the BK. Plaintiff received full discharge of the debt, but several months later, RJM mailed her two dunning letters seeking to collect the debt. Just before doing so, RJM searched for bankruptcies under the name "Lisa Ross," which did not pick up Plaintiff's BK in the name "Delisa Ross." Plaintiff's counsel told RJM that the debt was discharged, and RJM immediately ceased all collection efforts.

PROCEDURE: Plaintiff sued RJM in U.S. District Court for the Northern District of Illinois per 15 U.S.C. § 1692e(2)(A), which forbids a debt collector's false representation of the character, amount, or legal status of a debt. RJM moved for summary judgment, arguing that the 15 U.S.C. § 1692k(c) bona fide error defense applied because RJM had followed reasonable procedures designed to prevent dunning bankrupts. The trial court agreed that RJM's error was bona fide and it should not be liable. SUMMARY JUDGMENT GRANTED. Plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit.

DECISION: Trying to collect a debt discharged in bankruptcy is one of the many ways a collector can misrepresent the character, amount, or legal status of a debt. FDCPA is a strict liability consumer protection statute and violations of it need not be intentional to entitle a consumer to damages. The only way for a collector to save itself is to show that the violation was unintentional and occurred despite procedures reasonably designed to prevent errors.

RJM qualified for this defense. Plaintiff made the principal error in the first place, by not listing aliases on her bankruptcy schedules. If she had fulfilled this basic duty, RJM could have found her and would not have dunned her. RJM could not reasonably have found Plaintiff's full name by searching her short name. The Seventh Circuit tried itself to find "Delisa Ross" by entering "Lisa Ross" on search engines, but received no suggestions such as "do you mean Delisa Ross?" A credit report would have shown Plaintiff's BK discharge, but ordering a credit report for every debtor is prohibitively expensive and not reasonable to require for FDCPA compliance. Under these facts, Plaintiff's appeal was not far from frivolous. AFFIRMED in all respects.

EDITORIAL: I see the point, I'm afraid. Judge Posner has on numerous occasions ripped scofflaw collectors a new one, but is equally protective of collectors who did not break the law or tried their best not to. I am no fan of RJM Acquisitions, not least because they bought the entire Camco portfolio, and Camco was the Medellin Cartel of debt collection. But here, RJM didn't buy a toxic waste pool of fictitious debts like they did from Camco, and their own Plaza Associates let them down. Maybe RJM is wising up.