Wednesday, April 28, 2010

Violation of the Florida Consumer Collection Practices Act May Constitute a Violation of the Federal Fair Debt Collection Practices Act

The United States Court of Appeals for the Eleventh Circuit recently decided a case dealing with the interplay between the Federal Fair Debt Collection Practices Act (FDCPA) and its Florida counterpart, the Florida Consumer Collection Practices Act (FCCPA), Fla. Stat. § 559.55 et. seq. The decision, LeBlanc v. Unifund CCR Partners, G.P., --- F.3d ----, 2010 WL 1200691 (11th Cir. 2010), can be found here. According to the Court, even where the FCCPA does not create a private right of action for a violation of its terms, the FDCPA can provide a remedy.

The FDCPA has received an increasing amount of attention in recent years, with the struggling economy and the resultant proliferation of a new legal practice area- consumer debt collection defense. Lawsuits seeking damages for alleged violations of this law are becoming more and more popular. Of significantly lesser renown is the FCCPA, similar legislation enacted by the Florida legislature. In the spirit of the FDCPA, and as a supplement thereto (see Fla. Stat. § 559.552), the FCCPA makes it a violation of state law to engage in certain practices in the collection of consumer debt, including impersonating a law enforcement agency, using or threatening violence or force, disclosing the status of the debt to third parties, failing to disclose that the debt has been disputed, harassing the debtor, etc. The exhaustive list, which can be found at Fla. Stat. § 559.72, should look familiar to FDCPA attorneys.

The FCCPA also provides administrative remedies (Fla. Stat. § 559.730) and civil remedies (Fla. Stat. § 559.77) for violations of § 559.72, each of which is inspired by Federal law (15 U.S.C. §§ 1692(k) and 1692(l)).

In addition to these sections mirroring the FDCPA, the FCCPA requires consumer collection agencies located within the state and consumer collection agencies located outside the state conducting business here to register with the Office of Financial Regulation. Fla. Stat. § 559.553. But while it authorizes administrative actions against a consumer collection agency who fails to register, the FCCPA does not create a private right of action under Florida law for failing to register.

This brings us to the central question addressed by the Eleventh Circuit in Leblanc- whether relief can be provided under the Federal FDCPA for failing to register as a consumer collection agency as required by the Florida FCCPA. The issue came to the court because the Defendant collection agency allegedly sent a letter to a Florida debtor, prior to registering under the FCCPA, which threatened to sue him. The District Court ruled summarily that this violated the FDCPA because the letter contained a threat to take an action that could not legally be taken (i.e. sue the debtor in Florida without registering under § 559.553), and the collection agency appealed. The Eleventh Circuit reversed, holding that not all FCCPA violations amount to an FDCPA violation, and that in this case, based upon the specific language of the letter, a reasonable juror could find that the least sophisticated consumer would view the letter as something other than a threat to sue.

This decision is consistent with prior District Court rulings, and it makes sense. If the letter is a threat to take action that cannot legally be taken, it should be a violation of the FDCPA, § 1692e(5). The source of the law that makes the threatened action illegal, be it Federal consumer protection law, state criminal law, Federal Bankruptcy law, etc., is immaterial. Conversely, if the letter is not a threat to take an action that cannot legally be taken, then no section of the FDCPA can be invoked, and so the fact that a violation of the FCCPA has occurred is of no consequence. As a result, while the ruling should be noted, especially for its in-depth discussion of the least sophisticated consumer standard: "the least sophisticated consumer can be presumed to possess a rudimentary amount of information about the world and a willingness to read a collection notice with some care...however, the test has an objective component in that while protecting naive consumers, the standard also prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness,” it should not have a significant effect on the collection agency's policies and procedures.

Wednesday, April 21, 2010

United States Supreme Court Rules Debt Collectors Are Not Entitled to Bona Fide Error Defense for Mistakes of Law

The United States Supreme Court handed down its decision in the case of Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA today, holding, as expected, that the Fair Debt Collection Practices Act's bona fide error defense, discussed previously on this blog here, does not apply to mistakes of law. Justice Sotomayor delivered the opinion of the Court, in which Chief Justice Roberts and Justices Stevens, Thomas, Ginsberg, and Breyer joined (with Justice Breyer also writing a separate concurring opinion). Justice Scalia wrote an opinion concurring in part and concurring in the judgment, and Justice Kennedy dissented, with Justice Alito joining in his opinion.

The majority cites several sources of authority in support of its decision, some compelling and some not so compelling. In the coming weeks, we will explain each argument advanced by the majority and the corresponding arguments made by the concurrences and the dissent. In the meantime, it is important to note the practical effect of the ruling: a debt collector or collection attorney's mistaken belief in the legality of an action under the FDCPA will not excuse him or her from liability. As a result, the only way to completely shield yourself from liability for a mistake of law is under an advisory opinion provided by the Federal Trade Commission.

It should also be noted, however, that according to the majority this decision does not affect the ability of the trial court hearing an FDCPA lawsuit to award actual damages in a de minimis amount (even zero) under § 1692k(a)(1), or as the majority puts it, "to adjust [additional] damages where a violation is based on a good-faith error," under § 1692k(b), which provides:

(b) Factors considered by court
In determining the amount of liability in any action under subsection (a) of this section, the court shall consider, among other relevant factors—
(1) in any individual action under subsection (a)(2)(A) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional.
With this in mind, debt collectors and collection attorneys should remain dedicated to keeping abreast of developments in Fair Debt Collection Practices Act law, not only to keep themselves in compliance with the law and thereby avoid liability altogether, but to minimize their exposure to damages in the event they are sued by demonstrating their good faith.

Friday, April 16, 2010

Upcoming Seminar- "Commercial Collections: Legal Strategies from A to Z"

Jorge M. Abril, Esq. is scheduled to speak at the National Business Institute's upcoming seminar entitled Commercial Collections: Legal Strategies from A to Z. The seminar takes place June 21, 2010 at the Hyatt Regency Miami. The program description reads:

Know the Legal Remedies and Procedures for Collecting Commercial Debts- Do you have a firm grasp of the legal procedures for commercial debt collection? Attend this step-by-step, practical seminar to not only gain a better understanding of collection law fundamentals, but also learn the exact procedures for filing your claim and collecting on judgment. Get what's owed to your clients as smoothly and efficiently as possible with these proven collection techniques. Register today!
  • Get business debtors' attention with an effective demand strategy and process.
  • Avoid costly litigation with successful techniques to achieve debt settlement without filing a lawsuit.
  • Confidently proceed with your client's lawsuit – knowing specific procedures for where, how and what to file.
  • Exhaust every avenue for collection with proven strategies for locating debtors and their assets.
  • Discover the best methods to collect post-judgment.
  • Smoothly handle your next commercial collection claim with sample letters, forms, complaints, checklists and other must-have documentation.
  • Recognize and steer clear of unethical collection practices that could result in disciplinary action or disbarment.
Jorge will present sections on the Fair Debt Collection Practices Act (FDCPA), on Prefiling Strategies, and on Ethical Pitfalls in Collections. As an aside, Jorge and I are both perplexed as to why there is a section discussing the Fair Debt Collection Practices Act, given that the seminar addresses commercial collections and that the FDCPA applies only to consumer debt- a testament to the extent to which the FDCPA is misunderstood. Nevertheless, this seminar should be of interest to commercial litigators, collection agencies, and creditors. More information, including registration instructions and tuition costs, can be found here.