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Who can use FDCPA and Who follows it

Who Can Use, and Who Must Follow, the Fair Debt Collection Practices Act

The Fair Debt Collections Practices Act only applies to consumer debts and, by and large, the actions of debt collectors (or original creditors pretending to be debt collectors). This is broken down into the questions of the type of debt for which collection is sought and the type of entity seeking the debt. In this article we will first discuss what the FDCPA covers, and then what that means to you.

Consumer Debts only

The FDCPA applies to “consumer debts,” or debts incurred primarily for personal, family, or household purposes. 15 U.S.C. Sections 1692a(3) and (5), Creighton v. Emporia Credit Service, Inc., 981 F.Supp. 411 (E.D.Va. 1997). When the debt is rung up on a corporate or business credit card, the courts will look into the nature of the debt – and not simply the name on the card. As I have pointed out elsewhere, however, making this argument can be dangerous to the “corporate shield” since it suggests a merging of assets which is sometimes used to defeat the corporate shield and allow a creditor to pursue an owner of the corporation.

Natural Persons Only

The act also only protects “natural” persons, which means it applies only to actual people and not corporations or separate associations. Again, since debt collectors never actually speak to corporations or businesses, but only to human individuals, this simply means that if a debt collector is calling on a debt rung up for business purposes, or calling a business regarding its debt (and harassing whoever picks up the phone, for example), the FDCPA does not apply.

Transactions Only

Because the FDCPA applies to only consumer debt, it applies only to “transactions” engaged in primarily for personal, family, or household debt. In other words, it does not apply to debts generated by child support obligations, tort claims (lawsuits against you for harming another person), or personal taxes, for example. Mabe v. G.C. Services Limited Partnership, 32 F.3d 86 (4th Cir. 1994); Zimmerman v. HBO Affiliate Group, 834 F. 2d 1163 (3rd Cir. 1987); Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (11th Cir. 1998).

On the other hand, the term “transaction” can be fairly broad, and would include things like condominium fees or other fees or debts incurred as part of a transaction that might, in fact, have occurred years before the debt in question arose. Because the FDCPA applies to debts arising out of transactions, it has applied to condo fees for a house the consumer once lived in but later (at the time of the FDCPA violation) was renting out to others for the purpose of generating income. This would suggest the reverse might also be true – a condo originally purchased for business purposes but later converted to personal use might not be covered by the FDCPA, but I have not seen a case with that holding.

The Act does apply to things you might consider “non-credit” obligations, such as bad check debts, condominium assessment fees, residential rental payments, municipal water and sewer service, and other non-credit consumer obligations – Bass v. Stolper, Koritzinsky,Brewster & Neider, S.C., 111 F.3d 1322 (7th Cir. 1997); FTC v. Check Investors, 502 F.3d 159 (3d Cir. 2007).

Debt Collectors Only

In general, the FDCPA applies only to “debt collectors.” What that means used to be a lot clearer than it is now.

The Supreme Court confused the question of who was a debt collector in some decisions in 2018. Primarily, it determined that when a company buys a debt – regardless of its status at the time of purchase – it is a “creditor” under the part of the law debt defendants had been using to sue junk debt buyers.

Instead, a person buying a debt might be a debt collector if its “principle business” is the collection of debts. It is not clear HOW MUCH of a company’s business must be collection of debts for that to be its “principle business.” I would guess a sizable majority – perhaps 90% or more – but the term has rarely been litigated, and has never been quantified to my knowledge. It would seem clear that a bank with a sizable business providing credit cards would not be a debt collector if it happened to buy someone else’s debts and bring suit on them. Likewise, law firms buying debt and suing on them would probably not be debt collectors if they do anything else – a truly unfortunate result, in my opinion.

But classic debt collectors (i.e., those working for someone else) would still be debt collectors, and so, probably, are the largest junk debt buyers.

What the FDCPA does not cover is actions by an “original creditor” (i.e., the company or person who claims you borrowed from it) unless it is pretending to be another entity. Sometimes original creditors seek to exert additional pressure on delinquent bill payers by pretending to be a debt collector, and when they do this they are not only covered by the FDCPA but also often in violation of it, since the Act prohibits deception and unfair collection methods. The Act will also not cover the actions of loan “servicers,” which are financial companies that buy debt not in default and manage it as if they had extended credit in the first place.

What It Means to Be Covered by the FDCPA or Not

As I am sure you know, the FDCPA requires and prohibits certain actions, giving you defenses and the right to counterclaim or file suit against a debt collector. If the FDCPA does not apply, you simply cannot claim any rights under it – cannot require verification, bring claims for deception or abusive conduct, or seek to enforce any other rights under the FDCPA against non-debt collectors or against debt collectors for their actions in pursuit of non-covered debt.

Making such a claim could damage your ability to defend against these debts, so you should carefully consider whether the Act applies before attempting to assert rights under it.

If your debt or bill collector is not covered under the FDCPA, that does not necessarily mean that you have no rights worth asserting. It just means that you must look somewhere else for them. Many states have their own debt collection laws, and these may apply to situations the FDCPA does not. Also, more generally, most states have laws regarding how “outrageous” a person – including a debt collector – is allowed to be.

One of the great things about the FDCPA is that it gives some specific rules – debt collectors cannot call before 8 in the morning, for example, whereas a few calls by an original creditor early in the morning will probably not be illegal. As the behavior becomes more and more extreme, however, the more likely it is to be “outrageous” enough to give you the right to sue. Threats of physical harm or police activity probably go over this line, for example; cussing you out a time or two? – maybe not. It is simply not clear what non-debt collectors are allowed to do in many instances. Courts have been pretty tolerant of some surprisingly bad or extreme actions by original creditors.

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Welcome to Your Legal Leg Up.

Our goal is to help ordinary people who are facing debt problems now or trying to live down the effects of older debt problems. We want to help you protect what you have and build for tomorrow.

Debt Defense

We got our start in helping people defend against debt lawsuits brought by debt collectors. This is possible because debt collection is really a “factory” operation. The debt collectors find out practically nothing about individual cases before they bring suit, and in litigation they don’t like to spend any more time on them. Instead, they bring dozens, hundreds, or thousands (depending on the collector) of suits that are virtually identical. Because most people – we estimate somewhere between 80 and 95% of people – default or give up without paying any attention to the law suit whatever, the debt collectors really don’t need to do anything to rake in huge amounts of money.

And that’s what they do.

But the problem with that approach for them is that if you are willing and able to fight a little bit, they rapidly find it unprofitable to continue to fight with you. They make their money by collecting debts, not fighting them. We teach you to fight them in a way that increases the debt collector’s costs and improves your chances of winning. It takes some work, but your chances of winning are excellent.

Credit Repair

If you have had debt problems at one point, there’s a good chance your credit report is still suffering. And that means that good things are passing you by. You’re spending more for housing, insurance, and many other things, and there are some things you just can’t get – all because you have bad credit. You can fix that, and we can help. There are laws that help you get your credit report reviewed and straightened out, and there are practical ways to reconstruct your credit history so that you’re better off than you were before your debt problems.

Debt Negotiation

If you have debt collectors after you for a debt you can’t afford to pay, you must wonder whether there’s a way to make them go away without suing you. Of course, any one company can do whatever it pleases, but in general, the debt collectors can be brought to the table. They’ll negotiate, and you can get back on your feet without being sued. And without having to pay what you can’t afford.

Of course there are no free lunches, and anything you do to negotiate will cost you in various ways. We help you minimize those costs so you don’t pay more than you have to for less beneficial results. It’s all about making the best of a bad situation, and part of that means to keep it from getting worse. We can help.

 

About the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is the centerpiece of legal protections for debtors against debt collectors. The law was passed in its essential form in 1977, and its goal was to protect debtors against the abuses of debt collectors. This article discusses what makes this law great, and some of its limitations.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA)  was enacted to put an end to some of the worst practices of the debt collection industry. It’s been a very good law, but the debt collectors are still doing many of the things the law was designed to present. You may be able to sue them or prevent them from suing you..

The Debt Collection Industry

Before the act, the debt collection industry was routinely engaging in the most abusive sorts of behavior imaginable, from calling debtors at all hours of the day or night and subjecting them to streams of cursing and name-calling, to discussing their debt with children, neighbors, and employers. Debt collectors frequently misrepresented themselves as attorneys and often threatened legal action which they were powerless to initiate. And they often attempted to, and did, collect debts that either never existed or were long unenforceable because of statutes of limitation or bankruptcy.
Whatever the staid spokespeople of the debt collection industry may say, this is the background of their industry. The Fair Debt Collection Practices Act, 15 U.S.C. Section 1692, et seq., was enacted to put a stop to these extreme behaviors in 1977. Because the people intended to be protected by the act are underrepresented by lawyers, and because of the explosion of debt litigation over the past decade, many of the old abuses still continue, and as people increasingly defend themselves from the debt collectors, they develop new tricks all the time.

The FDCPA: A Pretty Good Law

Nevertheless, the FDCPA is in many ways a model piece of legislation. What makes the law so powerful is that, in addition to making certain enumerated acts illegal, the Act also more generally makes acts that are “oppressive,” “false or misleading representations,” or “unfair practices” illegal. This means that, whereas in most laws, the would-be wrongdoer is free to craft his actions around the specific language of the law and find “loopholes,” under the Fair Debt Collection Practices Act, at least, the consumer may argue that these actions are still unfair or oppressive. The Supreme Court has ruled that an “unfair” act can be shown by demonstrating that it is “at least within the penumbra” of some common law, statutory “or other established concept” of unfairness.

That’s pretty broad. The price for this flexibility, however, is that the remedies—what you get if you prove the case—are less powerful. And this may be why the practices are still occurring today.

As mentioned above, there are specific actions enumerated in the FDCPA, and these include most notably, suing on expired debts, filing suit in distant jurisdictions, publishing certain types of information regarding the debtor, calling outside of specified hours. And the list goes on. If the debt collector is acting in some highly offensive way, chances are he’s within the specific provisions of the Act. These can be found at 15 U.S.C. 1692c, d, e and f. You can find the specifics by Googling the Act or provision and determining whether the specific action you’re concerned about is within one of these provisions.

Making it Look Hard to Defend

Debt collectors make most of their money by scaring, or tricking, people into forfeiting their rights to defend themselves. That’s far, far cheaper and faster than actually litigating. So debt collectors spend a great deal of time and effort learning how to make people give up. They’re good at that, but if you fight back anyway, you have an excellent chance to win.

Remember that most of what debt collectors are doing with their petition is trying to scare you into giving up. They’re trying to make things scary and inconvenient for you so you won’t protect your rights. Here are some of their more common tricks and some things you can do about them.

One of the most common complaints I hear from people pursued by debt collections is that debt collectors have deceived them into not going to court.Then they get a default judgment and start collecting. Don’t let that happen to you!

Here’s how to spot this one coming– and what to do about it if it’s already happened to you.

The way it comes up is that the defendant (person being sued) receives the summons and petition only a relatively few days before the date given on the summons for showing up to court. The person being sued panics either because the date set is extremely inconvenient or because they do not have the resources to fight the suit regardless of which day is set for court.

They Trick You into Staying away from Court

So you call the debt collection law firm and asks to speak to the lawyer suing you. The lawyer will not speak to you (normally), and so you are forced to speak to some clerk, actually a skilled collection agent. The law firm then plays a “good cop, bad cop” routine, where the person speaking to you takes a message and agrees to get back to the defendant with the words of the lawyer. Or they play “tough but fair” and outright refuse to agree to move the court date.

They routinely move court dates for lawyers.

Either way, they want you to be maximally inconvenienced because they really, really, really don’t want you to show up or defend yourself! They say they will, however, agree to come to an “arrangement” that makes going to court “unnecessary.” Isn’t that nice

Then they either create an agreement and send it to you—or not. But if you think that going to court is unnecessary and don’t go, then the debt collector often “calls for default” (asks the court to give them a default judgment) whether you have an agreement or not.

But the agreement is usually a complete giving up anyway.

NO NO NO NO!

Don’t let this happen to you. If you can’t go to court on the date specified on the petition, think about filing an answer denying the allegations of their suit–and add a counterclaim for unfair debt collection by refusing to “move” (it’s called “continue”) the court date for you when they would do so for a lawyer.

Then you might file a “motion to continue” your court date with the court, telling it that you tried to work out the continuance with the other side but that it would not cooperate. Ask the court’s clerk for the “continuance date” and put that into your motion.

See, courts will almost ALWAYS continue a case if a lawyer asks for it. And if you file an answer first and then your request to continue, they’ll do it for you, too.

If the debt collector has already tricked you and gotten a default judgment, all is not lost. But you must act quickly. You should know that the law does not “favor” default judgments. This means that they lean against allowing them to stand if you make a decent argument against them.

The way you would do that would be to start with a motion to vacate the judgment.

 

Answer and Counterclaim

It is very helpful to have a counterclaim if you’re being sued by a debt collector. In this article we’ll discuss a few mechanics – things that are obvious to lawyers but might not be so obvious to people representing themselves.

What is a Counterclaim?

First of all, what is a counterclaim? Very simply, a counterclaim is a lawsuit you file in the same court against someone who is already suing you. That is, it is any lawsuit you file, whether or not it is related to the suit the other person filed.

The theory is that if two people are already in court for any reason, they may as well get everything done at the same time, but there are certain exceptions in cases where hearing the cases together would be too confusing, or the like. Many counterclaims do not have to be brought – you can wait till the first case is over and then (if time hasn’t run out) bring your case separately as an original suit. On the other hand, sometimes possible claims are so closely related that you are not allowed to wait: these are called “mandatory” counterclaims, and if you fail to bring a mandatory counterclaim as part of the first lawsuit you will lose the right. A classic example of mandatory counterclaims would be claims by both people in a car crash against each other – waiting and filing separately would be a big waste of court time and might also lead to contradictory judgments.

For debt defense, though, you might think of it as a defensive countermeasure. As in judo, they’ve been attacking you, and now you’re going to use what they’ve done against them.

Claims under the Fair Debt Collection Practices Act (FDCPA) can be brought as counterclaims, but they are not mandatory. You could, if you wanted to, bring a claim under the FDCPA in federal court – or even another state court – while a lawsuit against you for the debt was still underway. As a practical matter, when I was still practicing, I never did that, but you could do it.

Sources of Counterclaims

The FDCPA is the most logical source of counterclaims when you are being sued by debt collectors, for several reasons.

For one thing, the law is very broad. Anything that is an “unfair” debt collection practice is illegal under the FDCPA. Although several things are specified in the Act, many other things have been found to violate the law. That allows you to be a little creative.

Secondly, the FDCPA does not require any sort of “intent” to harm you. All you have to do is show that the debt collector did what you say is illegal. And you don’t actually have to have been hurt by what the debt collector did. That means that the unfair collection practice you claim they did does not have to have fooled you or hurt you at all.

In fraud cases, to give an example of a different kind of law, you have to prove that the person you claim defrauded you meant to do it (intent) and that it somehow harmed you (they did fool you, and you lost money). This makes claims under the FDCPA much easier than most other lawsuits. Finally, there is the question of evidence. Many FDCPA claims arise out of the debt collector’s lawsuit against you, and this will be part of the record, but all of the claims will be relatively easy to prove. Here are some articles that discuss some possible claims under the FDCPA:

There are other sources of possible counterclaims, however. There is a law in consumer law that provides that any time you would have a claim or defense against the seller, you also have that claim or defense against someone trying to collect the bill.That means that if you were ripped off by a seller, and then a debt collector comes after you, you can sue the debt collector for that fraud. If you do, you will probably have some significant advantages, as the debt collector probably does not have access, much less inexpensive, convenient access, to the witnesses it would need to defend the case. And there are other possible claims – like defamation or possible violations of the Fair Credit Reporting Act.

What You Actually Do

Assuming you decide to bring a counterclaim, what you actually do is attach it to your Answer. That is, you create your Answer, and then at the end you add allegations that would support your counterclaim. The materials in my Litigation Manual provide you samples of these.

 

The Fair Debt Collection Practices Act – the FDCPA

The Fair Debt Collection Practices Act (FDCPA) is the centerpiece of legal protections for debtors against debt collectors. The law was passed in its essential form in 1977, and its goal was to protect debtors against the abuses of debt collectors. This article discusses what makes this law great, and some of its limitations.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA)  was enacted to put an end to some of the worst practices of the debt collection industry. It’s been a very good law, but the debt collectors are still doing many of the things the law was designed to present. You may be able to sue them or prevent them from suing you..

The Debt Collection Industry

Before the act, the debt collection industry was routinely engaging in the most abusive sorts of behavior imaginable, from calling debtors at all hours of the day or night and subjecting them to streams of cursing and name-calling, to discussing their debt with children, neighbors, and employers. Debt collectors frequently misrepresented themselves as attorneys and often threatened legal action which they were powerless to initiate. And they often attempted to, and did, collect debts that either never existed or were long unenforceable because of statutes of limitation or bankruptcy.

Whatever the staid spokespeople of the debt collection industry may say, this is the background of their industry. The Fair Debt Collection Practices Act, 15 U.S.C. Section 1692, et seq., was enacted to put a stop to these extreme behaviors in 1977. Because the people intended to be protected by the act are underrepresented by lawyers, and because of the explosion of debt litigation over the past decade, many of the old abuses still continue, and as people increasingly defend themselves from the debt collectors, they develop new tricks all the time.

The FDCPA: A Pretty Good Law

Nevertheless, the FDCPA is in many ways a model piece of legislation. What makes the law so powerful is that, in addition to making certain enumerated acts illegal, the Act also more generally makes acts that are “oppressive,” “false or misleading representations,” or “unfair practices” illegal. This means that, whereas in most laws, the would-be wrongdoer is free to craft his actions around the specific language of the law and find “loopholes,” under the Fair Debt Collection Practices Act, at least, the consumer may argue that these actions are still unfair or oppressive. The Supreme Court has ruled that an “unfair” act can be shown by demonstrating that it is “at least within the penumbra” of some common law, statutory “or other established concept” of unfairness.

That’s pretty broad. The price for this flexibility, however, is that the remedies—what you get if you prove the case—are less powerful. And this may be why the practices are still occurring today.

As mentioned above, there are specific actions enumerated in the FDCPA, and these include most notably, suing on expired debts, filing suit in distant jurisdictions, publishing certain types of information regarding the debtor, calling outside of specified hours. And the list goes on. If the debt collector is acting in some highly offensive way, chances are he’s within the specific provisions of the Act. These can be found at 15 U.S.C. 1692c, d, e and f. You can find the specifics by Googling the Act or provision and determining whether the specific action you’re concerned about is within one of these provisions.