Under the Fair Debt Collection Practices Act (FDCPA), a debt collector is required to provide written notice of your right to dispute a debt within five days of its first attempt to collect the debt. See 15 U.S.C. Sec. 1692g(a). The law states that “a communication in the form of a formal pleading in a civil action shall not be treated as an initial communication under this section.” 15 US.C. Sec 1692g(d). The question we address here is whether the system Minnesota and the Dakotas use, which provides for service of a document that is not yet a civil action, is excluded from the definition of “initial communication.” In plain English, if a document may become part of a lawsuit, is serving it upon a debtor an initial communication under the FDCPA requiring the disclosures of Sec. 1692g(a). We argue that it is.

That would make most lawsuits, as they are currently being served in Minnesota and the Dakotas, a violation of the FDCPA.

“Pocket Service”

Minnesota and the Dakotas have a system of lawsuit initiation that is different than that of all other states, called “pocket service.” Under this procedure, plaintiffs are permitted to create what look like lawsuits and petitions and serve them on defendants without ever having filed suit. According to Minnesota law, this “commences” the action. MN Rule of Civil Procedure 3.1. Then, if the defendant fails to answer in time, the plaintiff can file suit and seek a default judgment. If the defendant does answer, however, the would-be plaintiff is free to leave the suit unfiled. It is “deemed” dismissed with prejudice if not filed within a year, MN R. Civ.P. 5.4, but “deemed” means, as is obvious, that it is NOT, in fact, dismissed – because it was never filed. Given that roughly 85% of debt cases are not answered but are in fact defaulted, while in almost all of the cases in which people do intelligently defend themselves the defendants win, pocket service is patently unjust in debt collection cases.

But our question here is, must the petition in a state allowing pocket protection include the right to dispute the debt? Or to put it slightly differently, is service of a petition and summons in a case which has not been filed constitute an “initial communication” for purposes of the FDCPA’s disclosure requirements? Our position is that it does, and that a debt collector whose first contact with a debtor is pocket service must include within that written document a notice of right to dispute.

They never do at present.

Further, even if they did include notice of the right to dispute, the pendency of the lawsuit would probably “overshadow” the right to dispute and be another violation of the FDCPA.

Here is the operative language of 15 U.S.C. Sec. 1692g:

(a) Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication… send the consumer a written notice containing —

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

Under the statute, pleadings of an “action” are not initial communications for purposes of the statute. Here is that provision at 15 U.S.C. Sec. 1692g (d):

(d) Legal pleadings

A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).

At first blush, Sec. 1692g(d) would seem to make a summons not an initial communication, but note that it says formal pleading “in a civil action.” The FDCPA has a section of definitions at 15 U.S.C. 1692a. It includes no definition of “civil action,” probably because the term has a widely accepted definition that it is a lawsuit that has been filed in court. With pocket service, no suit has been filed, and no suit need ever be filed. It is clearly not a pleading in a civil action. At most, it’s a pleading in what may become one.

Under Minnesota law, the action is supposedly “commenced” by service (Rule 3.1), but 15 U.S.C. Sec. 1692g(d) is federal law subject to federal interpretation – it is not governed by Minnesota’s vague use of the word “commenced.” At the time service is made, no court has knowledge of or jurisdiction over the matter – there has been no judicial involvement at all – and there may never be. Such a document cannot reasonably be construed as an actually existing lawsuit.

In addition to the plain language of the statute referring to a “civil action” and not a “potential civil action,” courts should require the FDCPA warnings in pocket service because the FDCPA is a “remedial” statute that should be read broadly and it is necessary to protect the interests the FDCPA requirements were designed to protect.

The purpose of the dispute provision of the FDCPA is to prevent debt collectors from pursuing people who do not owe the money. Congress had found that many such suits resulted in default judgments that were unjust. That risk, and that result, are plainly present in the pocket service jurisdictions. Moreover, as I understand the law, a debt collector can continue to communicate – completely free of the FDCPA – for up to a year under the most coercive conditions imaginable, before needing to file suit and submit to a court’s oversight.

The justification often given for exempting pleadings in a suit from the protections of the FDCPA is that once suit is filed, a court has oversight of the matter and can prevent overreaching and unjust behaviors. If pocket service is permitted without the notices required by the FDCPA, then the protections are withdrawn without that judicial oversight. Indeed, that state of affairs would enable the very thing the FDCPA was designed to prevent for the very reason that it allows debt collectors to seek default judgments without costs or judicial oversight, but to drop the case in the event a defense is offered, also without cost. So frivolous and unjust suits are encouraged, and debt collectors – notorious for their dishonesty and overreaching – would be permitted to set up a “heads I win, tails you lose” scenario fundamentally at odds with the purpose of the FDCPA.

If the defendant appears and defends, then the quasi lawsuit can continue without judicial oversight for up to a year (or even beyond) without a court even becoming aware of it. Such a situation is ripe for abuse, and there can be no doubt that is being abused on a routine basis.

The fact that Minnesota and the Dakotas would allow such a process for lawsuits other than debt collection may reflect badly on them but has no effect on the FDCPA. Under the Supremacy clause of the constitution, Federal law governs where there is any conflict with state law. The FDCPA makes pocket service without the notices required by the FDCPA illegal.