Henry A. JakobE-Mail: hiakob(ihwa.comDirect Dial: 713/328-2822

DEVELOPMENTS UNDERthe Fair Debt Collection Practices Act ("FDCP A")

JUDGMENT ENFORCEMENT IN TEXASJULY 2008

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LAWRENCE A. YOUNG

Lar Young is a partner in the law firm of HughesWattersAskanase in Houston, Texasand is immediate past Chairman of the Governing Committee of the Conference on ConsumerFinance Law. He is a fellow of both the American College of Consumer Financial ServicesLawyers and the American College of Commercial Finance Lawyers. Lar is the Texas StateEditor for both CarLaw and HouseLaw and is on the Advisory Board of the Consumer FinancialServices Law Report. He is also the Texas Chair for the American Collectors Association'sMembers' Attorney Program (MAP). Further, he is the former Editor of the Consumer FinanceLaw QUARTERLY REPORT and has authored or co-authored over 100 aricles and seminarpapers, a book, two plays and a screenplay on a varety of legal subjects in the consumer finance,commercial finance and banptcy fields.

Lar served on the Committee established by the Texas Consumer Credit Commissioner

to draft plain language consumer contracts. He curently serves on the Manufactured HousingInstitute Finance Lawyers Committee, the American Bar Association (ABA) Business LawSection Task Force on Insolvency and the Federal Cour Structure and the ABA Business LawSection Planing Committee. Lar is a past Chairman of the ABA Consumer BanptcyCommittee, the ABA Consumer Financial Services Debt Collection Practices and BanptcySubcommittee and the ABA Commercial Financial Services Interest and Usur Subcommittee.

Lar has defended numerous consumer class actions and has designed Texas home

equity lending programs, national debt collection programs and national banptcy reaffirmationand post-discharge secured creditor programs. He wrote or initiated several amendments to theBankptcy Code and wrote par of the Banptcy Code's legislative history. He also wroteseveral amendments to the Texas Finance Code. He initiated cases that held the banptcycourt unconstitutional and was in-house bankuptcy counsel to the amicus curiae in NorthernPipeline Company v. Marathon Pipeline Company, the United States Supreme Court case thatultimately held the banptcy court unconstitutionaL. As in-house counsel, he fuher initiatedUnited States v. Security Industrial Bank, the United States Supreme Cour case that foundretroactive lien avoidance under the Banptcy Code to be in violation of the Fifth AmendmentTaking Clause of the United States Constitution.

Lar attended the University of Michigan Law School and is a former Marne officer.

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HENRY A. JAKOB

Henr A. Jakob is an associate with HughesWattersAskanase. His practice focuses onlitigation in commercial and consumer cases, secured and unsecured credit transactions,landlord/tenant disputes, FDCP A and Texas Debt Collection Act matters, real and personalpropert lien and title disputes.

Mr. Jakob also serves the credit and collection industry and is a member of the ACAInternational, Member Attorney Program. In that capacity, he is a resource for member reviewsof collection letters for FDCP A risk assessment and management. He also defends attorneys anddebt collectors against FDCP A and other debt collection claims.

Mr. Jakob also advises clients on regulatory compliance issues under state law rangingfrom UCC to usur and under federal law including FCRA, TILA, RESPA and theServicemember's Civil Relief Act.

Mr. Jakob is a member of the Consumer and Litigation sections of the Houston BarAssociation and Texas Bar Association. He graduated from Chicago-Kent College of Law in1996. He obtained a bachelor's degree from the University of Texas at Austin in 1981 and aMaster of Ars degree in Economics from the University of Texas at Arlington in 1992. Hepracticed as a "Big-8" CPA between 1983 and 1993 with the firm of Coopers & Lybrand.

Mr. Jakob has authored and presented numerous aricles including:

~ Ethics in Landlord-Tenant Law, presented at Landlord Tenant Law in Texas, Beyond the

Basics, Houston, Texas, November 13, 2007;

~ When the Tenant Files Banptcy and the Effect of the Banptcy Reform Act onLandlords and Tenants, presented at Landlord Tenant Law in Texas, Beyond the Basics,Houston, Texas, November 13, 2007;

~ Lending Compliance: Fees and Compensation, Co-authored by Joyce L. Maxwell and

Henr A. Jakob, presented at Texas Credit Union League 1999 Compliance Conference,Dallas, Texas, October 4-5, 1999;

~ National Mortgage Class Action Issues, Co-authored by Lawrence A. Young and HenrA. Jakob, published in Consumer Mortgage Litigation: A Surey of Recent Cases andTrends, by LRP Publications, 1999.

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DEVELOPMENTS UNDERthe Fair Debt Collection Practices Act ("FDCP A")

The Fair Debt Collection Practices Act ("FDCP A") governs collection actions againstconsumers. The FDCP A is meant to protect consumers from abusive tactics often employed bydebt collectors including harassment, misleading or false misrepresentations and inadequate

disclosure. FDCP A cases are factually intensive often requiring trial despite the fact thatrecovery is limited to plaintiffs in many instances to $1,000 or $1,500 per violation. Despite theseeming hurdles of damages and limited recovery, much case law has developed analyzing

language in collection letters, methods of communication, and what is and is not acceptablebehavior in attempting to collect a debt. While on an individual basis, the threat of litigation maynot be great to debt collectors, the stakes are high in class action litigation.

Amendments to the FDCPA - what changed and does it matter?

Congress passed amendments to the Fair Debt Collection Practices Act ("FDCP A") inSeptember 2006. Three amendments with significant impact include:

Formal pleadings wil not constitute an initial communication under the FDCPA, andtherefore, wil not trigger the need for validation notice disclosures as otherwse required by theFDCP A.

Notices and forms sent by debt collectors, as required by other federal or state statutes orregulations, that are not an attempt to collect a debt, wil no longer be considered initialcommunications under the FDCP A. Specifically, this amendment eliminates conflicts with theFDCPA and sending notices required by the IRS (mandated 1099-C forms), Gramm-Leach-Bliley Act (privacy notices), and state or federal data security breach notification requirements.

The right to collect durng the 3D-day validation period, in the absence of a consumerdispute, is now codified in the FDCP A statute.

Specifically, 15 U.S.C. §1692g now contains (d) and (e) subsections as follows:

(d) Legal Pleadings - A communication in the form of a formal pleading in a civil actionshall not be treated as an initial communication for puroses of subsection (a).

(e) Notice Provisions - The sending or delivery of any form or notice which does notrelate to the collection of a debt and is expressly required by the Internal Revenue Code of 1986,title V of Gram-Leach-Bliley Act, or any provision of Federal or State law relating to notice ofdata security breach or privacy, or any regulation prescribed under any such provision of law,shall not be treated as an initial communication in connection with debt collection for purposesof this section.

Further, Section 1692g(b) now includes the following:

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Collection activities and communications that do not otherwise violate this title maycontinue during the 3D-day period referred to in subsection (a) unless the consumer has notifiedthe debt collector in wrting that the debt, or any portion of the debt, is disputed or that theconsumer requests the name and address of the original consumer. Any collection activities andcommunication during the 3D-day period may not overshadow or be inconsistent with thedisclosure of the consumer's right to dispute the debt or request the name and address of theoriginal creditor.

Under the old FDCP A, a complaint fied and served on a consumer constituted acommunication subject to the Act's notice requirements. Under the amendment, formal

pleadings no longer need to comply with FDCP A requirements for initial communications withconsumers. However, the question remains open as to whether other communications involvedin litigation such as letters or discovery may be initial communcations that require FDCP Acompliance.

Likewise, notices required by other laws that do not seek collection of a debt need not

conform to FDCP A requirements for initial communications.

Finally, debt collectors no longer need to wait for the 3D-day validation period to expirebefore continuing collection efforts provided the consumer has not disputed the debt or requestedthe name and address of the original creditor. However, collection activities undertaken duringthis time frame canot overshadow or be contrar to the consumer's right to dispute the debt orrequest information regarding the original creditor.

Telephone messages and possibly caller ID are subject to FDCPA requirements.

In Leyse v. Corporate Collection Services, Inc., a collection agency left three types of pre-recorded messages with the consumer in which the debt collector identified itself as CCS. Arepresentative provided a fictitious name and requested a retur call from the consumer. Theconsumer claimed the messages violated 15 U.S.C. § 1692d(6), which prohibits "the placementof telephone calls without meaningful disclosure of the caller's identity."

A 1692b communication occurs when the debt collector contacts a consumer to obtain theconsumer's location information. In Leyse, the debt collector admitted that the purpose of therecordings was to obtain a retur call to collect money. The court addressed whether the callersmeaningfully disclosed their identity.

According to a General Policy Statement promulgated by the FTC, '(a) debt collectoremployee's use of an alias that permits identification of the debt collector (i.e., where he uses thealias consistently, and his true identity can be ascertained by the employee) constitutes a'meaningful disclosure of the caller's identity." 53 F.R. 50097-02.

The court found that a fact issue existed as to whether the fictitious names given by thedebt collector constituted meaningful disclosure. However, the court did find that because theconsumer had no prior dealings with CCS, the acronym CCS could have no meaning for the

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consumer and was not meaningful disclosure.

CCS argued that had it left more information, it would have violated the FDCP A'sprivacy provision which states:

Except as provided in Section 1692b of this title, without the prior consent of theconsumer given directly to the debt collector, or the express permission of a courof competent jurisdiction, or as reasonably necessar to effectuate a post judgmentjudicial remedy, a debt collector may not communicate, in connection with thecollection of any debt, with any person other than the consumer, his attorney, aconsumer reporting agency if otherwse permitted by law, the creditor, the attorneyof the creditor, or the attorney of the debt collector.

By leaving a message, CCS argued it could not guarantee that someone besides theconsumer would not hear the message and thus, they could not leave more information withoutexposing itself to liability under the FDCP A.

The cour found that CCS placed itself in its predicament and granted plaintiffs motionfor summar judgment. The cour fuher found CCS violated § 1692e(11) which requires a mini-Miranda waring that debt collectors identify themselves and their intention to collect a debt. InLeyse, the messages did not identify CCS as a debt collector or mention debt collection.

Moreover, the court found that CCS violated § 1692e(10) which prohibits debt collectorsfrom using false or deceptive means to collect a debt or obtain information about the consumer.The court found that:

The apparent purose of Messages 1 and 2 was to be vague enough to provokethe recipient to return the calls in haste. Leaving a message that deceptivelyentices a consumer to communicate with a debt collector when he is caught offguard is precisely the kind of abuse the FDCP A intended to prevent.

A recent case out of Florida also addressed pitfalls when leaving telephone messages forconsumers. In Belin v. Litton Loan Servicing, plaintiffs sued defendant for violations of theFDCPA for "(1) repeatedly telling Mr. Belin and Ms. Daffron that the mortgage was in default,when in fact it was not; (2) repeatedly leaving messages on the answering machine at the home ofMr. Belin's mother, Carol Belin, that only gave the name of Litton, a phone number to call, anddirections to have Mr. Belin call that number; (3) speaking rudely to Ms. Belin on severaloccasions and then hanging up on her; and (4) callng Ms. Belin's house between 6:00 a.m. and7:00 a.m. one Sunday morning to speak with Mr. Belin about the debt." Defendant filed amotion to dismiss, which the court denied.

Defendant argued that phone messages were not communications under the FDCP Abecause they did not mention a debt. The court rejected this reasoning finding that messages lefton answering machines that do not directly convey information about a debt are stilcommunications under the FDCP A because they convey information about a debt indirectly,

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bècause the message's purose is to get the debtor to return the call to discuss the debt.

Likewise, the phone calls with Ms. Belin were communications because the defendantrequested a call back from Mr. Belin. The cour differentiated the case from cases allowing adebt collector to request to speak with the debtor because in this case, the defendant was

requesting a call back similar to the telephone messages.

Defendant argued that plaintiffs failed to state a claim for harassment for speaking rudelyto Ms. Belin because rudeness is not actionable under the FDCP A. The cour denied the motionto dismiss on this basis because it could not find that plaintiffs could not prove a set of factsshowing the natual consequences of the defendant's rudeness was harassment.

In Knoll v. Alled Interstate, Inc., the plaintiff defeated defendant's motion to dismissregarding claims under § 1692d (meaningful disclosure), § 1692e (false or misleadingmisrepresentations), and § 1692 (unfair, unconscionable means).7 The plaintiff alleged that thedebt collector called using a false caller id name and that displaying false information via a calleridentification device to deceive debtors into answering or returing the debt collector's callviolated the FDCP A. The cour found plaintiff s allegations suffcient to defeat defendant'smotion to dismiss. Furher, the cour declined to dismiss on the basis of defendant's benign

defense noting that "because the FDCP A is a remedial, strict liability statute, Knoll need notprove deception or actual damages to recover under the FDCP A. "8

Recent cases regarding validation notice requirements.

Section 1692g of the FDCP A requires certain notices. Under § 1692e, a creditor may notuse false, deceptive or misleading representations or means in connection with collection of anydebt, including when complying with § 1692g. The Second Circuit has held that 1692g and1692e are violated when the least sophisticated consumer would not understand the informationprovided. Specifically, a collection letter canot include language that overshadows orcontradicts the information regarding a debtor's rights.

In Rios v. Pinnacle Financial Group, Inc., a consumer alleged violations of the FDCP Afor failure to provide the required validation notice. The front of the letter contained five iconsfor payment options. At the bottom of the letter, in capital letters as large as any other letters onthe page, was the phrase "notice: see reverse side for important consumer information." Thereverse side of the letter contained the validation notice required by the FDCP A.

The court determined that the fact that the notice language was located on the back of theletter did not violate the FDCPA. Moreover, the payment options listed did not overshadow thedebtor's rights because the letter directed the debtor to see the reverse side and the letter did notdemand immediate payment. Thus, the court found the collection letter did not violate theFDCP A in form or substance.

In McMilan v. Collection Professionals, Inc., the Seventh Circuit extended its priorholdings that allegations of a confusing collection notice in violation of 1692g would survive a

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motion to dismiss to allegations of a false, deceptive or misleading notice under 1692f. InMcMilan, the consumer received a collection notice stating in pertinent par:

YOU ARE EITHER HONEST ORDISHONEST YOU CANNOT BE BOTH

Your creditor believed you to be honest when credit was extended. The injusticeof permitting this account to become past due and then ignoring all requests forpayment, casts a doubt of good intentions. We would like to give you this finalopportity to prove your honesty and good intentions. Payment in full orsatisfactory arange-ments for payment must be made without fuher delay.

The consumer alleged that the letter was false and deceptive under 1692e and attempted todisgrace her in violation 1692e(7). In addition, the consumer alleged that the letter employedunfair or unconscionable means to collect a debt in violation of 1692f. Collection Professionals,Inc. ("CPI") moved to dismiss.

CPI argued that the letter was true and accurate such that the consumer had no claimunder 1692e. CPI argued that no violation of 1692e(7) occurred for trying to disgrace theconsumer because the letter did not state or imply that the consumer had committed a crime orother fraud. In addition, because the letter was true, it could not be unfair or unconscionableunder 1692f.

The district court granted the motion to dismiss, finding that the letter stated truestatements and thus was not an attempt to disgrace the debtor. The district cour distinguishedcases suriving motions to summar judgment where violations of 1692g were alleged becauseSection 1692g requires certain language. Because no violations of 1692g were alleged, thedistrict cour granted the motion to dismiss.

On appeal, the Seventh Circuit reversed the district cour's dismissal of the consumer's1692e claim. The Cour of Appeals recognized that 1692g violations require a factualdetermination to ascertain how a paricular notice affects its audience. Thus, 1692g complaintswil generally surive a motion to dismiss. The Seventh Circuit applied the same reasoning to

claims under 1692e and 1692f finding that the inquiry "requires a fact-bound determination ofhow an unsophisticated consumer would perceive the letter."

In Voris v. Resurgent Capital Services, L.P, the defendant sought to collect debt via aletter disguised as a credit card offer.

14 The defendant moved for judgment on the pleadings

which the court denied in par as to the FDCP A violations. The subject communications

included: (i) the words "You are Pre-Approved* For a new Visa Credit Card and you can reduceyour debt;" (ii) the Visa logo is also prominently placed at the top third of the letter; (iii) an"Invitation Code" followed by a unique number; (iv) congratulatory greeting of "good news;" and

(v) the phrase "Call Resurgent at 1-866-206-9770 or fill out and return the REPLY CARD to signup for your new Visa credit card." The § 1692g notices were highlighted in a rectangular box inthe center of the front page, and the phrase "This is an attempt to collect a debt ..." wass bolded,

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also in the center of the page, however the Visa logo and languagepertaining to the credit card offer dominated.

Based on these characteristics, the court found

"the FDCP A-mandated notices here are overshadowed by thelanguage pertaining to the credit card offer. The least sophisticateddebtor would, given the letter's appearance, be confused as towhether the letter was exclusively an offer for credit that can beeasily disregarded, or an effort to collect a debt which, if ignored,will trigger consequences harful to the debtor. The fact that theenvelope reinforces the impression of jun mail fuher supportsthis conclusion. For these reasons, the letter is overshadowed bythe credit card offer and is therefore "misleading in both form andcontent.

,,15

A writing might be required for validation notice disputes.

The FDCP A requires a validation notice informing the consumer of certain rights in aninitial communication attempting to collect a debt. One of these rights is the consumer's right todispute the validity of the debt with a debt collector. A split exists between the circuits as towhether the consumer must dispute the validity of the debt in writing.

Section 1692g(a) states:

Within five days after the initial communication with a consumer in connection with thecollection of any debt, a debt collector shall, unless the following information iscontained in the initial communication or the consumer has paid the debt, send theconsumer a wrtten 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 thirt days after receipt of the notice,disputes the validity of the debt, or any portion thereof, the debt wil be assumed to bevalid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirt-

day period that the debt, or any portion thereof, is disputed, the debt collector wil obtainverification of the debt or a copy of a judgment against the consumer and a copy of suchverification or judgment wil be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer's written request within the thirt-day period, thedebt collector wil provide the consumer with the name and address of the original

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creditor, if different from the current creditor.

The Third Circuit requires that the dispute be in writing. In Graziano, the cour reasonedthat because a writing is required to trigger the protections in 1692g(a)(4) and (a)(5), then (a)(3)must also require a writing.

In contrast, the Ninth Circuit finds no requirement in 1692g(a)(3) that the dispute be inwriting. The Ninth Circuit relied on the plain language of the statute and follow Supreme Courtguidance on not grafting language into a statue even if it is likely Congress intended it, and foundthat absent an explicit writing requirement, one does not exist. Moreover, the Ninth Circuitfound several rights that are triggered by oral notice of a dispute:

Oral dispute of a debt precludes the debt collector from communicating thedebtor's credit information to others without including the fact that the debt isin dispute. Additionally, if a consumer owes multiple debts and makes apayment, the debt collector is prohibited from applying such payment to adebt which is in dispute. Moreover, a debtor's oral notification to a debtcollector entitles a debtor to relief under § 1692c(a)(1), which bars

communication with a debtor at "a time or place known or which should beknown to be inconvenient to the consumer."

Recently a Virginia district cour found the Ninth Circuit's reasoning in Camacho to bemore persuasive than the Third Circuit's rationale in Graziano. In Turner, the collection noticestated:

Upon your written request within 30 days, we wil provide you with the nameand address of the original creditor if different from the current creditor.

The consumer alleged, among other things, that the notice violated the FDCP A because itrequired a wrtten dispute. The Turner cour found the Ninth Circuit's reasoning more persuasive

because it "reinforces the FDCP A's imperative to address abusive debt collection practices. . . ."

Returned validation notice results in FDCPA violation.

In Johnson v. Midland Credit Mgmt., Inc., the cour found that a debt collector does notsatisfy notice requirements under the FDCP A if the notice is returned by the post offce.22 InJohnson, the debt collector sent a collection letter to a consumer with the required notice, but itwas returned undeliverable. The debt collector sent a second collection letter to a differentaddress. The consumer received this second letter, however the letter did not contain thevalidation notice. The debt collector sent the validation notice separately to the same newaddress but it was retured as undeliverable. The debt collector then ceased collection efforts.

The court recognized a line of cases which held that a debt collector need only prove thatit sent the validation notice, not that the consumer received the notice to fulfill FDCP A noticerequirements. The cour recognized the issue of whether the notice has been "sent" when the

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notice is returned as undeliverable as one of first impression. The cour found that when a noticeis returned as undeliverable the notice has not been "sent" to the consumer because the noticewas sent to an improper address, not the consumer. If the debt collector has not sent the notice toa valid address for the consumer, the debt collector has not complied with the plain language ofthe statute.

Moreover, the court found that the debt collector's bona fide error defense did not applybecause the debt collector did not have procedures "reasonably adapted to avoid any such error."The debt collector did not program its system to record this sort of information or act upon it.Essentially, the debt collector disregarded information concerning validation notices retured asundeliverable.

Permissible threats in collection letters.

Section 15 U.S.C. § 1692e provides that a debt collector must not use deceptive or falserepresentations including:

The representation or implication that nonpayment of any debt wil result in thearest or imprisonment of any person or the seizure, garishment, attachment,

or sale of any propert or wages of any person unless such action is lawfl andthe debt collector or creditor intends to take such action.

In Guidry v. Clare, a consumer wrote a check that was subsequently returned for non-

sufficient fuds. After several attempts to collect the debt, the debt collector telephoned the

consumer and said it would seek a warant for the consumer's arest if payment was not received

within 72 hours. The consumer did not pay the debt and the debt collector filed a criminalcomplaint for misdemeanor larceny by check, which resulted in the issuance of an arest warrantfor the consumer. The consumer alleged the collection agency's fiing of the criminal complaintviolated 15 U.S.C. § 1692e(4)-(5) because as a debt collector, it was forbidden from filing acriminal complaint.

The district court found the plain language of § 1692e(4) makes clear that a debt collectormay threaten legal action where permitted by law, provided the collector intends to followthrough with the threats. Given that the debt collector did seek a warrant, the court found therewas no question as to the debt collector's intent to take action.

In contrast, in Berger v. Suburban Credit Corp., a collection agency sent a collectionletter to a consumer that included the statement: "we shall take whatever steps are necessar topursue collection." The debt collector admitted that its practice was to return small accounts likethe account in this case to the creditor after sending two collection letters and possibly calling thedebtor. Because there was no evidence to suggest that the collection agency intended to actuallypursue "any steps necessar" to collect the debt or that it was even authorized to do so, the courtfound the agency violated § 1692e(5) of the FDCPA by threatening to take action it neverintended to take. See also Brown v. Card Service Center (reversing district court's finding of noviolation because "it would be deceptive under the FDCP A for (the debt collector) to assert that

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it could take an action that it had no intention of taking and has never or very rarely takenbefore. ").

In Rivera v. Amalgamated Debt Collection Servs., Inc., the collection letters at issuestated:

Therefore, unless this matter can be resolved within 30 days of the above date, it wil benecessar to consider the institution of legal procedures against you.

If you dispute the debt in whole or in par within (30) days of the date set forth above,we wil mail verification of the debt to you.

(In the) event of suit, you may be held liable for money damages plus interest, courcosts and attorney's fees.

The letters also stated that judgment would be recorded in the debtor's county of residence andthat depositions and action by a sheriff may be taken. It was undisputed that the debt collectorhad never taken any of these actions against anyone to whom it had sent these notices.

The cour recognized that the FDCP A requires validation of debt notices and prohibitsfalse or misleading statements to collect a debt. Because the letter suggested that the debtor hadless than 30 days to dispute the debt, the court found a per se violation of § 1692g. The lettershould have stated the debtors had 30 days from receipt of the letter to dispute the debt.

As to the § 1692e(5) violation for making an idle threat, the court found that because theparies disagreed on the meaning of the letter, (i.e. whether legal action was imminent or just tobe considered by the debtor collectors), sumar judgment was not proper. The court did note,however, that other courts have found similar language regarding the threat of legal action to notbe a violation. See e.g. Knowles v. Credit Bureau of Rochester, Division of Rochester Credit

Center, Inc. (finding no violation for letter that stated "Failure to pay wil leave our client nochoice but to consider legal action."); Madonna v. Acad. Collection Serv., Inc. (finding noviolation for letter that stated that the debt collector "may choose to pursue legal action(.)").Although the cour recognized these cases, it followed controlling precedent and denied summarjudgment so that the issue could be tried.

In Cambron v. Medical Data Systems, Inc., the district court adopted the banptcycour's recommendation that the plaintiff prevail on the grounds that a debt collection letterviolated the FDCP A by implying that the debt collector would take action it never intended totake.32 The offensive language was:

Since you have failed to pay this obligation in full, we now mustdetermine your ability to repay this debt. The information we maybe seeking, if available, to determine what further collection effortto take is:

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1.) Real estate ownership/equity2.) Personal propert assets3.) Saving, checking balances4.) Your source of income5.) Automobile ownership6.) Verification of employment

The court determined that the letter's implication that assets might be seized, possibleonly through legally obtaining a judgment lien, was false and misleading, since the debt collectorhad no intention of even investigating their assets.

Impermissible threat cases also lend themselves to class actions. In Hernandez v.

Midland Credit Mgmt., Inc., the consumer received a collection letter that stated the debtcollector might share nonpublic information about the consumer with certain nonaffiiated thirdparies unless the debtor took certain actions. Specifically, the letter stated that the debt collectorwas

delivering this Privacy Notice so that you understand what nonpublic personalinformation we gather about you, how we use or share that nonpublic personalinformation, and the safeguards we have in place in order to protect thatnonpublic personal information.

The collection letter fuher referenced a number of sources from which the debt collectorgathered information. The consumer alleged that the notice violated 1692c(b) of the FDCP Awhich prohibits

all communications "in connection with the collection of any debt" between a debtcollector and "any person other than the (debtor), his attorney, a consumer

reporting agency if otherwise permitted by law, the creditor, the attorney of thecreditor, or the attorney of the debt collector" "without the prior consent of the(debtor) given directly to the debt collector."

The consumer fuher alleged that even if disclosures were not made, the notice violatedthe FDCP A under 1692e( 5) which prohibits a "threat to take any action that cannot legally betaken or that is not intended to be taken .. "The court found the requirements for class

certification were met and certified the class.

In plaintiffs motion for summar judgment, he argued that the notice falsely representsthat Defendants have the right to make prohibited disclosures of nonpublic personal informationto nonaffiliated third paries unless the debtor affirmatively opts out. Defendants asserted thatthe disclosure was required by law and if in violation of the FDCP A, a bona fide error due toreasonable procedures in place to comply with the FDCP A. The court granted plaintiffs motionfor summary judgment leaving damages to be rendered after trial.37

"One Time Only" offers.

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Many consumers have brought lawsuits contending that offers that give settlementdeadlines are deceptive under the FDCP A. Most cours are finding that offers with deadlines donot violate the FDCP A. For example, in Jackson v. Nat'l Action Fin. Servs., Inc., a class actionwas brought against a debt collector alleging violation of the FDCP A for false or misleadingstatements in settlement offer letters. The letters made offers to settle debt at a percentage of thedebt if payment were received by a certain date. Plaintiffs alleged the letters were misleadingbecause plaintiffs later received better offers and alleged the debt collector was wiling to settleper the original offer even after the specified date.

The cour heard testimony that when making offers, the debt collector often had authorityto settle for less than the offer stated in the letter. Plaintiffs alleged this misrepresented the

duration and extent of the settlement authority in violation of § 1692e. Despite evidence that thedebt collector accepted payments after the settlement deadline and later offered lowersettlements, the court denied the plaintiffs' motion for sumar judgment. The letters were notfalse on their face because the debt collector was willng to settle for the amount specified withinthe time frame given.

In contrast, the Fifth Circuit found that a "one time only" letter does violate the FDCP A.In Goswami v. American Enterprise Collections, Inc., the collection letter stated: "( e )ffectiveimmediately, and only during the next thirt days, wil our client agree to settle your outstandingbalance due" with a certain percentage discount." The Goswami court determined that the phrase"only during the next thirty days" rendered the letter false because the defendant was actuallyauthorized to settle for less at any time.

Courts generally have limited Goswami to cases where the collection letter generallycontains an explicit statement that the letters were one-time-only offers. See, e.g., Kilszek v.Nelson, Watson, & Assoc., LLC (finding that a debt collection agency's inclusion of a deadline ina settlement letter did not imply that the agency would never again make a similar offer, butinstead provided an expiration date for the specific offer in the letter); Hancock v. ReceivablesMgmt. Solutions, Inc. (granting motion to dismiss FDCP A claim because debt collector'ssettlement letters did not state that the offers were '''only' valid for the next 30 days"); Headen v.Asset Acceptance, LLC (granting motion to dismiss where debt collector's settlement letters didnot expressly state that they were "one time only" offers); Kahen-Kashani v. Natl Action Fin.Servs. (granting motion for summar judgment on claim that debt collectors who made asettlement offer violated the FDCP A because the letter did not communicate that it was a "one-time, take-it-or-leave-it offer" and, in fact, "explicitly communicated that it may be possible toextend the offer under certain circumstances"); Kalinina v. Midland Credit Mgmt, Inc.,(affirming motion to dismiss FDCP A claim where collection letters, despite containingsettlement offers with expiration dates, "did not indicate that no other offers would be made").

Class actions.

In In re Farmers Insurance Co., Inc., FCRA Litigation, policyholders filed a class actionlawsuit alleging their insurers violated the FCRA by wilfully failing to provide adequate adverse

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action notices under 11 U.S.C. § 1681m. The plaintiffs contended that the defendant-insurershad policies of pullng consumer reports for underwriting purposes, taking adverse action basedon that information, and deliberately failing to provide proper adverse action notices. The namedplaintiffs moved to certify the class.

Attempting to avoid certification of the class, the defendants argued that the three namedplaintiffs could not represent the class because they were subject to a unique defense that theinsurers asserted would likely playa major role in the litigation. Specifically, the defendantspointed out that the named plaintiffs received oral adverse action notices from their insuranceagents, which the defendants claimed the FCRA expressly permits.

The cour explained that the unique defense rule is designed to protect class members andnot defendants. The judge therefore refused to deny certification based on this arguent andfurther noted that the oral adverse action notice would not come into play until it has determinedthat the written adverse action notices were deficient under the FCRA. As such, the defensewould not dominate the litigation.

The innocence of the least sophisticated consumer.

Section 1692e prohibiting deceptive or false misrepresentations is governed by thestandard of the "least sophisticated consumer."47 However, as one court noted, the "innocense

(sic) of the least sophisticated consumer is not unlimited."48

In Kistner, the defendant Law Offices of Michael P. Margelefsky, LLC housed both a lawpractice and a debt collection agency. The LLC sent a collection notice printed on law offceletterhead, signed by an account representative, and that expressly stated that the letter was froma debt collector. Plaintiff Kistner alleged that the collection letter violated § 1692e(3) whichprohibits the "false representation or implication" that a communication is from an attorney whenit is not.

The district cour rejected Kistner's arguments, instead finding that even the least

sophisticated consumer would not be deceived by the letter. The district court found that the textof the letter clearly stated it was from a debt collector and that it was signed by an accountrepresentative, not an attorney. As such, the letter could not be construed to have originated fromMargelefsky in his capacity as an attorney.

The court in Kistner noted that collection letters might be deceiving when printed on lawoffice letterhead and also signed by an attorney.49 In practice, the use of law office letterheadcould be potentially misleading and should probably be avoided. Otherwise, "blunting" languageshould be used to prevent the communication from being considered deceptive.50

On appeal, the Sixth Circuit found that the attorney was a debt collector under theFDCP A and remanded because fact issues remained as to whether letter created false impressionthat it was communication from attorney.51

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As can be seen from this sampling of cases, the potential for FDCP A violations issignificant. Case law from relevant jurisdictions should be referenced when faced with FDCP Aallegations based on the variety of communications subject to the FDCPA and cours' differingviews depending on the facts and specific language used by the debt collector.

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i Leyse v. Corporate Collection Services, Inc., 2006 WL 2708451 (S.D.N.Y. Sept. 18,2006).2 15 V.S.C. § 1692d(6).

3 Id. (citing 15 V.S.C. § 1692c(b)) (emphasis added).

4 Id. at *7.5 Belin v. Litton Loan Servicing, 2006 WL 1992410, * 1 (M.D. Fla. July 14, 2006).6 !d. at *5.7 Knoll v. Alled Interstate, Inc., 502 F.Supp.2d 943 (D.Minn. 2007).8 Id. at 948.9 Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2nd Cir. 1996).

io Rios v. Pinnacle Financial Group, Inc., 2006 WL 2462899 (S.D.N.Y Aug. 23, 2006).II McMilan v. Collection Professionals, Inc., 455 F.3d 754 (7th eir. 2006).12 !d. at 756-57.I3 !d. at 759.14 Voris v. Resurgent Capital Services, L.P., 494 F.Supp.2d 1156 (S.D.CaL. 2007).15 !d. at 1171-72.16 15 V.S.C. § 1 692g(a) (emphasis added).17 Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991).18 Camacho v. Bridgeport Fin., Inc., 430 F.3d 1078 (9th Cir. 2005).19 430 F.3d at 1082 (internal citations omitted).20 Turner v. Shenandoah Legal Group, PC, 2006 WL 1685698 (E.D. Va. June 12,2006).21 !d. at *5.22 Johnson v. Midland Credit Mgmt., Inc., 2006 WL 2473004 (N.D. Ohio Aug. 24, 2006).23 !d. at *14.24 15 U.S.C. § 1692e(4).

25 Guidry v. Clare, 442 F. Supp. 2d 282 (E.D. Va. 2006).26 Berger v. Suburban Credit Corp., 2006 WL 2570915 (E.D.N.Y. Sept. 5,2006).27 Brown v. Card Service Center, 464 F.3d 450 (3d Cir. 2006).28 Rivera v. Amalgamated Debt Collection Servs., Inc., 2006 WL 3393117 (S.D. Fla. Oct. 16,2006).29 !d. at *2; 15 V.S.C. §§ 1692(e) and 1692g(a).30 Knowles v. Credit Bureau of Rochester, Division of Rochester Credit Center, Inc., 1992 WL 131107, at *1

(W.D.N.Y. May 28,1992).31 Madonna v. Acad. Collection Serv., Inc., 1997 WL 530101, at *6 (D. Conn. Aug.l2, 1997).32 Cambron v. Medical Data Systems, Inc. (In re Cambron), 2007 WL 4287376 (M.D.Ala. 2007).33 Hernandez v. Midland Credit Mgmt., Inc., 236 F.R.D. 406, 407-08 (N.D. Il 2006).34 !d. at 408.35 Id. at 41 1-412 (citing 15 V.S.c. § 1692c(b)).36 15 VSC 1692e(5).37 Hernandez v. Midland Credit Management, Inc., 2007 WL 2874059 (N.D.Il 2007).38 Jackson v. Natl Action Fin. Servs., Inc., 441 F.Supp.2d 877 (N.D. Il July 11,2006).39 Goswami v. American Enterprise Collections, Inc., 377 F.3d 488, 492 (5th Cir. 2004).40 Id. at 495.41 Kiliszek v. Nelson, Watson, & Assoc., LLC, 2006 WL 335788, at *6 (M.D.Penn. Feb. 14,2004).42 Hancock v. Receivables Mgmt. Solutions, Inc., 2006 WL 1525723, at *3 (N.D. CaL. May 30, 2006).43 Headen v. Asset Acceptance, LLC, 383 F. Supp. 2d 1097, 1104-05 (S.D. Ind. 2005).44 Kahen-Kashani v. Natl Action Fin. Servs., 2004 WL 2126707, (W.D.N.Y. Sept. 21, 2004).45 Kalinina v. Midland Credit Mgmt, Inc., 2006 WL 2277936, at *1 (9th Cir. Aug. 9, 2006).46 In re Farmers Ins. Co., Inc., FCRA Litigation, 2006 WL 1042450, at *1 (W.D. Okla. Apr. 13,2006).47 Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2nd Cir. 1996).48 Kistner v. Law Offces of Michael P. Margelefsky LLC, 2007 WL 120150 (N.D. Ohio Jan. 10,2007).49 Id. (citing Clomon v. Jackson, 988 F.2d 1314, 1320 (2d Cir. 1993))50 See Rumpler v. Phillps & Cohen Assoc., Ltd., 219 F.Supp.2d 251 (E.D.N.Y. 2002)51 Kistner v. Law Offces of Michael P. Margelefsky, LLC, 2008 WL 495345 (6th Cir. Feb. 26, 2008).

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