Here, in this case, the U.S. Federal Court of Appeals held that a collection attorney violated the Fair Debt Collection Practices Act (FDCPA) by writing a letter to the debtor stating that the debtor had failed to comply with payment arrangements.

The creditor obtained a judgment against the debtor and the debtor was to make $20.00 per month payments on that judgment.

Nearly a year later, the debtor discontinued the agreed payments. The creditor’s attorney sent a letter to the debtor reminding the debtor that payments had not been received and indicated that collection proceedings would be initiated if the payments were not resumed.

The attorney’s letter to the debtor did not state that any information obtained from the debtor would be used to collect the debt. Neither did the attorney’s letter indicate that if the debtor disputed the debt (which was previously reduced to a judgment entered with the court), the attorney would provide verification of the debt.

The Federal Court held that the attorney should have sent notification to the debtor indicating that the validity of the debt is assumed unless the debtor disputes the validity within 30 days after receiving notice of the outstanding obligation. The court also found that the attorney’s letter did not advise the debtor that any information obtained from the debtor could be used to collect the debt.

The FDCPA also provides that a violation of the Act may result in the court assessing actual damages, costs and attorney fees against the attorney.

In another case of similar import, the court found that a collection attorney violated the FDCPA by sending a demand letter to the debtor. In the case of Diamond v. Corcoran (U.S. District Court, W. Dist. Mich., Case No. 5:92-CV-36), the demand letter sent to the debtor stated that the debtor should contact the Automakers Federal Credit Union in order to avoid further legal expenses.

The debtor was informed that “the matter has regretfully been referred to legal counsel and will be pursued by every legal means.”  The demand letter was captioned:

RE: Lansing Automakers Federal Credit Union v. Sylvester Diamond.

The court found that the caption of the letter inferred legal action had already been instituted and was a deceptive attempt to collect this debt since no legal action had yet been initiated. The court thought the caption in the letter was misleading and held that such deception was a violation of FDCPA.

This court also found that since the Act provides the violating attorney to pay the debtor’s actual damages, costs and attorney fees, the court awarded the debtor costs and attorney fees. Additional damages were not awarded as the court held that the violation was not intentional. Frey v. Gangwish (6th Circuit, Case No. 91-5616.

EDITOR’S COMMENT

The two cases above illustrate that debtors’ attorneys will sue collection attorneys for the most trivial violations of the FDCPA. Moreover, neither debtor in these cases alleged that the underlying debt was in dispute. Debtors are only attempting to strike back to hinder collection of valid debts. Please do not give them the ammunition to avoid collection of valid debts.

Author: Charles R. Harroun, Attorney at Law