Michigan Collection Law Blog

I just had to report this. An article in the Boston Globe reports about a debt collector who punched a lady in face in front of her 5 year old while trying to repossess her car. I thought it was interesting because these debt collectors and their employer have probably just made this woman and her child fairly wealthy even though they may not realize it yet. The Fair Debt Collection Practices Act ("FDCPA") prohibits certain collector activity that tends to harrass the debtor. Do you think punching a lady to repossess a vehicle might tend to be harrassing?

Before I jump on the FDCPA bandwagon and begin blowing the horn, you should note that the FDCPA does not apply to a creditor that is collecting on its own debts. Moreovre, process servers are also exempt from its strictures. Still, one has to wonder what possible justification tthere could be for pounding a mom, especially in front of her kid. World gone crazy? May be. Collectors out of control? Definitely.

The 6th Circuit has just decided, for the second time, Bach v First Union National Bank. I was very surprised to see the court of appeals cut the punitive damages awarded by an obviously outraged jury from $2.6 million down to $400,000. Ms.Bach obvious had a good case for violation of the Fair Credit Reporting Act against the bank because the jury awarded her $400,000 in damages. Equally obvious is the fact that she was treated maliciously by the bank as the jury also gave her punitive damages of $2.6 million. What is surprising is that the 6th Circuit took what I think is very extraordinary action. It reduced the jury's award of punitive damages of $2.6 million down to $400,000. The court reasoned that there were not enough aggravating factors to support a $2.6 million award. I think differently. I think that it took an incredible amount of nerve for the court to second guess a jury verdict based upon days and days of testimony and deliberation.

So why did the court really reduce a punitive damages verdict to 1/6th of its original value? I don't know. But I can tell you that courts are usually very reticent to supplant a jury verdict for their own. I do have to wonder, however, is this an omen of things to come in consumer litigation in our jurisdiction? Should consumers and their attorneys worry about whether this decision was simply a rogue opinion or is it the beginning of trend that will tend to route consumer rights? Time will tell.

The U.S. Court of Appeals for the Fourth Circuit just decided Sayyed v Wolpoff and Abramson. Sayyed was a consumer that was delinquent on his discover card. Wolpoff is a law firm that sued for the balance due plus attorneys fees. In pursing its client's case, Wolpoff served interrogatories that did not state "This is a communication from a debt collector." Moreover, Wolpoff filed a Motion for Summary Disposition. Sayyed countersued for violation of the FDCPA. Sayyed alleged that the interrogatories failed to state that they were a communication from a debt collector, in violation of 15 U.S.C. § 1692e(11). He also alleged that the interrogatories violated
§ 1692e(10)’s prohibition against false representations and § 1692f’s prohibition against unfair or unconscionable collection attempts by making three false statements: (1) that the trial date for the Maryland case was June 11, 2004; (2) that Sayyed had to state his grounds of refusal to answer the interrogatories under oath; and (3) that the state court could enter a default judgment against Sayyed if he did not mail answers to W&A within thirty days after the date of service. W&A argues that it cannot be subject to claims under the FDCPA because an absolute common law immunity attaches to "any statements made during the course of judicial proceedings." In W&A’s view, the allegedly false statements in W&A’s interrogatories and
summary judgment motion thus cannot constitute FDCPA violations. The court held that the FDCPA trumps such common law immunity. Hence, even in litigation and in its pleadings, an attorney's statements are governed by the FDCPA.

Wolpoff argued that the pleadings that it had sent were not transmitted to the debtor, but rather the debtor's attorney and thus, even if FDCPA applies to pleadings, the communication was not sent to the consumer. The court would have no part of that. The court noted that FDCPA defines "communication" broadly. Thus a communication to debtor's counsel is the same as a communication to the debtor.

Wolpoff did advance one very interesting argument that I had never seen before. It contended that the FDCPA cannot apply to the litigation process because the entire purpose of litigtion is to arrive at the truth. I found this argument appealing. W & A was actually telling the court that if it was going to be bound by the strictures of the FDCPA in advocating for its client, then the FDCPA will have a chilling effect upon its advocacy. This is really quite unthinkable, especially in light of the immunity that litigants enjoy in their pleadings. The court found it interesting as well, but alas, it was not enough to save W & A at the end of the day. The court found that inasmuch as Congress specifically and narrowly exempted formal pleadings from the notice requirement under FDCPA, that the rest of the statute must apply to the rest of the litigation process.

Wolpoff also contended that it relied upon its client's affidavit in support of its Motion for Summary Judgment. While the District Court bought this argument and dismissed Sayyed's case, the court of appeals reversed this decision. The court of appeals held that the district court should not have dismissed this claim out of hand, but rather it needed to make a finding of fact (which is impermissible on a Motion for Summary Disposition) as to whether Wolpoff is entitled to use the bona fide error exception of the FDCPA. This would probably necessitate a trial.

In my opinion, this is a scary case, but it is well reasoned and properly decided.

Lessons to be learned by Debt Collection Attorneys:

1. Although you do not have put the phrase "This is a communication from a debt collector" on pleadings, the FDCPA applies in all other respects to the litigation process including your pleadings. If you sue for an amount that is not allowed by contract or law, you bear the consequences.

2. Thus a communication to debtor's counsel is the same as a communication to the debtor.

3. Do NOT rely upon the bona fide error exception to the FDCPA to get you out of an FDCPA lawsuit quickly. Whether you are entitled to use this defense is a question of fact. Questions of fact are usually resolved after a long and expensive trial.

P.S. Special thanks to Attorney Remy Luria for her help in editing this post.

Following a three-day civil jury trial, a Los Angeles jury unanimously ordered debt collector Arrow Financial Services to pay Laura Nelson a total sum of $100,000.00 for false credit reporting and unfair debt collection practices. The jury awarded Ms. Nelson $85,000.00 for her emotional distress and mental anguish, and also added a $15,000.00 penalty against Arrow for its repeated violations of the Fair Debt Collection Practices Act. Laura Nelson v. Arrow Financial Services, LLC, United States District Court Case No. CV06-1568 RGK (PLAx).

I have not seen the opinion. Under the Fair Debt Collection Practices Act, a collector is liable to a consumer for the greater of the consumer's actual damages or $1,000. The collector is also liable for the consumer's reasonable attorney's fees. Now I will admit to you that I am not familiar with this case other than from blub which I have stated above. But I will say that if a jury was inflamed enough to award this kind of a verdict, the collector was certainly doing things that he knew was wrong.