Michigan Collection Law Blog

For the past several years, I have blogged about issues affecting debt collectors and their opponents, consumers. Some people have taken issue with the fact that I help both the proverbial Coyote and Road Runner. Too bad. Running a successful law firm such as Nitzkin and Associates has its advantages such as taking the cases that I want to take and representing the people that I want to represent.

I have decided to form an division in my firm dedicated strictly to helping consumers; its called Michigan Consumer Credit Lawyers. The website is still under construction. When it is complete, I will let you know. I anticipate that it will be live in the next few weeks. This new website will contain several self help videos for consumers on issues from what to do when they get sued to how to handle an abusive debt collector. Take heart as we also republishing our Nitzkin and Associates website with many instructional videos too.

The MCCL blog is already up at www.micreditlawyerblog.com. On this new blog, I will talk only about issues that affect consumers who have been wronged by debt collectors, banks, credit reporting agencies and anyone else that would treat a consumer like crap. MCCL's website will be up shortly to coach consumers on what to do when they are faced down by their larger and financially better heeled opponents. We are here for them to even those odds.

We are still and will always be debt collection attorneys. However, we mostly represent businesses and do commercial debt collection and hence, we really have no conflict of interest. I, Gary Nitzkin, will continue to write this blog coaching debt collectors on how to avoid violating the FDCPA and the FCRA.

If you have any questions, please feel free to email me, Attorney Gary Nitzkin or call me, tool free at 877-293-2882.

I just read the Sixth Circuit's opinion in Miller v Javitch, Block & Rathbone, 561 F.3d 588 (2009). This case holds good news for debt collection lawyers. In that case, Miller contends that JBR violated the Fair Debt Collection Practices Act by using false, deceptive, and misleading language in a debt-collection complaint. The state court "COMPLAINT [*3] FOR MONEY LOANED" read as follows:

1. Plaintiff acquired, for a valuable consideration, all right, title and interest in and to the claim set forth below originally owed by Defendant(s) to ASTA II/PROVIDIAN -03 /NAT As a result of the assignment, Plaintiff became, and now is, the owner of funds loaned on account number xxxx-xxxx-xxxx-0736.

WHEREFORE, Plaintiff prays for judgment against Defendant (s) in the amount of $ 4,604.56 with statutory interest from the date of judgment, costs of this action, and such other and further relief as the Court deems just and proper under the circumstances.

The FDCPA uses the "least sophisticated consumer" standard to determine whether something is confusing or misleading. This is a very low standard and hence, its very easy to violate. One would think that the the part of the complaint that refers to "ASTA II/PROVIDIAN -03 /NAT As a result of the assignment," would easily qualify as a violation of the FDCPA. The court did not think so.

In a very well worded opinion that court held:

[Not] everything a lawyer writes during the course of litigation must be stated in plain English understandable by unsophisticated consumers. However desirable that might be, it is not a command to be found in the FDCPA.. Section 1692e does not require clarity in all writings. What it says is that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. A rule against trickery differs from a command to use plain English and write at a sixth-grade level. . . . Whatever shorthand appeared in the complaint--the payments system through which credit-card slips flow is complex, and even many lawyers don't grasp all of its details--was harmless rather than an effort to lead anyone astray. It was the judge, not [the plaintiff], who had to be able to determine to whom the debt was owed, for it is the judge (or clerk of court) rather than the defendant who prepares the judgment specifying the relief to which the prevailing party is entitled.

So what does this mean to us collection attorneys? On the surface it appears that the court is holding that the FDCPA is inapplicable to pleadings. When the court states that it is only imporant for the judge or the clerk of the court to know what you are talking about in pleadings, the Sixth Circuit is pushing aside the communication strictures of the statute. Yet, I think this would be too broad of an interpretation because the court fell short of plainly stating that the FDCPA does not apply to pleadings. If it had meant to say that, it would and could have done so in a much more direct fashion. The court simply did not go that far. How do we read this case to stay out of trouble?

I think Javitch could have done away with the gibberish about the assignee and simply named it plainly. By failing to do so, it simply opened the door and invited an FDCPA claim in. Had Javitch simply named the assignee of the Plaintiff's credit card debt, Ms. Miller could never have been heard to complain about any FDCPA violation.

Moral of the story for collection attorneys - Do not think that this case gives you carte blanche to write your pleadings in legalese or in industry short hand. While the court sided with Javitch in this matter, it did NOT go as far as to say that the FDCPA does not apply to pleadings. The better practice is to write your pleadings in plain English as if you were explaining the complaint to the least sophisticated consumer. Your malpractice insurance carrier will thank you.

American Express settled its lawsuit against Visa for $1.8 billion. AE accused Visa conspiring to stifle banks from issuing AE credit cards.

Mastercard has agreed to make 12 quarterly payments of $150 million each at AE.

Here is AE's chance to savor this moment and say "Priceless."

On June 18, 2008, the Ohio Supreme Court held that a in order to prevail against an attorney in a malpractice action, the Plaintiff must show that the he would have won the underlying case and that the defendant in the underlying case was collectible. In Paterek v Peterson & Ibold, Mr. Paterek was injured in a car accident and hired Peterson as his lawyer. Peterson, unfortunately, missed the deadline for filing the complaint and Parterek's claim was lost. The Defendant in the underlying case had an insurance policy of $100,000.

Parterek sued his lawyer, Peterson. The jury awarded Paterek $382,000. The trial reduced that judgment to $100,000. The Ohio Court of Appeals reversed the trial court's reduction and reinstated the full verdict. The Ohio Supreme Court cut the proverbial baby in half and reduced the judgment to include not only the $100,000 face value of the at fault driver's policy, but added an additional $150,000, the face value of the at fault driver's underinsured motorists' policy.

This was a case of first impression in Ohio. This issue, unfortunately, has not been settled in Michigan.

There are some good lessons in this case for collection attorneys in Michigan. Yes, you should most certainly maintain malpractice coverage. But even more than that, a good calendaring system is your best defense to blowing deadlines.

My colleague, Mary Jane Elliot has been sued by Frank Glover for violation of the Fair Debt Collection Practices Act. I know Mary Jane. She is a very bright, and very astute individual. I don't know the facts of this case, but merely want to talk about a recent development in this case that has made money for the Plaintiff's counsel at her expense.

Mary Jane's attorney filed a veritable laundry list of affirmative defenses in connection with her answer. I have seen this done literally, hundreds if not thousands of times. Under the court rules, generally any affirmative defense not asserted is waived. Mary Jane's attorneys were probably concerned about inadvertently failing to assert a defense on her part and so, they listed a number of affirmative defenses that were really not relevant. Plaintiff's counsel seized the opportunity and filed a motion to strike these affirmative defenses and ask for sanctions. In a tersely worded opinion the court held in part:

Tenth Defense. As noted above, the tenth defense attempts to incorporate by reference all affirmative defenses recognized in Rules 8(c) and 12(b) of the Federal Rules of Civil Procedure. This is utter nonsense. It is inconceivable that every defense known to the law could be applicable to a case of this [*12] simplicity. The tenth defense does not given plaintiff fair notice of anything and will be stricken.

Eleventh Defense. Defendant asserts that plaintiff has suffered no damages as a result of any act or omission of defendant. This is not an affirmative defense. Plaintiff has the burden of demonstrating that he is entitled to whatever damages the statutes allow. The eleventh defense is a waste of ink and will be stricken.

Twelfth Defense. Defendant raises the equitable defense of unclean hands. The unclean hands defense will, in certain circumstances, provide a defense to claims for injunction or other equitable relief. See, e.g., Performance Unlimited, Inc. v. Questar Pub., Inc., 52 F.3d 1373, 1383 (6th Cir. 1995). As plaintiff seeks no equitable relief, the unclean hands doctrine is inapplicable to this case and insufficient on its face.

Thirteenth Defense. The thirteenth defense alleges verbatim: "Plaintiff's and/or their agents have engaged in the unauthorized practice of law." Leaving grammatical errors aside, the court notes the utter futility of this so-called defense. Although called upon to do so by the motion to strike, defendant has not attempted to justify its accusation that [*13] plaintiff has engaged in the unauthorized practice of law. If the accusation is aimed at plaintiff's counsel, it appears completely frivolous, as counsel has been admitted to the bar of this court. This nonsensical defense will be stricken.

Fourteenth Defense. In five words, defendant asserts the right of setoff, but does not identify any debt or claim owing to defendant that would give rise to such a right. Again, this is boilerplate pleading that the court will not tolerate. The defense will be stricken.

Fifteenth Defense. Defendant asserts that plaintiff's claims are barred "due to impossibility." The doctrine of impossibility may have some relevance to a contract claim or an action under Article II of the UCC. It is hard to conceive of a more ridiculous defense to an action under the Fair Debt Collection Practices Act.

The sharpness of the court's rebuke of of defense counsel's affirmative defenses grew with each successive affirmative defense. But, beesides the obvious embarrassment to Defense counsel, whats the harm? In this case, I see it as two fold: First, under the FDCPA, the Plaintiff may be awarded attorneys' fees if it prevails. This motion and the fact that partial relief was granted on it, will undoubtedly add to the Plaintiff's pot of attorneys' fees at the end of this case or during settlement negotiations.

Secondly and perhaps more importantly, Plaintiff's counsel took a chunk of Defense counsel's credibility from the court. Attorneys win and lose cases not just on the facts, but on their credibility. In close calls on rulings, one would be hard pressed to believe that a court does not look to the credibility of counsel. I am not throwing stones at Mary Jane's attorneys. Hell, I throw every affirmative defense into a case so as not to waive anything on behalf of my client. From now on, however, I will be quite sure to review those affirmative defenses. So will Mary Jane's attorneys, I am sure.

The Battle Creek Inquirer reports about a scam that certain group of companies have run on our Spanish speaking populations. It seems that Tono Records, dba Tono Music and Professional Legal Services, Tono Publishing, Promo Music, Millennium Three Corp., Dulce Ugalde, Luis Roberto Ruiz, and Maria Oceguera, all based in Los Angeles County, California.
advertised "free" English courses for the simple price of shipping and handling which fees ranged from $100- $160. These scum bags would then dun their customers for several hundreds of dollars and threaten them with jail to collect non existent debt.

Thankfully, the Federal Trade Commission acted swiftly and obtained an injunction against these companies and froze their assets for violation of the Fair Debt Collection Practices Act. I hope the FTC is successful in putting these pieces of garbage out of business.

Yeah, I am a debt collector and feel very strongly about this case. Its not an issue involving illegal vs. legal immigration. It involves a U.S. based company taking advantage of immigrants who may not be aware of their rights, by threats and intimidation. I am very thankful that our government has a department such as the FTC to see that these cowardly and greedy predators are all put out of business.

I am sad to report the passing John Mueller of Mueller, Mueller, Richmond, Harms and Sgroi. John was the senior partner of this firm. He was a large and imposing man in stature and reputation. He and his firm are very well respected in Michigan and indeed, around the country as one the best debt collection law firms. I met Mr. Mueller back in 1995 when I first joined the Commercial Law League. John was a soft spoken and intellgent man. He commanded the respect of others around him without insisting on it. During our brief meeting, he actually was able to show me why so many people had so much respect for him. After that meeting, I never really had occasion to talk with him again, but I will always remember him for the gentleman that he was.
John, you will be missed. Our industry has lost a most respected leader.

When a debtor files for bankrutpcy, I know enough to be mildly dangerous. However, when the bankruptcy gets messy, complicated and/or ugly, I bring in other counsel like Mark Shapiro, Tracy Clark or Stuart Gold. These guys are, as far as I am concerned, absolute gurus in bankruptcy. It's kinda funny that on some cases, they work with me and on other cases, we are on opposite sides of the table. Which is why it was really cool today that I was contacted by Dean Kirby, Jr. He is a collection attorney (quite well credentialed) that has a niche market in pursuing creditors rights in the bankruptcy court.

I looked at Kirby's blog and was very impressed with it. He writes about bankruptcy law from a creditor's perspective. His blog has a lot of very good and useful information for collection attorneys around the country.

Nice blog, Kirby. I am your newest subscriber,

Law.com, one of my favorite blogs reports about a Federal District court case In July 2000, Upton Cohen & Slamowitz in Woodbury, N.Y., had sent a letter to plaintiff Arthur Miller seeking payment of $1,676 he had charged to a Lord & Taylor credit card. The letter, signed by Mitchell Slamowitz, stated that the firm represented Lord and Taylor and that the matter had been forwarded to them for collection. The firm proceeded to file a collection action against Miller in August 2000, and he subsequently paid $1,200 to settle the suit.

Miller sued over the letter in February 2001, claiming that it violated the Fair Debt Collection Practices Act (FDCPA) by being written in a manner designed to confuse the "least sophisticated consumer" and by purporting to be by an attorney who was not meaningfully involved in the matter.

In denying Upton's Motion for Summary Disposition, the court held that a jury could find that Upton was not familiar with its client's collection policies and procedures. In short, the court found that the defendant law firm had a duty to conduct an independent investigation into the debtor's file. Upton was not entitled to simply rely upon Lord and Taylor's collection department as verification of the debt. Most shocking about the court's decision is that it held that because Upton is a high volume debt collection law firm, it is unlikely that it had any "meaningful involvement" with Mr. Miller's file. So what does this mean to the high volume debt collector?

1. Meaningful involvement with a debtor's file may mean that a collector has to have some familiarity with a client's collection procedures. It would appear that simply relying upon the client's affidavit is not enough. For a high volume debt collector, this can be a monumental task. The attorney who signs the collection letter to the debtor must have some familiarity with the debtor's account beyond the client's notes, records and affidavit.

2. Note that the collection law firm was sued in this case AFTER it had settled the underlying debt with the consumer. Does this suggest that every debt collector, when settling or compromising a debt should get a settlement agreement and mutual release of claims with the debtor? Getting such a document may not have necessarily been beneficial to Upton in this case. After all, one may only waive a right to a claim if they knew of those rights. If Mr. Miller was unaware of his FDCPA claim, he may argue that he did not intend to waive that right. Secondly, the debt collector was not a privy to the original debt claim. Hence when it settled Lord and Taylor's claim against Miller, Upton gave no consideration for being released from any liability. Nevertheless, I think it is always a good practice to get a release of all claims from a debtor when settling a debt. It could never hurt.

My neighbor got into a dispute with Detroit Edison ("DTE"). They had sent him a bill that he thought was outrageous ($565 for digging a hole in his yard and repairing some cable). My hard headed neighbor refused to pay the bill. I talked him into offering to pay half of it since if he didn't, it would necessarily mean that I would have to fight this in court if he got sued.

I sent a letter to DTE's collection law firm from North Carolina (no, I won't disclose its name). The law firm, through its collector, called my office. I spoke with the collector on Friday, November 10, 2006.

The first thing that she told me that it was illegal for my neighbor to "so much as dig a hole for a flower in his yard without contacting DTE." I informed that that was simply untrue because there is no such law in Michigan requiring any property owner to seek another permission to dig flower holes. She sarcastically asked me if Michigan's laws are different than the laws in the rest of country where its illegal to dig holes without contacting the utilities. I informed her that I am only licensed as a lawyer in Michigan and that I can only comment on Michigan law. I informed her again that she was wrong. HERE IS WHERE SHE GOT INTO TROUBLE....

After she refused my settlement offer of $250, she informed me that she was going to place this debt with local counsel in Michigan and that the debt would easily become a judgment of at least "$1,500 to $2,000." I asked her how that was possible since I am a collection attorney and I have NEVER been able to transform a $565 claim into a judgment of $1,500 to $2,000. "Attorneys' fees" she summarily responded. I told her that she just violated the Fair Debt Collection Practices Act ("FDCPA")as DTE would not be able to get more than $150 in attorneys fees in Michigan without having a signed contract or a statute. Under the FDCPA, a collector cannot threaten to take action that it does not legally have the right to take. A collector cannot mislead or lie to a consumer! But "Gary", you are thinking, you are a lawyer! You were not misled. You knew that this collector was wrong!" And yes, you would be right...but...Under the FDCPA, the standard for determining whether a collector violated the FDCPA is the "Least Sophisticated Consumer." This means that my actual knowledge of FDCPA is irrelevant. If what the collector did would have a tendency to mislead a unsophisticated consumer, then the collector's actions violate the FDCPA.

DAMAGES UNDER FDCPA - a party who violates the FDCPA is liable to a consumer for the greater of $1,000 or actual damages plus reasonable attorneys fees.

LESSONS TO BE LEARNED:

If you are collection agency or in this case, a collection law firm, TRAIN YOUR COLLECTORS IN FDCPA. Spend the time necessary to make them understand how the FDCPA works. In this case, the collection law firm is going to either pay us for violating FDCPA or its going to be embarrassed in front of its client and end up paying even more in attorneys fees. Either way, the North Carolina Law Firm could have easily avoided this mess by simply taking a little time and spending a little money to give their collectors an education.

Today, I was hired by a new client to collect a judgment that he obtained against a contractor. Nothing real unusual about this situation except that the client is fairly young man. I would say in his late 20s. He was in Iraq protecting our country when some sleaze bag contractor took advantage of his wife by taking her money and failing to do the work. When I learned that my client was a hero protecting my family and my country, I decided to handle his matter for free. I am too old to go to war for our wonderful country. But at least...at least...I can try to help our protectors even if it is in some small way such as this. I would sure like to see a cadre of us lawyers form to protect and aide our protectors families while they protect ours. I would welcome anyone else that would like to join me. How about you?

USA Today reports that the Internal Revenue Service has begun its tax recovery program with private debt collectors. The IRS states that it is doing all that it can to protect taxpayer rights and privacy. However, one should note that the Fair Debt Collection Practices Act, an act designed to curb such abuses, does NOT apply to governmental agencies. An interesting question that will undoubtedly come up is whether the FDCPA applies to these private collectors who are collecting a debt for their governmental client. The FDCPA excludes from the definition of "Debt Collector" "any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties." Ostensibly, these agencies appear to be governed by the FDCPA since they are not officers or employees of the United States. But it is equally possible that in light of this new federal program that allows for the use of private debt collectors, that the IRS may execute an agreement with the collection agencies wherein the agencies become employees of the IRS. This has not come to light yet. At least, not in the media. It will make for some very interesting litigation.

The Buffalo News reports that the Erie County Bar Association president, Stephen Lamantia believes that special rules should be established for collection attorneys. He seems to believe that debt collection attorneys are giving the bar association a bad name. He cites examples of non lawyer debt collectors using scare tactics to collect balances due from consumers.

The problem with Lamantia's position is that there is already a set of rules in place to govern not only attorney debt collectors, but non attorney debt collectors as well. The Fair Debt Collection Practices Act regulates just about anyone involved in third party debt collection. While Lamantia states that "most debt collection lawyers operate ethically", he would still create a set of rules aimed directly at collection attorneys.

To be sure, however, our section of the bar association is not completely without our problems. In 2005, Michigan had a very well known collection attorney who lost his license because he failed to serve process on debtors but filed proofs of service with the court anyway. However, each debtor whom he sued and failed to serve with process has a more than adequate remedy under the FDCPA and the Michigan Collection Practices Act. What more relief would Lamantia believe he could provide to the public?

Lawyers in general of have been the butt of jokes for years. Indeed, we all know that the media loves to excoriate us at every turn. The solution, however, is not for bar associations to cannabalize its members. I would suggest that Lamantia first review the FDCPA before advocating bureaucratically obnoxious if not politically pretty bar rules to govern us collection attorneys.

Your comments?

I freely acknowledge that self promotion on a blog is not appreciated by readers. However, I have decided to break that rule this time because it is important for attorneys and client to know when a collection attorney's services are necessary.

We just collected a $192,000 judgment that we received in April 2006. The judgment was obtained by other attorneys who were not collection attorneys, back in 2004. These other attorneys employed the most basic collection procedures which did not yield any results for the client. The client got frustrated and brought the judgment to us. We located assets of the debtor including stock in a family held business and have collected this judgment.

The moral of the story to other attorneys - Turn those judgments that you cannot collect over to a collection attorney. Everyone, especially the client, benefits from turning an otherwise uncollectible judgment over to a collection attorney.

An interesting article in today's Credit and Collection Website details how a name partner at a prominent law firm was hit with a jury verdict of $2.9 million for collection tactics that the jury did not like. Bernard Plechaty, 82, of Fort Lauderdaule, Fla., filed the lawsuit, claiming that Bob Weltman's collection tactics (and presumably his firm's collection tactics), were improper and forced him into bankruptcy. Weltman was also hit with attorneys fees of $500,000.

Continue reading "Prominent Debt Collection Law Firm hit with jury verdict" »