Left to right: Randy Evans and Shari Klevens, Dentons partners ()
Debt collection attorneys, take note: A recent Eleventh Circuit decision indicates a trend toward holding attorneys liable under the Federal Debt Collection Practices Act for work submitted in court. However, the Ninth Circuit has indicated its reluctance to find any FDCPA violation for communications only to the debtor’s counsel. This circuit split indicates potential risk for attorneys in this practice area.
The FDCPA was enacted in 1977 as an amendment to the Consumer Credit Protection Act and regulates debt collectors’ practices for collecting debts. The act is intended to promote fair debt collection and to eliminate abusive practices in the collection of consumer debts.
FDCPA Bans a Variety of Conduct
The FDCPA bans a range of conduct in debt collection practices, including the use of violence, the use of obscene or profane language, and repeated phone calls intended to annoy or harass any person at the called number. However, other less obvious conduct can also be interpreted as abusive and thus violative of the FDCPA.
The most frequent violation consists of threatening to take, or taking, an action that cannot be legally taken or is not intended to be taken. For example, some debt collectors send collection letters attempting to collect debts beyond the statute of limitations or threatening to contact third parties, such as the debtor’s employer.
In adjudicating claims under the FDCPA, courts generally view claims from the perspective of the consumers, whose circumstances may make them vulnerable to harassment, oppression or abuse. However, the mere filing of a lawsuit, or threatened filing of a lawsuit, without the immediate means of proving the debt does not constitute an abusive practice in violation of the FDCPA.
FDCPA Applies to Debt Collection Lawyers
Under the FDCPA, a “debt collector” is any person who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another. Since its inception, the FDCPA has been amended to provide broader protection to consumers.
Many recent appellate court decisions under the FDCPA rely heavily on the U.S. Supreme Court case Heintz v. Jenkins, in which the Supreme Court expressly held that the FDCPA “applies to the litigating activities of [debt-collector] lawyers.” 514 U.S. 291, 294 (1995). In reaching this decision, the Supreme Court considered a prior version of the FDCPA, which contained an express exemption for lawyers.
The exemption stated that the term “debt collector” did not include “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.” Congress later repealed this exemption in its entirety, leaving no other exemptions to fill its void. The Supreme Court interpreted the absence of an exemption to mean that Congress intended for lawyers to be subject to the Act whenever they meet the general “debt collector” definition. This expansive reading of the term “debt collector” places attorneys and law firms who engage in debt collection squarely within the purview of the FDCPA.
Ninth Circuit Held That FDCPA Does Not Apply to Communications Sent Only to Debtor’s Counsel
The Supreme Court has resolved the question of whether an attorney can be considered a “debt collector” under the FDCPA, but has yet to address whether the identity of the recipient—the debtor or a representative of the debtor—is a consideration in finding an FDCPA violation. Attorneys and law practices who regularly engage in debt collection activity can learn some valuable lessons from appellate decisions concerning the FDCPA.
The Ninth Circuit, however, has shed some light on this issue. In Guerrero v. RJM Acquisitions LLC, the court held that “communications directed only to a debtor’s counsel, and unaccompanied by any threat to contact the debtor, are not actionable under the Act.” 499 F.3d 926, 936 (9th Cir. 2007).
In Guerrero, the plaintiff consumer alleged violations of both the FDCPA and state consumer protection laws. After receiving two collection letters from the defendant, the plaintiff retained counsel. The plaintiff’s counsel then wrote a letter to the defendant alleging legal violations, seeking a settlement of the debt, and threatening suit otherwise.
The defendant then ceased direct communications with the plaintiff, as the FDCPA requires. However, the defendant did respond to the plaintiff’s counsel, providing more specific information about the plaintiff’s outstanding debt and again asserting its rights to collect the debt. Six months later, the plaintiff filed suit and alleged that the defendant’s letter to its counsel constituted a prohibited collection effort. On summary judgment, the district court agreed.
On appeal, the Ninth Circuit reversed and found that the defendant’s letter was not violative of the FDCPA because it was directed only to plaintiff’s counsel, and not the plaintiff.
Eleventh Circuit Holds That FDCPA Applies to Work in Court
This year, the Eleventh Circuit issued a decision that is contrary to Guerrero, creating a split. In June 2015, the Eleventh Circuit ruled that court filings by a debt collection attorney in litigation of a debt are actionable under the FDCPA, even if those filings are directed to the debtor’s attorney. In Miljkovic v. Shafritz and Dinkin, the court held, in a case of first impression, that representations made by an attorney in court filings during the course of debt collection litigation are actionable under the FDCPA. 791 F.3d 1291 (11th Cir. 2015). The court further held that the purpose underlying the FDCPA mandates a finding that the Act applies even when the attorney’s conduct is directed at someone other than the consumer—such as the debtor’s attorney.
Miljkovic arose out of an automobile loan that the plaintiff failed to repay. The defendant obtained a judgment in its favor and, in early 2014, obtained a writ of garnishment against the plaintiff’s wages to recover the unpaid balance.
The plaintiff filed a sworn affidavit that, under state law, he was exempt from garnishment because he was the primary source of income in his household. The defendant filed a sworn reply disputing that the plaintiff was a “head of household” under Florida law. After conducting discovery, the defendant filed a motion to dissolve the writ of garnishment, which the court granted.
The plaintiff then sued the defendant in federal court, claiming that by filing the sworn reply after obtaining actual knowledge of the plaintiff’s exemption, the defendant engaged in deceptive, harassing behavior in violation of the FDCPA. The defendant filed a motion to dismiss, claiming that it had just following procedural requirements under the Florida garnishment statute.
The district court found not only that the FDCPA was inapplicable to the defendant’s sworn reply, but also that communications directed to someone other than the consumer, such as the consumer’s attorney, were not actionable under the FDCPA.
On appeal, the Eleventh Circuit disagreed and held that the plain language of the FDCPA mandates prohibits abusive conduct even when the debt-collecting activity is directed at someone other than the consumer. According to the Eleventh Circuit, prohibitions of the FDCPA apply to all litigation activities of debt-collecting attorneys except for pleadings, which the law specifically exempts. Though the court found that the FDCPA did apply, the court affirmed dismissal of the plaintiff’s complaint under the facts at hand, finding that the reply had not been abusive, deceptive, or unfair.
Though Guerrero speaks to a letter while Miljkovic speaks to a court filing, the decisions create a conflict regarding whether debt collection attorneys can be subject of FDCPA liability when engaging in procedural filings and other substantive court filings. In Miljkovic, the Eleventh Circuit even cited to the concurring/dissenting opinion in Guerrero but does not reconcile the majority decisions.
Debt collection attorneys should beware of this circuit split and should look out for any Supreme Court decisions on the FDCPA that could resolve this apparent conflict.