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Debt-collection lawyers are increasingly being hauled into court as defendants in Fair Debt Collection Practices Act lawsuits by debt-burdened consumers who use litigation to fend off creditors. Lawyers say the statute’s vague and broad language opens the door to cases against law firms, and a recent federal court decision that denied litigation immunity to a debt-collection law firm creates even more risk for debt-collection lawyers. Other factors behind the trend include mistakes in court filings made by debt buyers � or their lawyers � who purchase debt from creditors but frequently lack enough information to avoid making false statements in pleadings. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which toughened the standards for consumer bankruptcies, is also contributing to the upswing in fair debt litigation because debt holders are seeking other ways to forestall debt collectors. At least 19 lawsuits against debt-collection lawyers have been filed in states across the nation since March, including Florida, Illinois, Massachusetts, Michigan and New York. ‘A case a day’ During the past few weeks, Barron, Newburger, Sinsley & Wier has been “pulling in a case a day” to defend a debt-collection law firm, said Manuel H. Newburger, an attorney in the firm’s Austin, Texas, office. “There seems to be no end in sight [to the cases],” said Newburger. “There’s an effort by the consumer bar to dictate the manner in which the creditors’ bar will represent their clients.” Newburger, who runs a consulting business for the collections industry with one of his firm’s Tampa, Fla., lawyers, has also noted an increase in suits since the bankruptcy reform law took effect. Daniel Edelman, a Chicago plaintiffs’ lawyer at Edelman, Combs, Latturner & Goodwin who has many fair debt lawsuits against debt collectors and debt-collection law firms, said that the system is “fraught with abuse. “It’s not difficult for someone who wants to comply to stay in the straight and narrow,” Edelman said. Fair debt cases are up because debt collectors are filing cases with inaccurate information or when the debt’s statute of limitations has expired, Edelman said. Debt-collection lawyer Ira Leibsker, who is also president of the 700-member Washington-based National Association of Retail Collection Attorneys, blamed the vague language of the Fair Debt Collection Practices Act and the court’s reliance on the standard of whether an unsophisticated debtor would be confused by the debt-collection firm’s actions. “Sometimes courts have to decide if firms are complying or not,” Leibsker said. Leibsker, who is also a an attorney at Chicago-based debt-collection law firm Blatt, Hasenmiller, Leibsker & Moore, said that debtors are also increasingly likely to resist debt collection and be sued by debt collectors. “Debtors are somewhat creating this marketplace,” Leibsker said. “[Debt collectors] have to figure out some way of collecting that debt.” Provisions are clear Plaintiffs’ lawyer Kenneth Quat of Concord, Mass.-based Quat Law Offices, said provisions in the law concerning litigation, and how debt collectors are to communicate with the debt holder, are clear. “It’s not even a close question,” Quat said. “It’s an instance of a particular industry not liking the law that’s on the books. They still have to follow it.” One of two cases Quat filed in federal court in Massachusetts last month is a potential class action against Boston-based Daniels Law Offices for allegedly violating the fair debt law by tacking on a percentage based on attorney fees before the money was collected and adding the fee to the principal, instead of calculating “reasonable fees” based on the lawyer’s time. Socheata Som v. Daniels Law Offices P.C., No. 07-40143 (D. Mass.). Daniels Law Offices did not respond to a request for an interview. Another pending case, a potential class action against J.A. Cambece Law Office in Peabody, Mass., revolves around allegedly deceptive and unfair statements in one of the firm’s standard dunning letters. Stephen D. Smith v. J.A. Cambece Law Office, No. 07-40144 (D. Mass.). The Cambece firm’s attorney, Kathryn Pieczarka, an associate at Boston-based Lawson & Weitzen, said she couldn’t talk about the case before the firm files a response to the complaint, but she said many cases stem from consumers’ efforts to avoid debt repayment. “Plaintiffs’ attorneys . . . are more often trying to find violations of the Fair Debt Collection Practices Act to get their clients out from under lawful debt-collection activities,” Pieczarka said. The FTC gets involved The Federal Trade Commission has also picked up on the controversy surrounding the law. In October, the agency is running its first-ever workshop on the law, which has not had a major overhaul in its 30-year history, to explore whether it is out of step with industry developments. One issue on the table is whether debt buyers are getting enough information from the original creditors to contact the right people, said Tom Pahl, assistant director in the division of financial practices. “It’s a forward-looking endeavor to figure out what’s happening in the marketplace and how we can respond more effectively to those changes,” Pahl said. Following the workshop, the agency is likely to issue a report with recommendations to policymakers, Pahl said. A May 9 decision in the 4th U.S. Circuit Court of Appeals denying immunity to Rockville, Md.-based debt-collection law firm Wolpoff & Abramson for claims based on statements made as part of its judicial proceedings has sent shudders throughout the defense bar. The circuit court reversed and remanded a lower court’s ruling to dismiss a fair debt case against a debt-collection law firm. The court rejected the law firm’s claim that it was entitled to common law litigation immunity for claims based on its statements during court proceedings. Sayyed v. Wolpoff & Abramson, No. 06-1458 (4th Cir.). Wolpoff & Abramson first sued Farid Sayyed in state court to collect an unpaid credit card debt. Sayyed then sued the law firm in federal court for violating the fair debt act in its interrogatories and its summary judgment motion. The debt-collection bar was relying on a couple of district court decisions from the 6th Circuit to claim a broad litigation immunity from the fair debt law for their legal filings, said Arlington, Va., lawyer Ernest Francis, who represented the plaintiff and appellant Farid M. Sayyed. But Sayyed is consistent with a 6th Circuit decision last year in Todd v. Weltman, Weinberg & Reis Co., 434 F.3d 432 (6th Cir. 2006), Francis said. The Todd ruling said that lawyers filing Fair Debt Collection Practices Act lawsuits don’t have the absolute immunity usually granted to witnesses in judicial proceedings. In that case, the debt-collection lawyer had filed an affidavit in state court to garnish property. “It removes an arrow from the quiver of those defending fair debt cases,” Francis said. Moving beyond ‘Todd?’ The Sayyed decision moves beyond Todd, said Bruce Menkes, a Chicago lawyer who chairs the debt collection practices subcommittee within the American Bar Association Section of Business Law. In Todd, the court said the law firm that tried to garnish the debt holder’s account didn’t qualify for state court witness immunity because the firm acted as a complaining witness, Menkes said. Sayyed, on the other hand, said even if the firm had given general immunity in state court, it wouldn’t be a defense in fair debt cases in federal court, Menkes said. Sayyed is not just a setback for defense lawyers, it will also chill legal representation of creditors, Newburger said. “This is a potentially nuclear explosion for lawyers who do debt-collection work,” he said. Newburger added that most fair debt-collection cases have “technical merit,” but an increasing number are filed in federal court after the debtor loses a state court case, solely for attorneys to collect fees. Living with the Sayyed decision means that more debt-collection lawyers will rely on the bona fide error defense, which is built on unintentional mistakes that occur, despite the debt collector’s procedures to avoid them, said Ronald Scott Canter, Wolpoff & Abramson’s director of legal compliance. But it depends upon what kind of mistake and where it happens, Canter said. There’s a split in the circuits about whether lawyers can use it for mistakes of law, or when a lawyer makes a legal misjudgment, or just for clerical mistakes, Canter said. “As a practical matter, lawyers rely on info provided by client when they file a pleading,” Canter said. “The court is saying we can be sued for repeating what our client said.” Yet what exactly constitutes a bona fide error, which is one of the most common fair debt collection defenses, is one of several legal issues still up in the air, Menkes said. “There’s very little agreement as to what qualifies for those measures,” Menkes said. “It’s hard to give clients advice.”

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