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The automatic stay and the discharge are two cornerstones of consumer bankruptcy law. They are, respectively, a fundamental debtor protection and a fundamental debtor objective. The automatic stay benefits debtors by allowing them to be free from virtually all collection efforts during the pendency of the bankruptcy case. Further, the discharge affords debtors a “new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.” Despite the protection afforded to debtors by the Bankruptcy Code, creditors sometimes continue their collection efforts, either intentionally or through oversight. Debtors and discharged debtors often resort to their bankruptcy courts to seek damages from violators of the automatic stay or the discharge injunction; arguably, however, federal bankruptcy law may not be the only source of remedy for such violations. Widespread abuse in the process of debt collection prompted Congress in 1977 to enact the Fair Debt Collection Practices Act (FDCPA), which was designed to protect consumers from an array of unfair, harassing, and deceptive debt collection practices without imposing unnecessary restrictions on ethical debt collectors. A consumer can enforce a violation of the FDCPA through an action in federal or state court. Additionally, a collection action violative of the FDCPA may offend the automatic stay while a case is pending, or the discharge injunction after the case is concluded. To that end, an important consumer bankruptcy question is whether a debtor can seek redress under both the code and the FDCPA. When two federal statutes address the same subject in different ways, a court must inquire as to whether one statute implicitly repeals the other; to conclude that it does, a court needs to find “an irreconcilable conflict between the statutes or a clear expressed legislative decision that one replace the other.” As it stands, the two federal circuit courts that have addressed this issue are in direct conflict. While the 9th U.S. Circuit Court of Appeals has found that the code implicitly repeals the FDCPA, the 7th Circuit has held that the code and the FDCPA arm a debtor with causes of action under both federal statutes. The FDCPA was enacted in response to “widespread” and “serious” national concern regarding debt collection abuses by third-party debt collectors. Notably, the FDCPA applies only to third-party debt collectors and not to direct collection actions by creditors trying to collect their own debt. The FDCPA specifically defines “debt” to mean “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services that are the subject of the transaction are primarily for personal, family or household purposes, whether or not such obligation has been reduced to judgment.” The FDCPA, therefore, does not apply to business-related or commercial debt. As recognized in the legislative history to the FDCPA, debt collection abuse can occur in a variety of ways, including, but not limited to the following: the use of obscene or profane language; threats of violence; telephone calls at unreasonable hours; misrepresentation of a consumer’s legal rights; disclosing a consumer’s personal affairs to friends, neighbors or employers; obtaining information regarding a consumer through false pretenses; impersonating public officials; and simulating the legal process. The FDCPA makes this type of conduct unlawful. In addition, Section 1692e of the FDCPA provides that a debt collector “may not use any false, deceptive or misleading representation or means in connection with the collection of any debt.” The FDCPA is a strict liability statute, and therefore does not require a showing of intentional conduct on the part of a debt collector. Thus, even an unintentional misrepresentation of the amount of the debt violates Section 1692e, and a single violation of the FDCPA is sufficient to establish civil liability. In determining whether a debt collector has violated the FDCPA, the majority of courts apply an objective standard measured by how the “least sophisticated consumer” would interpret the communication at issue. The inquiry turns on whether an “unsophisticated consumer” would have been misled by the communication. Because the FDCPA is aimed at curbing unscrupulous debt collectors, Section 1692k(c) of the FDCPA provides that a debt collector may avoid liability if it can prove by a preponderance of the evidence that any violation of the statute resulted from a “bona fide error,” notwithstanding “the maintenance of procedures reasonably adopted to avoid such error.” Finally, Section 1692k of the FDCPA provides for the imposition of civil liability against any debt collector that has violated the statute. Under the FDCPA, a consumer can recover any actual damages as a result of the debt collector’s failure to comply with the statute, “additional damages” of not more than $1,000 per action, costs of litigation, and reasonable attorney fees. In Walls v. Wells Fargo Bank N.A., the 9th Circuit concluded that a debtor may not prosecute simultaneous claims against an offending creditor under both Section 105 of the code and the FDCPA. In Walls, Donna Walls filed a Chapter 7 petition and listed a pre-petition obligation of $118,000 owed to Wells Fargo Bank, which was secured by a mortgage on her house. Walls continued to make payments to Wells Fargo Bank both before and after her debt was discharged. At some point thereafter, Walls ceased making payments and Wells Fargo Bank foreclosed on the house. The complaint Walls filed in district court alleged that Wells Fargo Bank failed to obtain a reaffirmation agreement after she filed for bankruptcy protection, and “that her debts were discharged, giving rise to the discharge injunction pursuant to Section 524(a)(2) and (c).” Walls maintained that the bank’s conduct of soliciting and collecting payments after she received her discharge was prohibited by Section 524 of the code and was an unfair and unreasonable means of collecting a debt under the FDCPA. Walls theorized that since her bankruptcy case had concluded, she needed to rely upon the FDCPA to protect her from unfair collection practices. The 9th Circuit disagreed with this assessment. According to the court, “there [was] no escaping” that Walls’ FDCPA claim was in actuality an action for an alleged violation of Section 524. In so finding, the 9th Circuit concluded as follows: “To permit a simultaneous claim under the FDCPA would allow through the back door what Walls cannot accomplish through the front door – a private right of action. This would circumvent the remedial scheme of the code under which Congress struck a balance between the interests of debtors and creditors by permitting (and limiting) debtors’ remedies for violating the discharge injunction to contempt. A mere browse through the complex, detailed and comprehensive provisions of the lengthy Bankruptcy Code . . . demonstrates Congress’ intent to create a whole system under federal control which is designed to bring together and adjust all of the rights and duties of creditors and embarrassed debtors alike. Nothing in either act persuades us that Congress intended to allow debtors to bypass the code’s remedial scheme when it enacted the FDCPA. While the FDCPA’s purpose is to avoid bankruptcy, if bankruptcy nevertheless occurs, the debtor’s protection and remedy remain under the Bankruptcy Code.” Thus, the 9th Circuit held that a debtor’s sole remedy for a violation of the discharge injunction exists under the code, and a debtor cannot bypass the code’s “remedial scheme” by filing an action against a creditor under the FDCPA. The upshot of the 9th Circuit’s holding in Walls is that the code implicitly “repeals” the FDCPA as a mechanism for debtors to curb collection efforts for debts that have been discharged. In direct contrast to the result reached in Walls, the 7th Circuit in Randolph v. IMBS Inc. concluded that while the code and the FDCPA certainly overlap in some respects, the code does not have the effect of repealing the FDCPA. As such, under the 7th Circuit’s approach, a debtor can conceivably bring a claim against a creditor under both the code and the FDCPA. In Randolph, when Cheryl Alexander filed her Chapter 13 petition she owed $1,125 to her dentist. Alexander listed the debt on the schedule of unsecured, nonpriority claims; the dentist was notified of the filing, along with the identity of Alexander’s attorney. The dentist filed a proof of claim, and the confirmed plan contemplated that the debt be paid over time. Two years after plan confirmation, the dentist died and his office hired Unlimited Progress Inc. to collect on old accounts, including Alexander’s. Unlimited Progress subsequently sent a dunning letter to Alexander, which Alexander ignored. When Unlimited Progress sent a second dunning letter to Alexander, she forwarded the letter to her attorney, who in turn contacted the debt collector and informed the collector about Alexander’s Chapter 13 case. Unlimited Progress immediately closed its file and never again contacted Alexander. Nonetheless, Alexander filed suit under the FDCPA, claiming that Unlimited Progress falsely represented that she was required to pay the outstanding bill immediately. The parties consented to a decision by a magistrate judge, who concluded that Section 362(k)(1) of the code (formerly Section 362(h) prior to the enactment of BAPCPA) pre-empted the FDCPA because the code occupied the field of debtor-creditor relations to the exclusion of other laws after the filing of a bankruptcy case. The 7th Circuit reversed the determination of the district court and held that Section 362(k)(1) does not implicitly repeal the FDCPA as a statutory mechanism by which debtors can seek redress from unlawful debt collection practices. Because Congress did not express a legislative intention that the code displaces the FDCPA, the appellate court examined whether an irreconcilable conflict existed between the two statutes. In doing so, the court compared the “operational differences” between the statutes, noting that while the statutes certainly overlap, the code and the FDCPA did not present an irreconcilable conflict. Perhaps most significant to the court’s conclusion is the difference in the “scienter” requirement to demonstrate a violation of each statute. While Section 362(k)(1) makes liability depend on the creditor’s “willful” violation of the automatic stay (i.e., intentionally performing the act which violates the stay with knowledge of the debtor’s pending bankruptcy case) Section 1692e(2)(A) creates a strict liability rule without proof of a mental state. Contrary to the position reached by the district court, the 7th Circuit determined that strict liability under Section 1692k(c) would not interfere with the administration of bankruptcy law established by Congress, particularly the willfulness requirement of Section 362(k)(1). In analyzing the different scienter requirements between the code and the FDCPA, the court stated as follows: “They are simply different rules, with different requirements of proof and different remedies. . . . To say that only the code applies is to eliminate all control of negligent falsehoods. Permitting remedies for negligent falsehoods would not contradict any portion of the Bankruptcy code, which therefore cannot be deemed to have repealed or curtailed Section 1692e(2)(A) by implication. To the extent that Walls holds otherwise, we do not follow it . . . .” Although the 9th Circuit and 7th Circuit adopted diametrically opposed holdings regarding the intersection of the code and the FDCPA, the majority of federal circuit courts have not addressed this issue. Consequently, unless and until the federal circuit courts reach a consensus or the U.S. Supreme Court elects to rule on this issue, attorneys representing consumers in all jurisdictions (with the exception of the 9th Circuit) should contemplate whether an action under the FDCPA is another viable remedy in addition to actions under sections 362(k)(1) and 524 of the code. RUDOLPH J. DI MASSA JR. , a partner at Duane Morris, is a member of the business reorganization and financial restructuring practice group. He concentrates his practice in the areas of commercial litigation and creditors’ rights. MICHAEL D. SOUSA practices in the area ofbankruptcy law with the firm. He is currently completing an LL.M. in bankruptcy from St. John’s University School of Law, where he was named the American Bankruptcy Institute Scholar. He is also a regular author and contributing editor for several national bankruptcy publications, including the Journal of Bankruptcy Law and Practice and the American Bankruptcy Institute Journal.

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