The Continued Erosion of the Protection Afforded to Attorneys
By Richard Thayer, Christian and Small Partner
In 1995, the United States Supreme Court, in a unanimous opinion, interpreted the definition of a debt collector under the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. 1962, et seq., to include attorneys regularly engaged in the practice of collecting debts. Heintz v. Jenkins, 514 U.S. 291 (1995).
The Supreme Court’s opinion in Heintz put an end to a decade-long division in authority regarding the application of the FDCPA to attorneys. Until its 1986 revision, the FDCPA included language specifically excluding practitioners of law, attempting to collect debts owed to their clients, from the definition of a debt collector. In fact, it was this revision to the FDCPA (the omission of this exclusionary language), which the Supreme Court heavily relied upon in reaching its decision in Heintz.
Naturally, the Supreme Court’s decision in Heintz served to significantly diminish the protections afforded to debt collection attorneys under the FDCPA. Justice Breyer, however, writing for the unanimous Court, dismissed the concerns raised by Heintz that this interpretation of the definition of a debt collector under the FDCPA would ultimately lead to exposure to liability for any attorney bringing an unsuccessful action to collect an outstanding debt.
Specifically, the Court held this argument to be unpersuasive due to the protections afforded to debt collectors under the FDCPA’s bona fide error defense, which provides, in part, that a debt collector will not be held liable under the FDCPA if he: shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. 15 U.S.C. 1692(k)(c).
Although the concerns raised by Heintz, including his ominous predictions regarding the fallout from the Supreme Court’s decision of his appeal, have not yet come to fruition, subsequent opinions of the Supreme Court regarding the interpretation of the FDCPA may provide debtors with the ammunition needed for an all-out onslaught on debt collection lawyers for alleged violations under the Act.
A Subsequent Interpretation of the FDCPA
On April 21, 2010, the United States Supreme Court issued another decision, which further diminishes the protections afforded to debt collection attorneys under the FDCPA. In Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, the Court interpreted the bona fide error defense enumerated in §1692k(c) of the FDCPA as being inapplicable to violations of the FDCPA resulting from a debt collector’s misinterpretation of the legal requirements of the Act.
The Court reasoned that §1692k(c)’s requirement that a debt collector maintain procedures reasonably adapted to avoid any such error more naturally evoked procedures to avoid mistakes like clerical or factual errors rather than legal errors. Thus, Justice Sotomayor, writing for the seven-justice majority, declared that an attorney and her law firm (collectively Carlisle) were not protected by the bona fide error defense for a mistaken interpretation of the requirements of the FDCPA.
Ways to Minimize Your Exposure
The FDCPA imposes a plethora of procedural requirements on debt collectors. These requirements vary from the proper procedure for locating and identifying collateral to the proper procedure for communicating with consumers and bringing legal actions for the collection of debt.
In other words, there is plenty of room for error when it comes to an attorney’s interpretation of the FDCPAs various requirements.
While this blog post is not meant to be a practitioner’s guide to debt collection, some of the more recent developments in the law merit the following list of suggestions for minimizing your risk of exposure to liability in connection with collecting consumer debts pursuant to the FDCPA:
1. Have the text of the Act readily available for review.
2. Prepare a quick-reference guide or a checklist to be used in every case.
3. Always track the language of the Act explicitly, rather than paraphrasing.
4. If you currently have forms that you use, re-examine them for accuracy.
5. Once you have an accurate form in place, use it (cut-and-paste, rather than re-typing the text).
6. If you have questions regarding the interpretation of certain requirements, rather than moving forward with your own interpretation, you may want to consider sending a formal request for an interpretation to the FTC.1
Although it remains to be seen exactly what impact these developments will have in this area of the law, following these tips will help to minimize any additional liability which may be imposed on attorneys as a result thereof.