Over the past five years there has been much negative publicity and regulation in the debt collection space regarding credit cards (and other consumer debts). Frankly, it seems there is so much going on that all of us (whether law firms, clients, or regulators) seem to be chasing our tails. We are all trying to do the “right” thing but do we know what the right thing is?
The recent lawsuit by the CFPB against Weltman, Weinberg & Reis highlights the disconnect between the ethical requirements imposed by our respective states’ regulatory bodies and what the CFPB evidently deems mandatory conduct for attorneys engaged in collections. This got me to thinking: What if I reached out to some collection industry experts and told them they could have “Christmas in July” and be granted the power to make changes to the FDCPA. What would the wish list look like, assuming we were being fair to all parties, and our goal was to bridge the gap? I think these would be the top contenders:
1. Clear Rules and Regulations
Without fail, this was the common theme echoed by everyone to whom I posed this question. All collection attorneys simply want a roadmap they can follow. For example, what should be included in a demand letter or complaint that is reasonable and provides a safe harbor? Or consider the issue of “meaningful involvement” which was the primary allegation against Weltman and is now a common theory in consumer lawsuits nationally. While, in my opinion, this clearly falls in the category of regulating the practice of law and should not be a federal issue. How about regulators provide a reasonable definition of what they expect?
2. Collaborative Rulemaking
In the same vein, the Weltman case is merely the most recent example of rulemaking by lawsuit. Collection firms and their clients are forced to sort through the recent consent decrees directed only to third parties and determine from those orders what they should do. If the goal of the CFPB is truly to assist consumers, then it is clear a consumer would be vastly aided by uniform rules that are arrived at to protect all consumers. In Weltman and other recent matters brought by the CFPB, there seemed to be focus on conduct undertaken on collection cases brought even before the CFPB event existed. How reasonable is it to expect collection firms follow rules that did not exist at the time? Hence, rather than using their role to create violations from actions that took place years in the past, let’s work collaboratively to make the marketplace fair going forward.
3. Communication
Can any of you think of one reason why someone between the ages of 18-35 would even consider talking to a collection representative by phone? This generation (and frankly most people in general) are on their smartphone all day long. It makes no sense in today’s world we have no rules for contacting consumers via text, chat, and email. This method of communication is more efficient, you can easily keep a record of the conversation, you can do it on your own time and consumers can communicate the times for communication or whether they want no communication at all.
4. FDCPA Claims
Too often, collection firms are not settling FDCPA cases because they did something wrong. Instead, we are settling cases because the cost of defending a matter, even to a successful conclusion, is far more expensive than settling. And if you lose, then you are paying legal fees for yourself and the consumer’s lawyers. Consumer lawyers know it is cost-effective to draft a boilerplate complaint and then make a demand which is always inclusive of fees. In fact, if you review certain settlement agreements, the consumer “allegedly” being protected gets $1,000 while their attorney gets 10 times that sum. Meanwhile, the consumer attorney has no responsibility and many times does nothing on the underlying state court action, leaving the consumer to fend for themselves. This scenario is certainly not intended to protect consumers. Every person with whom I have spoken has told me fundamental reform of damages is critical. Perhaps limiting fees to a percentage of the consumer’s recovery, or capping fees at a certain level depending on the value of the recovery would be workable. At minimum, a courtroom exception for pleadings and notice of pleadings should be considered.
5. Media
With a firm practicing in different states, I find the variance between the states regarding necessities to prove up a case a major hurdle. In one state, a debt buyer can testify as to the business records of the original creditor whereas you cross the state line and suddenly, your client needs to fly out both their in-house witness and a witness from the original creditor. In the next state, no witness is required at all, but a business records affidavit from the seller will do. Harmonizing the requirements to make clear that debt buyers who integrate the data and documents of the original creditor without alteration may testify and present evidence from the original creditor would make trial practice more efficient.
6. Costs, Fees and Interest
In every state in which we practice, the state law allows for pre and post-judgment interest as well as the recovery of costs. Yet, nearly every one of our clients disallows all interest and some will not collect costs. In addition, the case law regarding how one describes court costs pre-judgment actually makes discussions with the consumer more complicated and leads to more mistakes than it solves. Creating safe-harbor language for us would allow proper costs to be assessed without exposing the consumer to any harm would create transparency without harming the consumer.
As you can see, we are all so busy trying to do the right thing that we somehow have lost sight of the goal which, in my opinion, is to allow legal and ethical debt collections in a manner that protects the rights of consumers.
Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA.