Supreme Court to Decide if Filing Proof of Claim in Bankruptcy Violates FDCPA

The Consumer Financial Protection Bureau has filed an amicus brief in the U.S. Supreme Court in support of the respondent/consumer in Midland Funding, LLC v. Aleida Johnson, a decision of the Eleventh Circuit that held Midland’s filing of an accurate proof of claim in the consumer’s bankruptcy case on a time-barred debt violated the FDCPA.

In its brief, the CFPB argues that the Supreme Court should reject Midland’s arguments that the filing of a proof of claim that is accurate (i.e. provides correct information about an unpaid debt) but is for a debt that is time-barred does not violate the FDCPA, and even if the filing does violate the FDCPA, the Bankruptcy Code (Code) would preclude such application of the FDCPA.  According to the CFPB, nothing in the Code allows a creditor to legitimately file a proof of claim that it knows is subject to disallowance under the Code because it is time-barred.  The CFPB also argues that because a debt collector implicitly represents that it has a good faith basis to believe its claim is enforceable in bankruptcy when it files a proof of claim, the filing is misleading and unfair in violation of the FDCPA when the collector knows the claim is time-barred and therefore unenforceable in bankruptcy.

With respect to Midland’s preclusion argument, the CFPB argues that Code does not preclude an FDCPA action based on the filing of a proof of claim for a time-barred debt.  According to the CFPB, treating Midland’s alleged conduct as an FDCPA violation would not penalize Midland for conduct the Code authorizes and would not otherwise create any conflict between the FDCPA and the Code.

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Supreme Court Rules that Offer of Judgment Does not Moot Class Action

On January 20, 2016, the Supreme Court issued its decision in Campbell-Ewald Co. v. Gomez. Six of the Justices, for differing reasons, held that an unaccepted offer of complete relief does not in and of itself deprive a court of Article III jurisdiction by mooting a plaintiff’s claim.  The Court did, however, leave the door open to find that a fully funded offer of judgment could moot a potential class action by depriving the court of jurisdiction.

The Majority Opinion

Justice Ginsburg's majority opinion adopted the reasoning of Justice Kagan’s dissent in Genesis HealthCare Corp. v. Symczyk, reasoning that, under the language of Rule 68(b) and “basic principles of contract law,” an unaccepted offer of judgment, like an unaccepted offer to contract, is a legal nullity that “creates no lasting right or obligation” and has “no continuing efficacy.” The fact that the offer was unaccepted was critical to the majority’s reasoning because it meant that the plaintiff’s claim “stood wholly unsatisfied.” The opinion noted several times that the plaintiff “gained no entitlement to the relief” previously offered and had not received the relief previously sought, and thus retained a personal stake in the outcome of the litigation. See Campbell-Ewald v. Gomez, No. 14-857, slip op. at 8-12 (Jan. 20, 2016).

This is a norrow opinion, however.  It does not speak to a situation where a defendant makes an offer of judgment that completely satisfies all of the plaintiff's demands and then make a payment to satisfiy the offer.

A Fair Opportunity to Show Class Certification is Warranted

The court noted that “a would-be class representative with a live claim must be accorded a fair opportunity to show that certification is warranted.”  The Court went on to analogize an unaccepted offer of judgment to an unaccepted settlement offer, finding that as is the case of an unaccepted settlement offer, and unaccepted offer of judgment could not kick a plaintiff out of court.

Going Forward

It will be interesting going forward to see how defendants react to this ruling.  I predict we will begin to see offers of judgment with payment either accompanying them or paid into court.  We most certainly will see the issue of wheter such payment moots a claim litigated in near future.

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5 Mistakes Consumers Make When Dealing with Debt Collectors

Debt collectors have a seemingly unending bag of tricks when trying to get payment from consumers.  Most consumers, on the other hand, have little if any experience dealing with debt collectors.  Generally, consumers commonly make one or more of 5 mistakes when confronted by a debt collector.  These include (1) Failing to Get Debt Validation; (2) Failing to Find Out When the Last Payment on the Debt was Made: (3) Agreeing to a Payment Plan; (4) Not Registering Their Cell Phone on the National Do Not Call Registry: and (5) Not Seeking Legal Counsel.

1.  Failing to Get Debt Validation

Getting debt validation is almost always a good idea.  It is possible that the debt may not be yours.  In addition you may not recall the debt or the original creditor.  The debt collector may also be trying to recover unlawful interest.  The list goes on and on.

2.  Failing to Find Out When the Last Payment on the Debt was Made

Finding out when the last payment on the debt was made is critical because this tells us when the statute of limitations clock started ticking.  For instance, in Kentucky the statute of limitations is 5 years from the date of the last payment (default), and in Tennessee the SOL is 6 years.  Statutes of limitations vary from state-to-state, but nearly all run from the date of the last payment.

If the statute of limitations has expired, then the debt collector cannot file suit to recover the debt, and if it does, it violates the Fair Debt Collection Practices Act.

3.  Agreeing to a Payment Plan

Many times a debt collector will seem willing to work with a consumer to establish a payment plan.  Often, this is because the statute of limitations has expired, and when the consumer enters into a payment agreement with the debt collector, the SOL is reset.  Then if the consumer defaults on the payment plan, the debt collector can sue on the entire debt.

4.  Not Registering Their Cell Phone on the National Do Not Call Registry

If a consumer registers his cell phone on the National Do Not Call Registry and a debt collector calls, the debt collector has violated the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act.  The statutory damages under the TCPA are $500 to $1500 per call.  And, the statutory damages under the FDCPA are up to $1000 or actual damages plus attorney fees.

5.  Not Seeking Legal Counsel

Most, if not all, consumer lawyers do not charge for an initial consultation,  So, why not take advantage if you think your rights under the TCPA or the FDCPA have been violated?

Debt collectors have a range of tricks and tactics to separate consumers from their money.  Be smart and don't make the 5 common mistakes above.

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Eight Things Debt Collectors Won't Tell You

Debt collectors call often and many times threaten debtors in an attempt to get them to pay a debt.  However, many of their tactics are nothing more than a smoke screen.  Below, I discuss 8 things debt collectors won't tell you.

1.  Many of Their Threats Are Just Words

"I am going to inform the creditor that you have refused to pay."  I think the creditor may have figured that out since it has referred or sold your account to a debt collector.

"I will have the sherriff arrest you."  This is not going to happen.

They will set deadlines for your payment as a threat to get you to pay.  You can bet they would take your money after the deadline.

2.  They Have to Stop Calling You at Work If You Tell Them To

If you tell a debt collector to stop calling you at work, the FDCPA requires that the calls stop.  Of course, the debt collector wants to keep calling at work because of the potential embarrassment factor.

3.  They Can't Talk to Others About Your Debt

Debt collectors can't talk to your neightbors, your boss, or any other people other than a co-signer, your spouse, or your attorney.  Of course they want you to believe that your neighbors of boss would find out about the debt in hopes you would pay to prevent them from finding out.

4.  Most Debt Collectors Have Quotas

Since they have quotas, it might be better to hold them off for a while.  It could work to get them to accept less money later in the month.

5.  You Can't Be Sued on Your Debt

Many times debt collectors are attempting to collect old debt that is outside the staute of limitations, and as result, they can't sue you to collect the debt.

6.  The Worst Thing They Can Do Is File Suit

Debt collectors won't tell you that the worst thing they can do to you is file a civil suit?  Why?  Because they have to pay attorneys, filing fees, and wait to be paid until the litigation concludes.  And, they also don't want to risk having counterclaims filed against them for violating the FDCPA.

7.  Paying Them Won't Help Your Credit Score

Debt collectors often tell debtors that they will update their credit report if they pay off the debt.  The fact is that the credit report will keep the negative information associated with the account for six years and six months from the date the debtor stopped paying.

8.  You Likely Won't Have to Pay a Dead Relative's Debt

You are not responsible for your relative's debt unless you were a co-signer or your spouse died in a community property state.  The debt collector may file a claim against the estate of the deceased if the deceased left one.  Beware when a debt collector calls to attempt to collect a debt of a dead relative.

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Overshadowing FDCPA Notice Requirement Results in Class Certification

In Roundtree v. Bush Ross, the United States District Court for the Middle District of Florida, Tampa Division, granted class certification based in part on a claim by the Plaintiff that the 30-day validation notice provided by a law firm representing a condo association "overshadowed" the notice by its terms.  The notice at issue stated:

Unless the entire sum is paid within thirty (30) days of your receipt of this letter, we shall proceed with appropriate actions to protect the Association's interests, including, but not limited to the filing of a claim of lien and foreclosure thereon. If a claim of lien is filed against your unit to collect the amounts stated hereinabove, you will be responsible for the cost of recording the lien ($18.50), a title search ($25.00), and certified mail ($5.00 per unit owner per address), plus additional attorney's fees of approximately $200.00.

Roundtree argued that the demand for payment within 30 days would lead the least sophisticated consumer to waive her rights under 15 U.S.C. § 1692g(b), which provides, "Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor."  The court agreed that such language as used by Bush Ross could violated section 1692g(b).

We have encountered numerous communications from debt collectors that overshadow the 30-day notice requirement.  Initial communications that demand payment or offer a settlement before the expiration of the 30 days within which a consumer may request validation most likely violate section 1692g(b) by overshadowing the right to request validation within 30 days of the communication.

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866-279-9721

Robocalls--Stopping An American Pandemic

      America is in the midst of a pandemic. This pandemic is the flood of robocalls Americans receive on a daily basis. According to the FTC, it receives over 200,000 complaints per month about robocalls.

     What are robocalls? The FTC defines “robocalls” as follows:

Robocalls are unsolicited prerecorded telemarketing calls to landline home telephones, and all autodialed or prerecorded calls or text messages to wireless numbers, emergency numbers, and patient rooms at health care facilities.

     So, if you get a call to your home phone that is a prerecorded message from a telemarketer, the call violates the Telephone Consumer Protection Act (“TCPA”). And, if you get an autodialed call, prerecorded call, or text from a telemarketer on your cell phone the call or text violates the TCPA. And, federal courts have now expanded the coverage of the TCPA to also apply to debt collectors.

Because of modern telephone technology that utilizes the Internet robocalls can be made from anywhere in the world. In addition, modern technology also allows robocallers to “spoof” their number on caller id by giving false numbers. This makes catching and punishing robocallers much more difficult. And, because they are almost beyond the law, many robocalls are scams meant to separate people from their money.

     For instance, many offshore casinos text offers to cell phones. Or, scammers call and threaten people with jail time for a debt that in most instances the person doesn’t owe.

What to do? First, get your number registered on the national do not call registry. Although many of scammers could care less and will violate the do not call prohibition, other legitimate telemarketers will obey the prohibition. Second, do not answer your phone if you don’t recognize the number. Many times scammers will leave a voicemail, and on occasion, this can be used as proof against them. However, if you do answer a robocall, hang up. Do not press any number to get removed from their list. Third, file a complaint with the FTC at donotcall.gov. Fourth, if you have gotten a number of these robocalls, contact a consumer law attorney. The TCPA provides that a victim of a robocall may receive $500 per call in damages from the robocaller, and up to $1500 in damages if the violation is willful. Fifth, block the number. This may help somewhat, but do not be surprised to get another call from the same offender using a different number. Sixth, consider using a free robocall blocking service such as Nomorobo.

     This pandemic can be brought under control if consumers are educated about what they can do in reaction to this constant annoyance. However, it will not be easy or automatic.

www.debt-relief-law.com

866-279-9721