Collection Settlements Are Dead: The Sequel

Just in time for the summer movie season, one court has given debt collection litigation lawyers yet another reason to disconnect the telephone and computer. Now identifying yourself as a lawyer or a law firm on a voice mail or telephone message is sufficient facts to state a claim for a Fair Debt Collection Practices Act (FDCPA) violation.

This summer sequel is delivered in the recent decision Bard v. The Law Offices of Howard E. Scherr, P.C. Case No. 13-cv-1411 (E.D. N.Y.).  Here the law firm left a voice mail message identifying who they were, advising that their firm engages in debt collection and requesting a call back.  Plaintiff asserted that such a message falsely represented the fact that it was from an attorney and thus violated §§ 1692e(3) and §1692e(10) of the FDCPA. The district court agreed that sufficient facts were pled to state a claim for a class action complaint.

I don’t have to be reminded that our sequel takes place in the land of Grecco v. Trauner, where the Second Circuit held that attorneys could otherwise disclaim their status as attorneys when sending a collection letter, and that making such a disclaimer would not confuse the otherwise “least sophisticated consumer.” Despite the Second Circuit’s desire to make a happy ending from a weak screenplay, meaningful involvement is simply bad jurisprudence.

For one, nowhere does the FDCPA even speak of the term meaningful involvement. One state ethics board took great exception with such a disclaimer, because of course, you are certainly practicing law when you are communicating on your firm’s letterhead. Nonetheless, some federal courts continue to impose “meaningful involvement” upon debt collection attorneys; passing judgment for their conduct just because of their chosen practice area.

Even Judge Sotomayor warned against this kind of interpretation of the FDCPA in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, stating that certain “provisions should not be assumed to compel absurd results when applied to debt collection attorneys.”  Yet this is exactly what the district court did here.

In McMahon v. LVNV Funding et al, the 7^th Circuit concluded that uttering the dirty word “settlement” in a letter was an implied threat of litigation. Here, leaving a polite voice mail message and a truthful identification that you are a law firm results in the same implied threat.

So just like the original, the moral of our sequel is simply… do not communicate at all, especially if you are an attorney. The credits are now rolling. The villainous attorney has been stabbed in the heart and lies bleeding in the field, never to call and leave a message for a consumer again. Sorry Dorothy we are not in Kansas anymore.

This post originally appeared on the Consumer Financial Services Blog, run by ARM defense firm Maurice & Needleman.

Joann Needleman is Vice President of Maurice & Needleman, P.C., where she is the Managing Attorney of the firm’s Pennsylvania office. Joann has extensive litigation experience in state and federal courts, successfully defending creditors against claims brought under the Fair Debt Collection Practices Act, Fair Credit Reporting Act and, in Pennsylvania, under the Fair Credit Extension Uniformity Act. She provides counsel, consultation and litigation services to financial institutions, law firms and debt buyers throughout the country. Needleman also currently serves as the elected President of the National Association of Retail Collection Attorneys (NARCA).