Contents. Fair Debt Collection (5th ed. 2004) 2005 Supplement Contents. CD-Rom Contents... xxxv. Introduction and Overview

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1 Fair Debt Collection (5th ed. 2004) Contents 2005 Supplement Contents CD-Rom Contents... xxxv Part I Chapter 1 Introduction Introduction and Overview 1.1 How to Use This Manual Organization of the Manual Companion CD-Rom for Fair Debt Collection Clearinghouse Numbers Read NCLC REPORTS and Fair Debt Collection Cumulative Supplement for Most Current Developments Consumer Lawyers May Obtain Analysis of Unfair Debt Collection Practices Claims from National Consumer Law Center Experts Fair Debt Collection Training and Continuing Legal Education Specializing in Fair Debt Collection Law How Debt Collectors Operate Debt Collector: Who Is Included? The Debt Collection Industry The Debt Collection Process Creditors Collection Agencies Credit Reporting Agencies Technological Changes Caller ID Telephone Service and Faxes Raise Privacy Issues Complaints About Collection Agencies Ranked First at Federal Trade Commission Application of Fair Debt Collection Laws Outside Traditional Debt Collection Context Introduction Fair Debt Collection Laws as a Remedy for Abusive Landlord Conduct Overview Deceptive Eviction Notices Self-Help Eviction Confiscation of Tenant s Personal Property Withholding Unjustified Amounts from the Tenant s Security Deposit Demanding and Collecting Rent That Is Not Due Use of Profane or Abusive Language or Harassment to Collect Rent Debts Abusive Lending Practices Overview xi

2 Fair Debt Collection Coverage Collection of Illegal Charges False Threats of Criminal Prosecution Litigation Misconduct Debt Pooling Utility Company Disputes Surviving Debt Book for Consumers Chapter 2 Preparation of a Debt Collection Harassment Case 2.1 Initial Interview Strategy for Initial Interview Questions to Uncover All Damages Suffered by the Client Examining the Validity of the Debt Underlying the Collection The Client s Legal Objectives Should Be Clarified Bankruptcy Clients and Fair Debt Collection Practices Act Claims Bankruptcy Clients Frequently Have FDCPA Claims FDCPA Claims in Straight (Chapter 7) Bankruptcies FDCPA Claims in Chapter 13 Bankruptcy FDCPA Attorney Fees and Bankruptcy Federal and State Fair Debt Collection Claims That Arise Out of a Bankruptcy Strategies to Stop Debt Collection Harassment Without Litigation or Bankruptcy Introduction The Consumer Can Request the Collector to Stop Dunning Contacts The Consumer May Propose a Workout Agreement The Consumer May Complain of Harassment to Consumer Protection Agencies The Consumer Should Complain to the Collector About Billing Errors The Consumer s Lawyer May Send a Letter Requesting the Collector to Stop Contacts Evaluating Strategies for Harassed Debtors Preparation of a Suit for Damages Future Collection Contacts May Be Recorded by the Client to Diminish Factual Evidentiary Issues Involving Liability A Written Statement Should Be Obtained from a Client Considering a Suit Fee-Generating Debt Collection Cases Must Be Referred to Private Lawyers by Legal Services Corporation Grantees Developing the Case Chronology of Events Importance of Collector s Documents Recording the Dates and General Messages of Contacts Pattern or Practice Evidence Drafting Pleadings Importance of State Claims Choice of Federal or State Court Specificity of Pleading Avoiding Dismissal Structuring the Case Sample Complaints Proper Service Be Prepared for Collector Re-Opening Default Judgment Mandatory Arbitration Clause May Provide for Arbitration of Consumers Claims for Abusive Debt Collection xii

3 Contents Discovery Usually Focuses on Obtaining and Interpreting the Collector s Records of Collection Contacts Counsel Not Familiar with Trying Debtor Harassment Cases Should Review Materials on Trial and Damages Before Negotiations Liability Issues Are Frequently Determined by Summary Judgment A Debt Collection Harassment Trial Usually Should Be Tried by a Jury Offers of Judgment Offers of Judgment in General Offer of Judgment in Class Action FDCPA Cases Consumer s Recovery of Attorney Fees Where Offer of Judgment Provides for Costs but Not Attorney Fees Pitfalls to Avoid in Using Surveys and Experts to Prove Deception in FDCPA Cases Establishing Deception Cost of Survey Evidence Rejection of Survey and Expert Evidence Sources for Experts Proving the Nature, Cause, and Value of Actual Damages Maximizing Damage Awards Benefits the Community as Well as Clients Overlooked Damages in Debt Collection Abuse Cases General Principles Common Types of Injuries and Losses Resulting From Debtor Harassment General Stress-related injuries Out-of-pocket losses Injuries to personal relations Leveraging Other Relief Ambiguous Legal Labels for Damages Evidence Must Establish the Existence, Extent, and Cause of an Injury and the Value of the Loss Compensable Emotional Stress and Other Losses Vary Among States Causation Is an Important Element in the Proof of Damages in a Debtor Harassment Case Preparing for a Jury Trial of an FDCPA Case Punitive Damages Consumer Claims Against Collector s Professional Liability Insurer Creditor s Liability for Acts of Its Employees, Collection Agency or Attorney Keeping Accurate Records for Awards of Attorney Fees Injunctions, Administrative Agency Complaints, and Community Education Part II Chapter 3 The Fair Debt Collection Practices Act Overview of the Fair Debt Collection Practices Act 3.1 Scope, Purpose, and Effective Date Sources of Law and Research Aids The Language of the Act Legislative History Case Developments Federal Trade Commission Formal Advisory Opinion Federal Trade Commission Informal Staff Letters FTC Staff Commentary on FDCPA Introduction xiii

4 Fair Debt Collection Authority of FTC Staff to Issue Commentary Using This Manual for FDCPA Issues Chapter 4 Persons and Transactions Covered by the Fair Debt Collection Practices Act 4.1 Introduction Persons Who Must Comply as Debt Collectors The Term Debt Collector Any Person Whose Principal Business Is Collecting Debts Is a Debt Collector Any Person Who Regularly Collects Debts Owed to Another Is a Debt Collector Creditors Using False Names Are Debt Collectors Repossession and Foreclosure Companies Forms Providers Who Misrepresent Their Collection Involvement Violate theact Flat-Rate and Other Collectors Covered Extent of Participation in the Collection Process Lawyers Must Review File Before Signing Collection Letter Lawyers Regularly Collecting Consumer Debts Must Now Comply with All FDCPA Provisions Introduction Attorney Amendment Legislative History Scope of FDCPA Attorney Coverage Issues Unique to Attorney Debt Collectors General Venue provision Communications with third parties Notice of validation rights Other pitfalls to avoid Attorney Liable for Allowing Signature to Appear on Collection Letters Without Reviewing File FDCPA and Lawyers Ethical Obligations Intertwine General Lawyers collection letters must avoid false threat of suit Interstate collection letters must avoid misrepresenting lawyer s authority to sue Representing only part of the effects of suit is deceptive Intermingling activities of collection agency and attorney may be unlawful Persons Specifically Excluded from the Term Debt Collector Narrow Exemptions Help Define FDCPA Coverage Creditors Employees Collecting in the Name of the Creditor Are Specifically Excluded A Commonly Owned or Affiliated Corporate Collector Collecting Only for Its Affiliates Is Specifically Excluded If It Is Not Principally a Debt Collector State and Federal Officials Performing Their Duties Are Specifically Excluded Process Servers Are Specifically Excluded Bona Fide Nonprofit Consumer Credit Counselors Are Specifically Excluded xiv

5 Contents Attorneys Specifically Excluded Before 1986 Now Covered Persons Collecting Debts as Part of Bona Fide Fiduciary or Escrow Arrangements Are Specifically Excluded An Extender of Credit Collecting on Behalf of Another a Debt It Originally Extended Is Specifically Excluded Persons Collecting Debts Not in Default When Obtained Are Specifically Excluded The Enforcer of a Security Interest in an Account Used as Collateral for a Commercial Loan Is Specifically Excluded Transactions Covered by the Act The Act Covers Only Debts Allegedly Owed by a Natural Person Debts Covered by the FDCPA Consumer, Not Commercial, Debts Covered A Broad Range of Consumer Debts Are Covered Coverage of Noncontractual Obligations Questioned FDCPA Protects Consumers and Other Persons Collection Activities Covered by the FDCPA Indirect and Attempted Collections Covered Communications Covered by the Litigation Activities Covered by the FDCPA Chapter 5 Consumer Protections and Rights Under the Fair Debt Collection Practices Act 5.1 Encouraging the Exercise of FDCPA Rights General Principles of Construction of the Act Act Protects Least Sophisticated Consumers Strict Liability Under the FDCPA Effect to Be Given to the Plain Meaning of the Act FDCPA Limits a Collector s Communications with a Consumer Consumers Privacy and Relationships Protected Contacts at Unusual or Inconvenient Times or Places Prohibited Text of 15 U.S.C. 1692c(a)(1) Communications Broadly Covered Contacts at Inconvenient Times Contacts at Inconvenient Places Collector Should Inquire About Convenience of a Contact Relation to Other Provisions Collector May Not Contact a Consumer It Knows to Be Represented by an Attorney Contacts at Workplace Are Restricted Informing Most Other People of the Consumer s Indebtedness Is Prohibited Text of 15 U.S.C. 1692c(b) Contacting Friends, Neighbors, Relatives, Employer Is Usually Prohibited Collector May Contact Certain Nondebtors Collector May Contact Others in Specific Situations Contacts in Other Situations Communication to Be Given Ordinary Broad Meaning Relation to Other Provisions Obtaining Location Information About a Consumer from Other Persons Is Strictly Regulated Consumers May Waive, by Direct Prior Consent, Protections from Collection Contacts xv

6 Fair Debt Collection Right to Stop Collection Contacts Text of 15 U.S.C. 1692c(c) General Information Referring a Debt to Another Collector After Consumer s Request to Cease Collection Giving Notice of a State Right to Terminate Collection Contacts Conduct Serving to Harass, Oppress, or Abuse Is Prohibited Harassing, Oppressive, and Abusive Conduct Generally Prohibited Collectors May Not Use or Threaten Violence or Criminal Conduct Collectors May Not Use Obscene, Profane, or Abusive Language Publishing a List of Allegedly Defaulting Debtors Is Prohibited Text of 15 U.S.C. 1692d(3) Shame Lists Prohibited Certain Credit Reporting Permitted Coded Lists of Debtors Must Conceal Identity Advertising a Debt for Sale to Coerce Payment Is Prohibited Repeated or Continuous Telephone Calls Intended to Annoy, Abuse, or Harass Are Prohibited Collector s Employee Must Provide Meaningful Disclosure of Identity When Telephoning Text of 15 U.S.C. 1692d(6) General Use of Aliases Care Must Be Exercised When Leaving Messages False, Deceptive, or Misleading Representations and Collection Methods Are Prohibited General Collectors May Not Use False, Deceptive, or Misleading Representations or Collection Means Selected Text of 15 U.S.C. 1692e Courts to Construe Broad Prohibition to Address New Forms of Deception Deception Standards Developed Under the Federal Trade Commission Act FDCPA Deception Standard Builds on FTC Act Objective Standard of Deception Is Applied to Protect the Least Sophisticated Half Truths Deceptive Where Implication of Statement Misleading Some courts have difficulty with deceptive half truths Expert witnesses may be helpful to establish deception Base Claims on More Specific Provisions of Act When Possible Threat of Suit May Be Deceptive Misrepresenting imminence of suit, or intent or authority to sue Lack of intent to sue Establishing lack of intent to sue Using on-line databases to establish false suit threats Disguised threats of suit Other Threats and Statements May Be Deceptive Other deceptive threats Other deceptive statements Filing a time-barred suit is deceptive Legislative history xvi

7 Contents Collectors May Not Falsely Imply an Affiliation with the Government Collectors May Not Falsely Represent the Character, Amount or Legal Status of Any Debt Text of 15 U.S.C. 1692e(2)(A) Character Amount Legal Status Collectors May Not Falsely Represent the Services They Have Rendered or the Compensation to Which They Are Entitled Falsely Implying That a Person Is an Attorney or That a Communication Comes from an Attorney Is Prohibited Implying That Nonpayment Will Result in Arrest, Imprisonment, Garnishment, Attachment, Seizure, or Sale If Such Action Is Unlawful or Unintended Is Prohibited Threatening Unlawful or Unintended Action Is Prohibited Text of 15 U.S.C. 1692e(5) General False Threats of Legal Action Other False Threats Threats of Illegal Action Relation to Other Protections Falsely Implying That Transfer of a Debt Will Preclude a Consumer s Claim or Defense or Will Subject the Consumer to a Practice Prohibited by the Act Is Prohibited Misrepresenting That the Consumer Committed a Crime or Engaged in Other Misconduct in Order to Disgrace the Consumer Is Prohibited Communicating or Threatening to Communicate False Credit Information Is Prohibited Using or Distributing Written Material Giving a False Impression of Its Source, Authorization, or Approval Is Prohibited False Representations or Deceptive Means to Collect or Attempt to Collect a Debt or to Obtain Information About a Consumer Is Prohibited Collector Must Disclose That a Communication Is to Collect a Debt, That Information Received Will Be Used for Debt Collection, and That It Is a Debt Collector Overview Information Required by This Provision Must Be Effectively Provided Phone Calls, the Debt Collection Warning, and Other FDCPA Requirements Falsely Implying That Accounts Have Been Transferred to Innocent Purchasers for Value Is Prohibited Falsely Implying That Documents Are Legal Process Is Prohibited Using Any Business Name Other Than the True Name of the Collector s Business Is Prohibited Falsely Implying That Documents Are Not Legal Process Is Prohibited Falsely Implying That a Collector Operates or Is Employed by a Credit Reporting Agency Is Prohibited Use of Unfair or Unconscionable Collection Means Is Prohibited General Prohibition; Construing Unfair and Unconscionable Particular Unfair or Unconscionable Methods Prohibited Collecting Any Amount Not Permitted By Law Is Prohibited Restrictions on Soliciting, Accepting, and Depositing Postdated Checks Causing Expenses to a Person by Concealing the Collection Purpose of a Communication Is Prohibited xvii

8 Fair Debt Collection Repossession or Threats of Repossession Are Prohibited When There Is No Right or Intent to Repossess or When the Property Is Exempt from Repossession Using a Postcard to Communicate with a Consumer Regarding a Debt Is Prohibited All Language and Symbols on Envelopes Used for Collection Are Prohibited Except for the Collector s Address and Name If the Name Does Not Indicate the Collector s Business Validation of a Debt Congress Considered Debt Validation Significant Content, Placement, and Provision of the Validation Rights Notice Text of 15 U.S.C. 1692g(a) Overview Placement of the Validation Rights Notice FTC Staff Believes Oral Validation Notice Permitted Provision of Written Validation Notices Content of Validation Notice The validation notice must be complete Notice should indicate that oral disputes overcome collector s presumption of validity of debt Debt collector must disclose amount of the debt Debt collector may not mislead or confuse the consumer about the amount of the debt Collection Activities May Not Obscure, Confuse, or Contradict Validation Rights Some debt collection activities permitted during 30-day validation right period Demands for immediate payment Threat of suit Threat to make adverse credit report Telling consumer to telephone the debt collector Other requests and the validation rights notice Question of law or fact and proof Legal standards Overview Obscuring or overshadowing the debt validation notice Contradiction of debt validation rights Confusion Verification of a Debt Text of 15 U.S.C. 1692g(b) Consumers Should Request Verification in Writing A Debt Collector Verifies a Debt by Providing Information That Is Responsive to the Consumer s Request Debt Collector Must Cease Collecting from Time of Receipt of Verification Request Until Debt Verified Failure by a Consumer to Exercise Validation Rights May Not Be Taken as an Admission of Liability Consumer May Direct Application of Payments When a Collector Holds Multiple Accounts Restrictions Against Bringing Suits in Inconvenient Forums Text of 15 U.S.C. 1692i Suit Must Be Filed Where Consumer Resides or Signed Contract or Where Property Located xviii

9 Contents Enforcing a Judgment in a Jurisdiction Where the Consumer Does Not Reside or Did Not Sign the Contract Legislative History Supplying Forms That Misrepresent the Involvement of Another in the Collection Process Chapter 6 Availability of a Private Fair Debt Collection Practices Act Cause of Action 6.1 Private Remedy Is Primary Enforcement Mechanism Cases and Parties Must Be Carefully Evaluated Evaluation of Cases and Formulation of Strategy Overview Increasing FDCPA Awards Bringing an FDCPA Suit as a Class Action Increasing Recoveries in Debt Collection Harassment Class Actions A Wide Range of Parties Plaintiff May Be Named Under the Act A Wide Range of Parties Defendant May Be Named Under the Act Parties to a Private FDCPA Action Are Entitled to a Trial by Jury Actual Damages Are Available to Any Person Injured By a Violation of the Act Introduction Actual Damages Are Defined Broadly by the Courts Proof of Actual Damages Standards of Causation in FDCPA Cases Class Actions for Actual Damages Introduction Whether to Bring a Class Action Common Questions Manageability of Class Action Statutory Damages Statutory Damages Up to $1000 Are Available in an Individual Action A Court Must Grant Statutory Damages When a Violation Contravenes the Purposes of the Act and Some Basis Is Provided for Statutory Damages In Determining Statutory Damages, Courts Must Consider the Intent, Frequency, Persistence, and Nature of the Noncompliance Statutory Requirements Enhancing Statutory Damages Factors Reducing Statutory Damage An Award of Statutory Damages Is Not Necessarily Related to an Award of Actual Damages An Award of Statutory Damages May or May Not Be Related to the Amount of a Punitive Damages Award Multiple Statutory Damages Each Person Affected by Violation of the FDCPA May Be Entitled To Recover a Separate Statutory Award for Each Violation Multiple Statutory Damages for Multiple Violations Multiple Statutory Damages for Multiple Victims Punitive Damages Punitive Damages May Be Recovered in Addition to Actual or Statutory Damages in a Supplemental State Claim Punitive Damages in Supplemental State Claim Separate Claim for Punitive Damages xix

10 Fair Debt Collection Punitive Damages Under the FDCPA FDCPA Provides Statutory Damages in Class Actions Requirements for FDCPA Class Actions Seeking Statutory Damages General Federal Rules of Civil Procedure Rule 23 Requirements Introduction Numerosity Commonality Typicality Adequacy of representation Superiority and manageability Class Statutory Damages Increasing Class Recovery of Statutory Damages Factors Determining Amount of Class Statutory Damages Proof of Debt Collector s Intent Is Not Required Successful Plaintiffs Are Entitled to Awards of Reasonable Attorney Fees Fee Shifting is Central to the Congressional Goals for the FDCPA Common Fund Attorney Fee Awards in Class Action Cases Truth in Lending Act and Civil Rights Precedents The Written Fee Agreement Individuals Appearing Pro Se Calculating the Attorney Fee Award Fees Generally Required Using Lodestar Approach Determining the Allowable Hours Establishing the Hourly Rate Adjustments to the Lodestar Fee Applications Appealing Attorney Fee Awards Attorney May Pursue Appeal on Adequacy of Attorney Fee Award Attorney Fees for Time Spent on Appeals and for Attorney Fee Petitions Attorney Fees Where the Claim Is Settled Right to Attorney Fee Award Tactical and Ethical Factors in Negotiating a Settlement Containing Attorney Fees Declaratory or Injunctive Relief in Individual and Class Actions FDCPA Provides a One Year Statute of Limitations for Private Actions Jurisdiction Over Violations of the FDCPA State and Federal Courts Have Concurrent Jurisdiction Over Private Civil Actions Under the FDCPA Personal Jurisdiction and Venue May Be Obtained Over Out-Of-State Collectors Overview Transaction of Business Test in Long-Arm Statutes Tort Tests in Long-Arm Statutes U.S. District Court Venue State Law Claims Closely Related to an FDCPA Claim May Be Joined in Federal Suits Federal Courts May Permit Joinder of Parties Subject to a State Law Claim Closely Related to an FDCPA Claim Federal Agencies Responsible for Administrative Enforcement of the FDCPA Administrative Enforcement FTC Informal Staff Letters and Formal Advisory Opinions Relation of the FDCPA to State Laws xx

11 Contents FDCPA Preempts Inconsistent State Law Provisions FTC Must Exempt States With Substantially Similar, Adequately Enforced Laws Part III Chapter 7 Chapter 8 Other State and Federal Claims Against Debt Collectors and Creditors Debt Collector s Defenses and Counterclaims Under the Fair Debt Collection Practices Act 7.1 Debt Collector Defenses Available Under Other Laws General No Technicality Defense Other Novel Defense Rejected A Debt Collector May Recover Attorney Fees Upon Showing That an FDCPA Suit Was Brought to Harass the Collector Rule 11 Sanctions in FDCPA Cases Federal Courts Usually Refuse Supplemental Jurisdiction Over a Debt Collector s Counterclaim to Collect the Underlying Debt Debt Collector Not Liable for Unintentional Violations Resulting From Bona Fide Error if the Collector Maintained Procedures to Avoid Such Errors Overview Recent Decisions Sustaining the Defense Requirements to Sustain the Defense Courts Split on Defense for Mistakes of Law Prior Litigation May Bar an FDCPA Action Overview Res Judicata Comity Rooker-Feldman Doctrine Good Faith Conformity With a Formal FTC Advisory Opinion Later Ruled Invalid Is a Defense to an FDCPA Suit Federal Trade Commission Debt Collection Law 8.1 Using FTC Law and Remedies Enforcement of FTC Standards Filing Complaints About Debt Collectors and Creditors Practices with theftc State UDAP Statute as a Vehicle for Enforcing FTC Rules Use of the FTC s Statements of Basis and Purpose to Interpret General State UDAP Prohibitions FTC Decisions on Debt Collection Abuses Introduction Threats Misrepresenting a Collector s Intention to Take Legal Action Dunning Letters That Appear to Be Telegrams Misrepresenting the Existence of a Debt or the Amount Due Harassing or Abusive Telephone Calls or Letters Contacting or Threatening to Contact Third Parties Filing Collection Suits in Courts Distant from the Consumer s Residence Misrepresenting the Adverse Impact of Nonpayment upon a Consumer s Creditworthiness Misrepresenting a Fictitious Collection Agency as an Entity Separate from the Collector xxi

12 Fair Debt Collection Misrepresenting That a Claim Has Been or Will Be Transferred to an Attorney or Separate Department of a Collector Misrepresenting a Collector s Affiliation with the Government Using Subterfuge to Obtain a Consumer s Current Address or Place of Employment Collection Letters That Simulate Legal Process Advertising Easy Credit While Using Rigorous Collection Methods Against Delinquent Consumers Failure of Creditor to Oversee Its Collection Agency Other Common Misrepresentations and Unfair Practices FTC Regulations and Informal Guides Former Informal Debt Collection Guide FTC Credit Practices Rule Restricts Six Creditor Remedies Chapter 9 Other Federal Claims 9.1 Fraudulent or Defamatory Use of Mails Collecting for Unordered Merchandise May Be Illegal Telephone and Harassment Criminal Statutes Use of Caller ID As a Debt Collection Device Enforcement of Telephone Company Tariffs Claims Against Detariffed Telephone Companies That Permit Telephone Harassment Truth In Lending Disclosures Extortionate Collection Methods and Other RICO Violations Advantages and Disadvantages of RICO Claims Qualifying Conduct Collection of an Unlawful Debt or Pattern of Racketeering Activity RICO s Substantive Prohibitions RICO and Debt Collection State Racketeering Statutes The Fair Credit Reporting Act Overview Creditors and Collectors As Consumer Reporting Agencies Creditors and Collectors Liability for Making Inaccurate Reports to Credit Bureau Overview Notice of the Dispute Reporting Agency s Duty to Notify Creditor of Obligation to Reinvestigate Furnisher s Duty to Conduct a Reasonable Investigation Reinvestigation Time Limits Prohibition Against Re-reporting Inaccurate Information Improperly Acquiring Credit Report Special Duties Where Debt Arises from Fraud or Identity Theft FCRA Remedies FDCPA and Other Prohibitions Relating to Credit Reports Publicizing Indebtedness; Deceptive Use of Credit Bureau in Name Disputed Debts and the Validation Process Threatening to Report Debt UCC Article 3 and the Electronic Fund Transfers Act Introduction Preauthorized Drafts and UCC Article xxii

13 Contents Electronic Fund Transfers and the EFTA Electronic Fund Transfers and NACHA Rules Other Remedies for Unauthorized Withdrawals Discrimination in Choice of Collection Tactics on the Basis of Consumer s Race, Religion, Sex, Age, or Other Prohibited Category Federal Credit Repair Organizations Act Overview Coverage of Creditors and Collectors Substantive Prohibitions Private Remedies Bankruptcy Constitutional Torts Servicemembers Civil Relief Act Introduction Who Is Protected by the Act? Protections in Court Proceedings Introduction Cases in Which the Servicemember Has Not Been Notified of the Proceeding Cases in Which the Servicemember Has Been Notified of the Proceeding Protections Against Property Executions Tolling of Statutes of Limitations Interest Rate Reduction Prohibition Against Self-Help Repossession and Foreclosure Automobile Leases Deferment of Enforcement of Obligations During Active Duty Residential Leases Remedies for Violations Other Federal Restrictions on Debt Collection Chapter 10 Tort Remedies 10.1 Introduction Overview FDCPA Does Not Preempt Tort Claims Privilege Identity Theft Intentional or Negligent Infliction of Emotional Distress Invasion of Privacy Overview Intrusion upon the Debtor s Right to Seclusion Holding Up to False Light Public Disclosure of Private Facts Intentional Interference with Contractual Relationships Defamation Malicious Prosecution and Abuse of Process Introduction Malicious Prosecution Abuse of Process Attorney s Liability to Third Parties for Collection Negligence Other Torts May Arise in the Debt Collection Context Related Legal Questions xxiii

14 Chapter 11 Part IV Chapter 12 Fair Debt Collection Other State Remedies 11.1 Introduction Consumer Protections Under State Debt Collection Statutes and Regulations Overview Validity of State Debt Collection Statutes Upheld State Debt Collection Statutes Coverage State Debt Collection Statutes Protections Privacy Abusive Collection Activities Prohibited Unfair and Deceptive Debt Collection Activities Prohibited State Debt Collection Statutes Remedies General State Consumer Protection Statutes Prohibiting Unfair and Deceptive Acts and Practices (UDAP) Nature and Advantages of a UDAP Claim UDAP Coverage of Debt Collection Activities General Debt Collection Is in Trade or Commerce Coverage Under Statutes Requiring a Consumer Transaction Types of Creditors and Debts Covered What Debtors Are Protected? Deceptive Debt Collection Activities Unfair and Unconscionable Debt Collection Activities Under UDAP Statutes UDAP Remedies for Debt Collection Violations State Credit Repair Organization Statutes Introduction Coverage Substantive Prohibitions Private Remedies Unauthorized and Unethical Practice of Law by Creditors, Lawyers, and Collection Agencies Unauthorized Practice of Law by Creditors Unauthorized Practice of Law by Collection Agencies Unethical or Unauthorized Practice of Law by Lawyers Remedies for Unauthorized Practice of Law and Ethical Violations State Criminal Statutes Enjoining Abusive Debt Collection Practices Other State Limitations on Debt Collection Defending Consumers Against Collection Actions Protection of Debtor s Exempt Wages and Property 12.1 Introduction General Principles Exemption Laws Must Be Liberally Construed in Favor of the Debtor Proceeds from Sale of Exempt Property Constitutional Validity of Exemption Statutes Impairment of Contracts Due Process and Taking of Property Equal Protection State Constitutional Issues Due Process Protections from Garnishment or Execution of Exempt Property Introduction xxiv

15 Contents The Constitutional Balancing of Interests Prompt Post-Garnishment Notice Is Required Garnishment Notice Must Inform Debtor of Exemptions Notice Must Inform Debtor of Procedures to Contest Garnishment Debtor Has a Right to a Prompt Hearing Protection of Debtors Wages Federal Wage Garnishment Protections Purposes of Consumer Credit Protection Act Wage Garnishment Restrictions Scope of Federal Wage Garnishment Protections Earnings Subject to CCPA Garnishment Protections Calculating Amount of Wages Protected Remedies for Excessive Wage Garnishment Federal Protections Against Employee Discharge for Wage Garnishment CCPA discharge prohibition Criminal and administrative enforcement Is there a federal private cause of action? Title VII claims State law wrongful discharge claims Special Federal Wage Garnishment Provisions for Particular Categories of Creditors or Debtors Introduction Wage Garnishment Restrictions Where Federal Agency or Student Loan Guaranty Agency Is Creditor Garnishment of Federal Employees Wages Debt Collection Against Military Personnel State Restrictions on Wage Garnishment Relation Between Federal and State Wage Garnishment Protections Wage Assignments Protection of Other Exempt Income and Property Introduction Homestead Exemptions Dollar Amounts or Acreage Protected Who May Claim Homestead Exemption Distinctions Between Rural and Urban Homesteads Non-Traditional Homesteads, Mobile Homes, and Interests Less Than Fee Simple Occupancy Special Rules for Certain Types of Debts Pre-existing Debts Entireties Property Exemptions for Personal Property Purpose General Scope Tools of the Trade Tenancy by the Entireties in Personal Property Exemptions for Bank Accounts Protection of Benefit Payments General Public Assistance Benefits Social Security and SSI Benefits Other Federal and State Benefits Wildcard Exemptions and Stacking Exemptions for Pensions and Retirement Benefits xxv

16 Fair Debt Collection Exemptions for Insurance Benefits Personal Injury and Other Causes of Action and Judgments Special Exemption Schemes for Particular Types of Debt Health Care Debts IRS and Other Federal Debts Alimony, Child Support, and Similar Claims Protection of Exempt Funds That Have Been Paid or Deposited into Bank Accounts Key Issues Are Benefits Exempt Once Deposited in Bank Account? Accumulation of Excessive Funds Commingling of Exempt and Non-Exempt Funds Do Federal Wage Protections Apply to Paid or Deposited Earnings? Protection of Federal Benefits Electronically Deposited Into Accounts Introduction Electronic Transfer Accounts: Protection for Exempt Benefits Fringe Banking and Federal Benefits Protection of Exempt Funds from Creditors Self-Help Remedy of Setoff Overview Constitutionality Majority Rule Courts Protect Exempt Income Deposited in Checking or Savings Account Additional Limitations Upon Banker s Right of Setoff Restrictions on Card Issuers Use of Setoff General prohibition of setoff by card issuers Allowable card issuer setoffs against pledged deposit accounts Automatic payment plans Bankruptcy and Other Setoff Situations Creditor s Right to Seize Funds in a Joint Bank Account May Be Limited to Debtor s Contribution Introduction The Contract Approach The Net Contribution Approach Must the Creditor Give Notice of the Setoff to the Nondebtor Co-depositor? Waiver of Exemptions General FTC Prohibition of Waiver of Exemptions Chapter 13 Defending Consumers Against Collection by Federal Administrative Agencies 13.1 Congress Strengthens Federal Government s Debt Collection Powers Federal Agencies Non-Litigation Collection Methods History of Federal Collection Laws and Regulations Federal Collection Statutes Regulations Under the Claims Collection Act The Federal Agency Must Make Proper Written Demand for Payment Release of Information to Credit Reporting Agencies Contracts with Private Debt Collection Agencies and Collection Lawyers Interest, Administrative Charges, and Penalties Offset Against Federal Employee s Salary Tax Refund Interception xxvi

17 Contents Administrative Offset Against Federal Benefit and Other Payments General Benefits Against Which Debts Can Be Offset Offset Procedures Defenses to Offsets Installment Plans and Other Compromises Suspension, Termination, and Discharge of Claims Federal Agencies Implementation of Collection Requirements Survey of Selected Agencies Department of Education: Student Loans Department of Health and Human Services Department of Housing and Urban Development Department of Veterans Affairs Department of Agriculture Debtor Remedies for Illegal Agency Collection Practices Overview Bivens Suit Suit Under Privacy Act Administrative Procedures Act Federal Tort Claims Act Violation of Bankruptcy Stay Fair Debt Collection Practices Act State Agencies Special Problems of Tax Collection Federal Debt Collection Procedures Act Civil Procedure and Exemptions for Collection of Federal Government s Claims Prejudgment and Postjudgment Remedies Property Exempt from Seizure Distant Filing of Collection Suits Possible Impact on Low-Income Consumers Chapter 14 Medical Debt 14.1 Introduction The Problem of Medical Debt Aggressive Debt Collection Practical Considerations Applicability of Fair Debt Collection Practices Act to Abusive Medical Collection Agencies General Coverage of Various Actors in Medical Debt Collection Other Federal Statutes Applicable to Medical Debt Truth in Lending EMTALA Debt Collection and Privacy of Medical Information Credit Reporting Issues and Medical Debt Nursing Home Law State Remedies for Medical Debt Collection Abuses General State Debt Collection Statutes State UDAP Statutes State Tort Law Special Exemption Statutes for Medical Debts Defenses to a Hospital Collection Action xxvii

18 Fair Debt Collection General Account Stated Actions Defenses to Contract Claims Duress as a Defense Other Defenses to a Contract Action Quantum Meruit Reasonable Value Burden to Show Reasonable Value Discriminatory Pricing: How the Poor Pay More Overbilling, Error and Hospital Negligence Other Defenses or Counterclaims in Health Collection Suits Liability for Familial Medical Care Under Necessaries Statutes Health Care Providers Lien on Personal Injury Recoveries General Hospitals Ability to Seek a Lien After Receipt of Insurance Payment Liens by Insurers or Third Party Payors Chapter 15 Collection Expenses, Dishonored Check Claims, and Collection via Arbitration 15.1 Introduction State Restrictions on the Recovery of Collection Expenses Overview Charging Collection Fees Proportional to Debt and Other Excessive Fees Penalize Consumers State Legislation Limiting Recovery of Collection Expenses Noncontractual Collection Fees Contractual Collection Fees General Freedom of Contract Approach Indemnity Approach Courts Prohibiting Recovery of Collection Expenses Threats to Proceed Against Consumers Under Criminal and Civil Dishonored Check Laws Criminal Dishonored Check Laws Overview Defenses Based on Constitutional Rights Checks That Are Postdated or Given for Preexisting Debts Other Limitations and Defenses Civil Dishonored Check Statutes Arbitration as Technique to Resolve Collection Lawsuits Introduction How Collection via Arbitration Works Threats Related to Collection via Arbitration Participating in the Arbitration Proceeding Vacating an Award or Contesting Award Confirmation What Law Applies Challenges to Arbitration Award Should Be Brought Within Three Months Grounds to Vacate an Award Challenging Confirmation of the Award Affirmative Challenge to the Creditor s Use of Arbitration to Collect Debts Introduction xxviii

19 Contents Structuring the Challenge to Overcome Legal Impediments Four major impediments to an affirmative challenge Government enforcement actions Private litigation Is the Arbitration Agreement Enforceable? Arbitrator Bias Arbitration Is Not an Equivalent Forum for Collection Actions Turning the Tables on the Collector Referring Court Collection Actions to Arbitration Appendices Appendix A Appendix B Appendix C Text of the Fair Debt Collection Practices Act A.1 Cross-Reference Table of Public Law Section Numbers with 15 U.S.C. Section Numbers A.2 Fair Debt Collection Practices Act A.3 Senate Report No on the Fair Debt Collection Practices Act Federal Trade Commission Advisory Opinion and Staff Letters Regarding the Fair Debt Collection Practices Act B.1 Federal Trade Commission Advisory Opinion B.2 FTC Informal Staff Letters Federal Trade Commission Staff Commentary on the Fair Debt Collection Practices Act Appendix D Wage Garnishment Statute and Department of Labor Wage Garnishment Regulations D.1 Restrictions on Garnishment, 15 U.S.C D.2 Department of Labor Wage Garnishment Regulations, 29 C.F.R , 870.2, , , Appendix E Summary of State Debt Collection Statutes Appendix F Summaries of State Exemption Laws Appendix G Practice Aids G.1 General Interview Checklist for Debt Collection Harassment G.1.1 General Questions G.1.2 Client s General Objectives G.1.3 Contacts by Letter G.1.4 Contacts by Telephone or Personal Visit G.1.5 General Questions on Damages G.1.6 Third Party Contacts G.1.7 Miscellaneous Collection Abuses G.1.8 General Questions on Underlying Debts G.1.9 Current Debts xxix

20 Fair Debt Collection G.2 Chronology of Debt Collection Contacts G.3 Fair Debt Collection Act Violations Checklist (15 U.S.C to 1692o) G.3.1 Coverage G.3.2 Notice Violations G.3.3 False or Misleading Representations G.3.4 Unfair Practices G.3.5 Harassment or Abuse G.3.6 Communications with the Consumer and Third Parties G.3.7 Other Violations G.3.8 Damages G.3.9 Documents G.4 Abbreviations Commonly Used by Collectors G.5 Debt Collection on the Web Appendix H Appendix I Appendix J Appendix K Appendix L Sample Complaints H.1 Complaint Including Both Federal and State Causes of Action H.2 Complaint Under Fair Debt Collection Practices Act Sample Discovery I.1 Sample Set of Interrogatories I.2 Sample Request for Documents I.3 Sample Request for Admissions I.4 Sample Class Discovery I.4.1 Interrogatories I.4.2 Requests for Admissions I.4.3 Requests for Production of Documents Sample Trial Documents J.1 Sample Brief in Support of Motion for Partial Summary Judgment J.2 Sample Jury Voir Dire Questions, Instructions, and Proposed Verdict Sheet J.2.1 Sample Plaintiff s Request for Voir Dire Questions J.2.2 Sample Proposed Jury Instructions J.2.3 Sample Verdict Sheet J.3 Pretrial Order J.4 Trial Brief J.5 Motion in Limine J.5.1 Plaintiff s Character J Motion J Memorandum in Support of Motion in Limine J.5.2 Attorney Fees Sample Documents for Award of Attorney Fees K.1 Sample Motion for Award of Attorney Fees K.2 Sample Declaration in Support of Motion for Attorney Fees K.3 Sample Order for the Award of Attorney Fees K.4 Sample Memorandum in Support of Award of Attorney Fees Fair Debt Collection Practices Act Case Summaries L.1 Coverage L.1.1 Debt, 15 U.S.C. 1692a(5) xxx