Wrongful Debt Collection
Consumer Transactions
Dr. Steiner
Debt Collection and the Texas Bar Exam
BLE: Topics tested on Consumer Law
“Texas and Federal debt collection acts: Federal
Fair Debt Collection Practices Act and Texas
Debt Collection Practices Act”
Past Exams
Texas Debt Collection Practices Act was tested
on Feb. 2002, July 2002, Feb. 2004, July 2005
bar exams
July 2005 Call of the Question:
Debt Collection
1. What conduct or actions, if any, of NCC
and/or Capital were violations of the
Texas Debt Collection Practices Act?
Explain fully.
2. What remedies, if any, are available to
Dan under the Texas Debt Collection
Practices Act and the Texas Deceptive
Trade Practices Act? Explain fully.
Feb. 2004 Call of the Question:
Debt Collection
What rights and civil remedies, if any, does
Carlos have under the Texas Debt Collection
Act and the Texas Deceptive Trade Practices
Act
1. Against Bank? Explain fully.
2. Against Law Firm? Explain fully.
Web Resources: FTC Formal Actions
Web Resources:
FTC Staff Opinion Letters
Web Resources:
FTC Staff Commentary on FDCPA
Web Resources:
National Consumer Law Center
Duty v. General Finance Co.
Whether debtors have right to recover
damages for mental anguish and physical
injury willfully and wantonly inflicted upon
them by wrongful conduct by creditors
attempting to collect debt
Did these debt collectors love their work or
what?
Texas Debt Collection Practices Act
Originally enacted in 1973
Proscribes certain “debt collection methods”
Civil remedies include injunctive relief, actual
damages, and attorneys fees
Violations of Debt Collection Act are
violations of DTPA
FDCA: 15 U.S.C. § 1692 (1977):
Congressional Findings
(a) Abusive practices
There is abundant evidence of the use of
abusive, deceptive, and unfair debt collection
practices by many debt collectors. Abusive debt
collection practices contribute to the number of
personal bankruptcies, to marital instability, to
the loss of jobs, and to invasions of individual
privacy.
(b) Inadequacy of laws
Existing laws and procedures for redressing
these injuries are inadequate to protect
consumers.
15 U.S.C. § 1692:
Congressional Findings
(c) Available non-abusive collection methods
Means other than misrepresentation or other
abusive debt collection practices are available for
the effective collection of debts.
(d) Interstate commerce
Abusive debt collection practices are carried on to
a substantial extent in interstate commerce and
through means and instrumentalities of such
commerce. Even where abusive debt collection
practices are purely intrastate in character, they
nevertheless directly affect interstate commerce.
Relation of FDCPA to state law:
15 USC § 1692n
This title does not annul, alter, or affect, or
exempt any person subject to the provisions of
this title from complying with the laws of any
State with respect to debt collection practices,
except to the extent that those laws are
inconsistent with any provision of this title, and
then only to the extent of the inconsistency. For
purposes of this section, a State law is not
inconsistent with this title if the protection such
law affords any consumer is greater than the
protection provided by this title.
Defining “debt collector”
15 U.S.C. § 1692a(6)
The term “debt collector” means any person who
uses any instrumentality of interstate commerce
or the mails in any business the principal
purpose of which is the collection of any debts,
or who regularly collects or attempts to collect,
directly or indirectly, debts owed or due or
asserted to be owed or due another. . . [T]he
term includes any creditor who, in the process of
collecting his own debts, uses any name other
than his own which would indicate that a third
person is collecting or attempting to collect such
debts.
15 U.S.C. § 1692a(5)
The term does not include—
(A) any officer or employee of a creditor while, in
the name of the creditor, collecting debts for
such creditor;
(B) any person while acting as a debt collector
for another person, both of whom are related by
common ownership or affiliated by corporate
control, if the person acting as a debt collector
does so only for persons to whom it is so related
or affiliated and if the principal business of such
person is not the collection of debts; …
Tex. Fin. Code § 392.001(6)
“Debt collector” means a person who directly or
indirectly engages in debt collection and
includes a person who sells or offers to sell
forms represented to be a collection system,
device, or scheme intended to be used to collect
consumer debts.
15 U.S.C. § 1692a(5)
The term “debt” means any obligation or alleged
obligation of a consumer to pay money arising
out of a transaction in which the money, property,
insurance, or services which are the subject of
the transaction are primarily for personal, family,
or household purposes, whether or not such
obligation has been reduced to judgment.
Miller v. McCalla, Raymar, and the rest
FDCPA coverage
Determining whether debt was a consumer debt
or a business debt
Statutory interpretation according to Posner
Heintz v. Jenkins
Whether term “debt collector” in FDCPA applies
to lawyer who “regularly” through litigation tries
to collect consumer debt
Statutory definition of “debt collector”
Why does court conclude attorneys may be
“debt collectors”?
Implied exemption?
15 U.S.C. § 1692e:
False or misleading representations
A debt collector may not use any false,
deceptive, or misleading representation or
means in connection with the collection of any
debt. Without limiting the general application of
the foregoing, the following conduct is a violation
of this section:
(3) The false representation or implication that any
individual is an attorney or that any
communication is from an attorney.
Volume debt collection practices and
letters “from an attorney”
If law firm handled 55,000 new cases a month,
mailing over 110,000 letters, received only
limited information, reviewed collection files with
such speed that no independent judgment could
be found, and then issued form collection letters
with the click of a mouse, a reasonable jury
could conclude that the law firm lacked sufficient
professional involvement with plaintiff’s file that
the letters could be said to be “from an attorney”
Miller v. Wolpoff & Abramson (2d Cir. 2003)
Tex. Fin. Code § 392.001
(7) “Third-party debt collector” means a debt
collector, as defined by 15 U.S.C. Section
1692a(6), but does not include an attorney
collecting a debt as an attorney on behalf of
and in the name of a client unless the attorney
has nonattorney employees who:
(A) are regularly engaged to solicit debts for
collection; or
(B) regularly make contact with debtors for the
purpose of collection or adjustment of debts.
Goldstein v. Hutton, Ingram, Yusek,
Gainen, Carroll & Bertolotti
Is a law firm “regularly” engaging in debt
collection when it had derived only $5000 in
revenues (.05% of its $10 million annual
revenue) from sending 145 “three-day
notices” over the preceding year?
Predicates for “debt collector” status
Principal purpose
Regularly engaging
Goldstein v. Hutton, Ingram, Yusek, Gainen,
Carroll & Bertolotti
(1) the absolute number of debt collection
communications issued, and/or collection-related
litigation matters pursued, over the relevant period(s),
(2) the frequency of such communications and/or
litigation activity, including whether any patterns of such
activity are discernable,
(3) whether the entity has personnel specifically assigned
to work on debt collection activity,
(4) whether the entity has systems or contractors in place
to facilitate such activity, and
(5) whether the activity is undertaken in connection with
ongoing client relationships with entities that have
retained the lawyer or firm to assist in the collection of
outstanding consumer debt obligations.
Romine v. Diversified Collection
Statutory definition of “debt collector”
Western Union’s AVT (Automated Voice
Telegram) service
Do Western Union’s activities taken together,
amount to a direct or indirect attempt to collect
a debt?
15 U.S.C. § 1692a(6)
The term “debt collector” means any person
who uses any instrumentality of interstate
commerce or the mails in any business the
principal purpose of which is the collection of
any debts, or who regularly collects or attempts
to collect, directly or indirectly, debts owed or
due or asserted to be owed or due another.
Zimmerman v. HBO Affiliate Group
Whether cable television
companies, by demanding
money to settle claims
against cable thieves, were
seeking to collect a “debt”?
Three problems with
plaintiff’s argument
15 U.S.C. § 1692a(5)
The term “debt” means any obligation or
alleged obligation of a consumer to pay money
arising out of a transaction in which the money,
property, insurance, or services which are the
subject of the transaction are primarily for
personal, family, or household purposes,
whether or not such obligation has been
reduced to judgment.
Defining Debt
15 U.S.C. § 1692a(5) Tex. Fin. Code § 392.001.
The term “debt” means any “Consumer debt” means
obligation or alleged an obligation, or an
obligation of a consumer to alleged obligation,
pay money arising out of a primarily for personal,
transaction in which the family, or household
money, property, insurance, purposes and arising from
or services which are the a transaction or alleged
subject of the transaction transaction.
are primarily for personal,
family, or household
purposes, whether or not
such obligation has been
reduced to judgment.
Bass v. Stolper, Koritzinsky,
Brewster & Neider, S.C.
Whether transactions under FDCPA’s are
limited to those involving the offer or
extension of credit
Court’s stance toward Zimmerman
Statutory interpretation
15 U.S.C. § 1692a(5)
The term “debt” means any obligation or
alleged obligation of a consumer to pay money
arising out of a transaction in which the
money, property, insurance, or services which
are the subject of the transaction are primarily
for personal, family, or household purposes,
whether or not such obligation has been
reduced to judgment.
Collection of Bad Checks and
FDCPA
Every circuit court that has addressed this issue has
sided with the Seventh Circuit:
Broadnax v. Greene Credit Serv., 106 F.3d 400 (6th
Cir. 1997)
Snow v. Jesse L. Riddle, P.C., 143 F.3d 1350 (10th
Cir. 1998)
Charles v. Lundgren & Assoc., P.C., 119 F.3d 739 (9th
Cir. 1997)
Following the definition of “debt” in Zimmerman,
district courts in the Third Circuit have held that the
FDCPA doesn’t apply to the collection of bad checks.
See, e.g., Krevsky v. Equifax Check Serv., Inc., 85
F.Supp.2d 479 (M.D. Pa. 2000)
Tex. Gov’t Code § 311.023.
Statute Construction Aids
In construing a statute, whether or not the
statute is considered ambiguous on its face, a
court may consider among other matters the:
(1) object sought to be attained;
(2) circumstances under which the statute was
enacted;
(3) legislative history;
(4) common law or former statutory provisions,
including laws on the same or similar subjects;
Tex. Gov’t Code § 311.023.
Statute Construction Aids
(5) consequences of a particular construction;
(6) administrative construction of the statute; and
(7) title (caption), preamble, and emergency
provision.
Validation Notice:
15 U.S.C. § 1692g
Within five days after the initial
communication with a consumer in
connection with the collection of any
debt, a debt collector shall, unless the
following information is contained in the
initial communication or the consumer
has paid the debt, send the consumer a
written notice containing
Validation Notice:
15 U.S.C. § 1692g
(1) the amount of the debt;
(2) the name of the creditor to whom the
debt is owed;
(3) a statement that unless the
consumer, within thirty days after
receipt of the notice, disputes the
validity of all or part of the debt, the debt
will be assumed to be valid by the debt
collector;
Validation Notice:
15 U.S.C. § 1692g
(4) a statement that if the consumer notifies
the debt collector in writing within the thirty-
day period that all or part of the debt is
disputed, the debt collector will mail
verification of the debt or a copy of a
judgment to the consumer; and
(5) a statement that, upon the consumer's
written request within the thirty-day period,
the debt collector will provide the consumer
with the name and address of the original
creditor, if different from the current creditor.
Swanson v. Southern Oregon
Credit Serv., Inc.
IF THIS ACCOUNT IS PAID WITHIN
THE NEXT 10 DAYS IT WILL NOT BE
RECORDED IN OUR MASTER FILE
AS AN UNPAID COLLECTION ITEM.
A GOOD CREDIT RATING–IS YOUR
MOST VALUABLE ASSET
Unless you, within thirty days after receipt of the notice, dispute the validity of all or part of the debt, the debt will be
assumed to be valid by us. If you notify us in writing within the thirty-day period that all or part of the debt is disputed,
we will mail verification of the debt or a copy of a judgment to the consumer; and upon your written request within the
thirty-day period, we will provide you with the name and address of the original creditor, if different from the current
creditor.
Swanson:
Least Sophisticated Debtor Standard
Was validation notice
“overshadowed” by the rest of
the letter?
Importance of “visual effect”
Would least sophisticated
debtor likely be misled by the
notice?
Warnings under 15 USC § 1692e
A debt collector may not use any false, deceptive, or
misleading representation or means in connection with
the collection of any debt. Without limiting the general
application of the foregoing, the following conduct is a
violation of this section:
(11) The failure to disclose in the initial written
communication with the consumer and, in addition, if the
initial communication with the consumer is oral, in that
initial oral communication, that the debt collector is
attempting to collect a debt and that any information
obtained will be used for that purpose, and the failure to
disclose in subsequent communications that the
communication is from a debt collector, except that this
paragraph shall not apply to a formal pleading made in
connection with a legal action.
Tex. Fin. Code § 392.304.
(a) Except as otherwise provided by this section, in debt collection or
obtaining information concerning a consumer, a debt collector may not
use a fraudulent, deceptive, or misleading representation that employs
the following practices:
(5) in the case of a third-party debt collector, failing to disclose,
except in a formal pleading made in connection with a legal action:
(A) that the communication is an attempt to collect a debt and that
any information obtained will be used for that purpose, if the
communication is the initial written or oral communication between
the third-party debt collector and the debtor; or
(B) that the communication is from a debt collector, if the
communication is a subsequent written or oral communication
between the third-party debt collector and the debtor;
FDCPA Form Letter: Bartlett v. Heibel
Would the letter work in Texas?
CPRC § 38.001.
A person may recover reasonable attorney's fees
from an individual or corporation, in addition to the
amount of a valid claim and costs, if the claim is
for:
(1) rendered services;
(2) performed labor;
(3) furnished material; …
(7) a sworn account; or
(8) an oral or written contract.
FDCPA Form Letter: Bartlett v. Heibel
Would the letter work in Texas?
CPRC § 38.002.
To recover attorney's fees under this chapter:
(1) the claimant must be represented by an
attorney;
(2) the claimant must present the claim to the
opposing party or to a duly authorized agent of
the opposing party; and
(3) payment for the just amount owed must not
have been tendered before the expiration of
the 30th day after the claim is presented.
Blum v. Fisher & Fisher :
Unsophisticated Consumer Standard
A consumer who is of
below average
sophistication or
intelligence or is
uninformed, naïve, or
trusting
Is standard “ratcheted”
up or down to conform to
reasonable perception of
consumer standing in
shoes of plaintiff?
Blum v. Fisher & Fisher
This foreclosure could result in the mortgage lender
taking title to your property in approximately 7
months. During that time you may be allowed to stay
in the house absolutely rent free. In addition, you
have the right to save your house from foreclosure
by either catching up your loan or by paying off the
total mortgage debt through sale, refinancing or
otherwise.
Gammon v. GC Serv. (7th Cir. 1994):
Critique of “Least Sophisticated Consumer” Standard
It strikes us virtually impossible to analyze a debt
collection letter based on the reasonable
interpretations of the least sophisticated
consumer. Literally, the least sophisticated
consumer is not merely “below average,” he is
the very last rung on the sophistication ladder.
Stated another way, he is the single most
unsophisticated consumer who exists. Even
assuming that he would be willing to do so, such
a consumer would likely not be able to read a
collection notice with care (or at all), let alone
interpret it in a reasonable fashion.
“Least Sophisticated” and “Unsophisticated”
Consumer Standards
Least Sophisticated Consumer Standard
Swanson v. Southern Oregon Credit Serv., Inc., 869 F.2d 1222
(9th Cir.1989)
Wilson v. Quadramed Corp., 225 F.3d 350 (3rd Cir.2000)
Savino v. Computer Credit Inc., 164 F.3d 81 (2nd Cir.1998)
Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir.1985)
Unsophisticated Consumer Standard
Gammon v. GC Services, 27 F.3d 1254 (7th Cir.1994)
Duffy v. Landberg, 215 F.3d 871 (8th Cir. 2000)
Fifth Circuit: Peter v. GCServ. L.P., 310 F.3d 344 (5th Cir. 2002)
We have explicitly avoided ruling on which of these standards, if
either, we use. . . Because the difference between the standards
is de minimis at most, we again opt not to choose between these
standards.
Jenkins v. Union Corp.: First letter
Our client has requested that we contact you
regarding your check which has been returned by
the bank and payment refused. We realize this could
be an oversight on your part and not willful disregard
of an obligation.
However, intentional payment with a dishonored
check for goods or services can lead to serious
consequences.
The amount due includes a service fee, which must
also be paid. To avoid any possible
misunderstanding, it is important you immediately
make payment to or arrangements with [Jerry
Montell Pontiac].
Jenkins v. Union Corp.: First letter to Jenkins
Transworld Systems, Inc. is a licensed collection
agency and any information obtained from you
will be used for the purpose of collecting this
debt. All portions of this claim shall be assumed
valid unless disputed within thirty days of
receiving this notice. If disputed in writing,
verification of the debt will be provided to you. If
the original creditor is different from the above
named creditor, the name and address of the
original creditor will also be provided.
Jenkins v. Union Corp.: 2d common letter
IMPERATIVE--Grace period about to expire. Our
client shows an unpaid account in the above stated
amount appearing legally due and owing by you.
This account has been referred to our agency and
we are authorized to pursue collection. With offices
nationwide, a number of alternatives are available
to us to effect settlement. You may eliminate the
possibility of additional trouble and make further
communication unnecessary by contacting your
creditor at once. Be sure to enclose this letter with
your payment for proper identification.
Jenkins v. Union Corp.: Third letter to Jenkins
Above claim still due. Federally mandated
dispute period will expire within 10 days. Unless
we hear from you, at that time we will assume
your debt to be legally due.
Please be advised that there are two ways of
settling a legitimate debt-- timely payment or as
the result of protracted and unpleasant collection
effort. At this time the choice is still yours. Make
further effort on our part unnecessary by making
payment to [Jerry Montell Pontiac].
Jenkins v. Union Corp.: First letter to Terrafino
URGENT--This account has been assigned to
our agency for immediate collection.
Please be advised that we have been
authorized to pursue collection and are
committed to make whatever efforts are
necessary and proper to effect collection.
Strongly recommend you contact our client to
make payment arrangement.
Threats of Litigation:
15 USC § 1692e(5)
A debt collector may not use any false,
deceptive, or misleading representation or
means in connection with the collection of
any debt. Without limiting the general
application of the foregoing, the following
conduct is a violation of this section:
(5) The threat to take any action that cannot
legally be taken or that is not intended to be
taken.
Jenkins v. Union Corp.: Third letter to Terrafino
As Collection Manager of Transworld
Systems Inc., I thought it important to state
our intentions regarding your debt. The
economic feasibility of some type of litigation
by our client has not been determined.
Jenkins v. Union Corp.: Third letter to Terrafino
However, please understand that if legal
action were to be undertaken, it would be
costly and time-consuming for both parties.
The loser of such an action would probably
be subject to court costs and/or attorney fees,
if applicable. Should such court action occur,
and should your creditor prevail, there would
be available various avenues to satisfy a
judgment. You may wish to check your state
laws concerning these remedies.
Jenkins v. Union Corp.: Third letter to Terrafino
It is not my intention to threaten or alarm you
about this matter but merely to point out the
problems of refusing to pay what appears to be a
just and legal debt.
We would hope, however, that additional costly
collection efforts not be necessary (sic) and that
you demonstrate your willingness to resolve this
matter by remitting the full amount due to
[Glenoaks Medical Center].
Jenkins v. Union Corp.:
Reverse side of form letters
COLORADO
If you refuse to voluntarily pay this debt, or you
wish our agency to cease communication either
written or oral at either your place of
employment or residence, and you so advise
Transworld Systems Inc. in writing, we will not
communicate with you further ....
Jenkins v. Union Corp.:
Court’s suggested revision
We are required under state law to notify
consumers of the following rights. This list does
not contain a complete list of the rights
consumers have under state and federal law.
If you refuse to voluntarily pay this debt, or you
wish our agency to cease communication either
written or oral at either your place of
employment or residence, and you so advise
Transworld Systems Inc. in writing, we will not
communicate with you further ....
Problem 25
a. Calling a debtor at her place of employment
Federal § 1692c
(a) Without the prior consent of the consumer
given directly to the debt collector or the express
permission of a court of competent jurisdiction, a
debt collector may not communicate with a
consumer in connection with the collection of any
debt—
(3) at the consumer’s place of employment if the
debt collector knows or has reason to know that the
consumer’s employer prohibits the consumer from
receiving such communication.
Problem 25
a. Calling a debtor at her place of employment
Texas § 392.302
In debt collection, a debt collector may not oppress,
harass, or abuse a person by:
(2) placing telephone calls without disclosing the name
of the individual making the call and with the intent to
annoy, harass, or threaten a person at the called
number;
(3) causing a person to incur a long distance telephone
toll, telegram fee, or other charge by a medium of
communication without first disclosing the name of the
person making the communication; or
(4) causing a telephone to ring repeatedly or
continuously, or making repeated or continuous
telephone calls, with the intent to harass a person at the
called number.
Problem 25
b. Calling a debtor’s mother and telling her
that her son owes you money
Federal § 1692c.
Except as provided in section 1692b [location
information], without the prior consent of the
consumer given directly to the debt collector, or
the express permission of a court of competent
jurisdiction, or as reasonably necessary to
effectuate a postjudgment judicial remedy, a debt
collector may not communicate, in connection with
the collection of any debt, with any person other
than the consumer, his attorney, a consumer
reporting agency if otherwise permitted by law, the
creditor, the attorney of the creditor, or the
attorney of the debt collector.
Problem 25
c. Sending letter with debtor with return address that
includes “Debt Collection Agency”
Federal § 1692f(8)
Using any language or symbol, other than the
debt collector’s address, on any envelope when
communicating with a consumer by use of the
mails or by telegram, except that a debt
collector may use his business name if such
name does not indicate that he is in the debt
collection business.
Problem 25
d. Telling a debtor who’s current that his wages will
be garnished if he becomes delinquent
Federal § 1692e(5)
The threat to take any action that cannot legally
be taken or that is not intended to be taken.
Federal § 1692f
Texas § 392.301(a)(8).
(a) In debt collection, a debt collector may not
use threats, coercion, or attempts to coerce that
employ any of the following practices: . . .
(8) threatening to take an action prohibited by law.
Problem 25
e. Immediately recalling debtor after debtor hangs up
Federal § 1692d(5)
Causing a telephone to ring or engaging any
person in telephone conversation repeatedly or
continuously with intent to annoy, abuse, or
harass any person at the called number.
Problem 25
e. Immediately recalling debtor after debtor hangs up
Texas § 392.302
In debt collection, a debt collector may not
oppress, harass, or abuse a person by:
(4) causing a telephone to ring repeatedly or
continuously, or making repeated or continuous
telephone calls, with the intent to harass a person
at the called number.
Problem 25
F. Telling a debtor that unless immediate payment is
made the debtor’s account will be reported to the credit
bureau, impacting his credit rating
Federal
Validation rights
Threatens an action that can’t legally be taken. § 1692e(5)
Texas
§ 392.301. A debt collector may not use threats, coercion,
or attempts to coerce that employ any of the following
practices:
(3) representing or threatening to represent to any person other
than the consumer that a consumer is wilfully refusing to pay a
nondisputed consumer debt when the debt is in dispute and the
consumer has notified in writing the debt collector of the dispute;
Problem 25
g. Telling a debtor “we work with the government; you must
surely know what problems you will face if you do not pay”
Federal § 1692e
A debt collector may not use any false, deceptive,
or misleading representation or means in
connection with the collection of any debt. Without
limiting the general application of the foregoing,
the following conduct is a violation of this section:
(1) The false representation or implication that the
debt collector is vouched for, bonded by, or affiliated
with the United States or any State, including the use
of any badge, uniform, or facsimile thereof.
Problem 25
g. Telling a debtor “we work with the government; you must
surely know what problems you will face if you do not pay”
Texas § 392.304(a)(9)
(a) Except as otherwise provided by this section,
in debt collection or obtaining information
concerning a consumer, a debt collector may not
use a fraudulent, deceptive, or misleading
representation that employs the following
practices:
(9) representing falsely that a debt collector is
vouched for, bonded by, or affiliated with, or is an
instrumentality, agent, or official of, this state or an
agency of federal, state, or local government
Problem 25
h. Attempting to collect a debt that collector is unaware it’s barred
by the statute of limitations
Federal § 1692k(c)
A debt collector may not be held liable in any
action brought under this subchapter if the
debt collector 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.
Problem 25
h. Attempting to collect a debt that collector is unaware it’s barred
by the statute of limitations
Texas § 392.401.
A person does not violate this chapter if the
action complained of resulted from a bona
fide error that occurred notwithstanding the
use of reasonable procedures adopted to
avoid the error.
Problem 25
Harassing debtor about an obligation arising
out of small family-owned business
Problem 25
J. Wrongful contact with debtor’s relative; can
relative of debtor sue?
Federal § 1692k. Civil liability
[A]ny debt collector who fails to comply with
any provision of this subchapter with respect
to any person is liable to such person in an
amount equal to the sum of—
Most cases appear to allow any person
harmed by collector’s actions, but West v.
Costen says debtor’s mom couldn’t recover
under FDCPA
Texas § 392.403. Civil Remedies (a) A
person may sue for . . .
Problem 25
J. Wrongful contact with debtor’s relative; can
relative of debtor sue?
Federal § 1692d
A debt collector may not engage in any conduct the
natural consequence of which is to harass, oppress, or
abuse any person in connection with the collection of a
debt. Without limiting the general application of the
foregoing, the following conduct is a violation of this
section:
(2) The use of obscene or profane language or language
the natural consequence of which is to abuse the hearer or
reader.
(5) Causing a telephone to ring or engaging any person in
telephone conversation repeatedly or continuously with
intent to annoy, abuse, or harass any person at the called
number.
Problem 25
k. Stating that debt collector has convinced creditor to give you
another chance when it’s automatic
Federal §1692e False or misleading
misrepresentations
Texas § 392.304.
(14) representing falsely the status or nature
of the services rendered by the debt collector
or the debt collector's business;
Problem 25
l. Sending letter with attorney’s signature when the
attorney never reviewed file or had any input
Federal § 1692e. A debt collector may not
use any false, deceptive, or misleading
representation or means in connection with
the collection of any debt. Without limiting the
general application of the foregoing, the
following conduct is a violation of this section:
(3) The false representation or implication that
any individual is an attorney or that any
communication is from an attorney.
Problem 25
l. Sending letter with attorney’s signature when the
attorney never reviewed file or had any input
Texas § 392.304. (a) Except as otherwise
provided by this section, in debt collection or
obtaining information concerning a consumer,
a debt collector may not use a fraudulent,
deceptive, or misleading representation that
employs the following practices:
(16) using a communication that purports to be
from an attorney or law firm if it is not;
(17) representing that a consumer debt is
being collected by an attorney if it is not;
Problem 25
m. Threatening to file for amount “plus interest” where
interest couldn’t be awarded
Federal § 1692f
A debt collector may not use unfair or
unconscionable means to collect or attempt to
collect any debt. Without limiting the general
application of the foregoing, the following conduct
is a violation of this section:
(1) The collection of any amount (including any
interest, fee, charge, or expense incidental to the
principal obligation) unless such amount is
expressly authorized by the agreement creating
the debt or permitted by law.
Problem 25
m. Threatening to file for amount “plus interest” where
interest couldn’t be awarded
Federal § 1692e. A debt collector may not
use any false, deceptive, or misleading
representation or means in connection with
the collection of any debt. Without limiting the
general application of the foregoing, the
following conduct is a violation of this section:
(5) The threat to take any action that cannot
legally be taken or that is not intended to be
taken.
Problem 25
m. Threatening to file for amount “plus interest” where
interest couldn’t be awarded
Texas §§ 392.303.
(a) In debt collection, a debt collector may not
use unfair or unconscionable means that
employ the following practices: . . .
(2) collecting or attempting to collect interest
or a charge, fee, or expense incidental to the
obligation unless the interest or incidental
charge, fee, or expense is expressly
authorized by the agreement creating the
obligation or legally chargeable to the
consumer;
Problem 25
m. Threatening to file for amount “plus interest” where
interest couldn’t be awarded
Texas § 392.304
(12) representing that a consumer debt may
be increased by the addition of attorney's
fees, investigation fees, service fees, or other
charges if a written contract or statute does
not authorize the additional fees or charges;
Brown v. Oaklawn Bank
To what extent
may a creditor
use the threat of
criminal
prosecution to
procure payment
of a debt under
Texas Debt
Collection Act?
15 U.S.C. § 1692a(5)
The term [debt collector] does not include—
(A) any officer or employee of a creditor while, in
the name of the creditor, collecting debts for
such creditor;
(B) any person while acting as a debt collector
for another person, both of whom are related by
common ownership or affiliated by corporate
control, if the person acting as a debt collector
does so only for persons to whom it is so related
or affiliated and if the principal business of such
person is not the collection of debts; …
Tex. Fin. Code sec. 392.001(6)
(6) “Debt collector” means a person who directly
or indirectly engages in debt collection and
includes a person who sells or offers to sell
forms represented to be a collection system,
device, or scheme intended to be used to collect
consumer debts.
Tex. Fin. Code § 392.301
(a) In debt collection, a debt collector may not
use threats, coercion, or attempts to coerce
that employ any of the following practices:…
(2) accusing falsely or threatening to accuse
falsely a person of fraud or any other
crime;…
(5) threatening that the debtor will be
arrested for nonpayment of a consumer debt
without proper court proceedings;
(6) threatening to file a charge, complaint, or
criminal action against a debtor when the
debtor has not violated a criminal law;
Tex. Fin. Code § 392.301
(b) Subsection (a) does not prevent a debt
collector from:
(1) informing a debtor that the debtor may be
arrested after proper court proceedings if the
debtor has violated a criminal law of this state;
(2) threatening to institute civil lawsuits or other
judicial proceedings to collect a consumer debt;
or
(3) exercising or threatening to exercise a
statutory or contractual right of seizure,
repossession, or sale that does not require court
proceedings.
Texas Disciplinary R. Prof. Conduct 4.04
Respect for Rights of Third Persons
(a) In representing a client, a lawyer shall not
use means that have no substantial purpose
other than to embarrass, delay, or burden a
third person, or use methods of obtaining
evidence that violate the legal rights of such a
person.
(b) A lawyer shall not present, participate in
presenting, or threaten to present:
(1) criminal or disciplinary charges solely to gain
an advantage in a civil matter;
Romea v. Heiberger & Assoc.
Whether back rent is a debt
Whether required state law three-day notice
for possessory action is a communication
under FDCPA
Whether lawyers sending required state law
notices are exempted from FDCPA
Shimek v. Forbes, 374 F.3d 1011
(11th Cir. 2004)(note case)
Does filing a lien contemporaneously with
sending the demand letter (with 30-day
validation notice) violate the FDCPA?
Does a debt collector violate the FDCPA by
failing to prevent the recording of the lien
after the consumer has requested
verification?
Shorty v. Capital One Bank
§1692e(2)(A) prohibits “false representation” of
the “character, amount, or legal status of any
debt”
Does a debt collector violate §1692e(2)(A) by
sending an otherwise legally sufficient debt
validation notice without notifying the debtor that
the debt is time-barred?
Randolph v. IMBS, Inc.
Relationship between automatic stay
provision of bankruptcy law and FDCPA
Is bankruptcy the only recourse against post-
bankruptcy debt-collection efforts?
Does the Bankruptcy Code implicitly repeal
the FDCPA in a post-bankruptcy debt
collection?
Problem 26 (Feb. 2004 Exam)
What rights and civil remedies, if any, does
Carlos have under the Texas Debt Collection
Act and the Texas Deceptive Trade Practices
Act
Against Bank? Explain fully.
Against Law Firm? Explain fully.
Problem 26 Bank
Bank as debt collector under Texas Debt
Collection Act
Bank’s violations of Texas Debt Collection Act
Tie-in statute?
Consumer standing under DTPA
DTPA violations
Problem 26 Bank
Bank as debt collector under FDCPA
§ 1692a(6) defines “debt collector”
Assuming debt collector status, did Bank
violate FDCPA?
§ 1692e(4) The representation or implication
that nonpayment of any debt will result in the
arrest or imprisonment of any person or the
seizure, garnishment, attachment, or sale of
any property or wages of any person unless
such action is lawful and the debt collector or
creditor intends to take such action.
Problem 26 Law Firm
Law firm as debt collector under Texas Debt
Collection Act
Violations of Texas Debt Collection Act
Tie-in statute
Consumer standing under DTPA
Professional services exemption and DTPA
DTPA violations
Problem 26 Remedies
Damages under Texas Debt Collection Act
Damages if tie-in
Damages under DTPA
Damages under FDCPA
Then article 5069-11.10
(a) Any person may seek injunctive relief to
prevent or restrain a violation of this Act and
any person may maintain an action for actual
damages sustained as a result of a violation
of this Act.
(c) A person who successfully maintains an
action under this article shall be awarded at
least $100 for each violation of this Act.
Elston v. Resolution Serv., Inc.
Is proof of actual damages necessary to
successfully maintain a suit for violations of
Texas Debt Collection Act?
Does the $100 minimum award provide an
independent cause of action?
current Tex. Fin. Code § 392.403
(a) A person may sue for:
(1) injunctive relief to prevent or restrain a
violation of this chapter; and
(2) actual damages sustained as a result of a
violation of this chapter.
(e) A person who successfully maintains an action
under this section for violation of Section
392.101[bond requirement], 392.202[correction of
files], or 392.301(a)(3)[threatening to represent that
the consumer is refusing to pay nondisputed debt
when it’s disputed] is entitled to not less than $100
for each violation of this chapter.
Damages under Texas Debt
Collection Act: GreenPoint Credit
GreenPoint Credit Corp. v. Perez, 75 S.W. 3d
40 (Tex. App.—San Antonio 2002)
Five-million-dollar award for actual damages
upheld. “The compensatory damage issue
was asked in the broad form, with the
elements of physical pain, mental anguish,
medical care and disfigurement listed.”
“This unfair debt collections act case involves
an illegal threat by a finance company to put
an elderly woman in jail for a debt that she did
not owe, on a mobile home she did not own.”
Damages under Texas Debt
Collection Act: GreenPoint Credit
GreenPoint began calling Mrs. Perez and insisting the
owed money on a mobile home. During the second call,
the GreenPoint representative was rude, used obscene
language, and threatened if she did not send in a payment
that day, a sheriff's deputy was going to come and put her
in jail that afternoon, at 2 p.m. “This about did Mrs. Perez
in.” Her daughter found her later distraught and crying; she
insisted on surrendering to the sheriff because she was
going to be put in jail, and apparently was ready to turn
herself in. The Sheriff called GreenPoint himself and told
them that they had the wrong person. “He informed
GreenPoint that Mrs. Perez owned no mobile home and
that Mrs. Perez's signature did not match the one on the
document. The Sheriff's words also fell on deaf ears.”
Damages under Texas Debt
Collection Act: GreenPoint Credit
Approximately two weeks later, GreenPoint sent a
field representative to Mrs. Perez's home to
investigate the case. The representative completed a
Field Contact Form in which he stated that Mrs.
Perez continued to deny having signed any contract
and that Mrs. Perez provided him with an ID and a
social security card. The representative also
obtained a handwritten affidavit from Mrs. Perez,
signed and notarized, in which she swore that she
had never signed any documents for the purchase of
a mobile home, and never consented for anyone
else to provide her personal information for such.
Despite the evidence that they had the wrong
person, GreenPoint sued anyway.
Damages under Texas Debt
Collection Act: GreenPoint Credit
“This was an extraordinarily traumatic event for Mrs. Perez.
Handicapped by advancing age, a demonstrated history of
anxiety and nervousness, inability to understand the language,
culturally insulated, and uneducated, she had few protection
mechanisms available to counter the unexpected threats.”
“Physical evidence of Mrs. Perez's injuries were also before
the jury. Graphic photographs of eruptions of her skin and
disfiguring, angry running sores were evidence of the turmoil
within. There was also evidence of heart palpitations,
shortness of breath, nausea, sleeplessness, panic attacks,
difficulty in concentrating, irritability, reclusiveness and
elevated blood pressure which caused the doctor to prescribe
various medications.”
Arbitration and Texas Debt
Collection Act
Arbitration clause said “all disputes, claims, or
controversies arising from or relating to this
contract” were subject to arbitration. Texas Debt
Collection Act claims were to be arbitrated.
In re Conseco Fin. Serv. Corp., 19 S.W.3d 562
(Tex. App.—Waco 2000, orig. proceeding) (even
the issue of the validity of the arbitration clause
was to be arbitrated)
In re Conseco Fin. Serv. Corp., 2002 WL 413179
(Tex. App.—Beaumont 2002, orig. proceeding)
15 USC §1692k(a). Civil liability
Except as otherwise provided by this section,
any debt collector who fails to comply with any
provision of this subchapter with respect to any
person is liable to such person in an amount
equal to the sum of—
(1) any actual damage sustained by such
person as a result of such failure;
(2)(A) in the case of any action by an
individual, such additional damages as the
court may allow, but not exceeding $1,000
McHugh v. Check Investors, Inc.
FDCPA damages
Actual damages
Statutory damages
Attorneys fees
State law claim
Actual damages
Punitive damages
Crain v. Unauthorized Practice of Law
Committee
Defining the practice of
law
Is preparing and filing
mechanic’s liens or lien
affidavits the
unauthorized practice of
law?
Tex. Fin. Code §392.301
Threats or Coercion
(a) In debt collection, a debt collector may not
use threats, coercion, or attempts to coerce that
employ any of the following practices:
(1) using or threatening to use violence or
other criminal means to cause harm to a
person or property of a person;
(2) accusing falsely or threatening to accuse
falsely a person of fraud or any other crime;
Tex. Fin. Code §392.301.
Threats or Coercion
(3) representing or threatening to
represent to any person other than the
consumer that a consumer is wilfully
refusing to pay a nondisputed consumer
debt when the debt is in dispute and the
consumer has notified in writing the debt
collector of the dispute;
Tex. Fin. Code §392.301.
Threats or Coercion
(4)threatening to sell or assign to
another the obligation of the consumer
and falsely representing that the result of
the sale or assignment would be that the
consumer would lose a defense to the
consumer debt or would be subject to
illegal collection attempts;
Tex. Fin. Code §392.301.
Threats or Coercion
(5) threatening that the debtor will be
arrested for nonpayment of a consumer
debt without proper court proceedings;
(6) threatening to file a charge,
complaint, or criminal action against a
debtor when the debtor has not violated
a criminal law;
Tex. Fin. Code §392.301.
Threats or Coercion
(7) threatening that nonpayment of a
consumer debt will result in the seizure,
repossession, or sale of the person's
property without proper court proceedings;
or
(8) threatening to take an action prohibited
by law.
Tex. Fin. Code §392.301.
Threats or Coercion
(b) Subsection (a) does not prevent a debt
collector from:
(1) informing a debtor that the debtor may be
arrested after proper court proceedings if the
debtor has violated a criminal law of this
state;
(2) threatening to institute civil lawsuits or
other judicial proceedings to collect a
consumer debt; or
(3) exercising or threatening to exercise a
statutory or contractual right of seizure,
repossession, or sale that does not require
court proceedings.
Tex. Fin. Code §392.302 Harassment;
Abuse
In debt collection, a debt collector may not
oppress, harass, or abuse a person by:
(1) using profane or obscene language or
language intended to abuse unreasonably
the hearer or reader;
(2) placing telephone calls without
disclosing the name of the individual
making the call and with the intent to
annoy, harass, or threaten a person at the
called number;
Tex. Fin. Code §392.302 Harassment;
Abuse
(3) causing a person to incur a long distance
telephone toll, telegram fee, or other charge by a
medium of communication without first disclosing the
name of the person making the communication; or
(4) causing a telephone to ring repeatedly or
continuously, or making repeated or continuous
telephone calls, with the intent to harass a person at
the called number.
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(a) Except as otherwise provided by this section, in debt
collection or obtaining information concerning a
consumer, a debt collector may not use a fraudulent,
deceptive, or misleading representation that employs
the following practices:
(1) using a name other than the:
(A) true business or professional name or
the true personal or legal name of the debt
collector while engaged in debt collection; or
(B) name appearing on the face of the credit
card while engaged in the collection of a
credit card debt;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(2) failing to maintain a list of all business or professional
names known to be used or formerly used by persons
collecting consumer debts or attempting to collect
consumer debts for the debt collector;
(3) representing falsely that the debt collector has
information or something of value for the consumer in
order to solicit or discover information about the
consumer;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(4) failing to disclose clearly in any communication with
the debtor the name of the person to whom the debt
has been assigned or is owed when making a demand
for money [doesn’t apply to a person servicing or
collecting real property first lien mortgage loans or
credit card debts];
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(5) in the case of a third-party debt collector,
failing to disclose, except in a formal pleading
made in connection with a legal action:
(A) that the communication is an attempt to
collect a debt and that any information
obtained will be used for that purpose, if the
communication is the initial written or oral
communication between the third-party debt
collector and the debtor; or
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(B) that the communication is from a debt
collector, if the communication is a subsequent
written or oral communication between the third-
party debt collector and the debtor;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(6) using a written communication that fails to
indicate clearly the name of the debt collector
and the debt collector's street address or post
office box and telephone number if the written
notice refers to a delinquent consumer debt;
(7) using a written communication that demands
a response to a place other than the debt
collector's or creditor's street address or post
office box;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(8) misrepresenting the character, extent, or
amount of a consumer debt, or misrepresenting
the consumer debt's status in a judicial or
governmental proceeding;
(9) representing falsely that a debt collector is
vouched for, bonded by, or affiliated with, or is an
instrumentality, agent, or official of, this state or
an agency of federal, state, or local government;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(10) using, distributing, or selling a written
communication that simulates or is represented
falsely to be a document authorized, issued, or
approved by a court, an official, a governmental
agency, or any other governmental authority or
that creates a false impression about the
communication's source, authorization, or
approval;
(11) using a seal, insignia, or design that
simulates that of a governmental agency;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(12) representing that a consumer debt may be
increased by the addition of attorney's fees,
investigation fees, service fees, or other charges
if a written contract or statute does not authorize
the additional fees or charges;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(13) representing that a consumer debt will
definitely be increased by the addition of
attorney's fees, investigation fees, service fees,
or other charges if the award of the fees or
charges is subject to judicial discretion;
(14) representing falsely the status or nature of
the services rendered by the debt collector or
the debt collector's business;
(15) using a written communication that violates
the United States postal laws and regulations;
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(16) using a communication that purports to be
from an attorney or law firm if it is not;
(17) representing that a consumer debt is being
collected by an attorney if it is not; or
§392.304. Fraudulent, Deceptive, or
Misleading Representations
(18) representing that a consumer debt is being
collected by an independent, bona fide
organization engaged in the business of
collecting past due accounts when the debt is
being collected by a subterfuge organization
under the control and direction of the person who
is owed the debt.
§ 392.306.
Use of Independent Debt Collector
A creditor may not use an independent debt
collector if the creditor has actual knowledge
that the independent debt collector repeatedly
or continuously engages in acts or practices
that are prohibited by this chapter.
§392.401. Bona Fide Error
A person does not violate this chapter if the
action complained of resulted from a bona
fide error that occurred notwithstanding the
use of reasonable procedures adopted to
avoid the error.
§392.403. Civil Remedies
(a) A person may sue for:
(1) injunctive relief to prevent or restrain a
violation of this chapter; and
(2) actual damages sustained as a result of a
violation of this chapter.
(b) A person who successfully maintains an
action under Subsection (a) is entitled to
attorney's fees reasonably related to the amount
of work performed and costs.
§392.403. Civil Remedies
(c) On a finding by a court that an action
under this section was brought in bad faith or
for purposes of harassment, the court shall
award the defendant attorney's fees
reasonably related to the work performed and
costs.
§392.403. Civil Remedies
(d) If the attorney general reasonably believes
that a person is violating or is about to violate
this chapter, the attorney general may bring an
action in the name of this state against the
person to restrain or enjoin the person from
violating this chapter.
§392.403. Civil Remedies
(e) A person who successfully maintains an
action under this section for violation of Section
392.101[bond requirement], 392.202[correction of
files], or 392.301(a)(3)[threatening to represent
that the consumer is refusing to pay nondisputed
debt when it’s disputed] is entitled to not less than
$100 for each violation of this chapter.
§ 392.404(a).
Remedies Under Other Law
A violation of this chapter is a deceptive
trade practice under Subchapter E, Chapter
17, Business & Commerce Code, and is
actionable under that subchapter.
Problem 27 (February 2002 Exam)
Did Bank’s collection efforts violate the Texas
Debt Collection Act? Explain fully.
Did Best Credit’s collection efforts violate the
Act? Explain fully.
If Bank or Best Credit violated the Act, what
civil remedies are available to Sid under the
Act? Explain fully.
Examiner’s Comments
This question called for familiarity with the
Texas Debt Collection Act (TDCA). Some
examinees correctly noted that it is not a
violation of the TDCA for a collector to threaten
to commence a civil action to collect the
debt. Many examinees correctly stated that the
TDCA generally prohibits deceptive and
coercive debt collection practices, but they did
not refer to specific prohibitions that the
Bank may have violated.
Examiner’s Comments
In the second section, involving Best Credit's
collection efforts, most examinees stated
the [federal, ed.] time restrictions on telephone
contact by debt collectors, as well as the
[federal, ed.] rules regarding contact at the
consumer's place of employment, but failed to
discuss how or whether the facts supported
finding a violation of these [federal, ed.]
restrictions. In addition, while many examinees
concluded that the numerous phone calls were
harassing, they did not discuss whether the facts
showed the debt collector’s intent to harass,
which is required by the statute.
Examiner’s Comments
With respect to damages, most
examinees correctly noted that a violation of
the TDCA is also actionable as a violation of
the Texas Deceptive Trade Practices Act
(DTPA). However, some examinees only
discussed remedies available under the
DTPA and did not address the remedial
scheme in the TDCA.