Ask William:
The Fair Debt Collection Practices Act
Q: The majority of my legal practice is representing clients relating to real estate and business transactions. However, I do assist a few clients in collecting on consumer debt. Does my limited collection practice subject me to liability under the federal Fair Debt Collection Practices Act (“FDCPA”)?
A: The FDCPA, codified at 15 U.S.C. § 1692 et seq., is the most important federal legislation regulating the collection industry. Enacted in 1978, its purpose is to eliminate abusive, deceptive, and unfair practices in the collection of consumer debt. The statute applies to define “debt collectors”, essentially collection agencies and collection attorneys seeking to recover consumer debt. The FDCPA gives the debtor the right to require a collector to stop contacting him/her; it requires collectors to deal only with a debtor’s attorney; it gives debtors the right to require a collector to verify the debt; and it requires debt collectors in any event to notify debtors:
(1) of so-called debt-validation rights (including the debt amount and the original creditor’s name); and
(2) that communications are from a debt collector and for the purpose of debt collection.
The FDCPA is a strict liability statute. It is no defense that violations were negligent or unintentional. Prevailing plaintiffs are entitled to actual damages, statutory damages of up to $1,000 per action where actual damages cannot be proved, costs, and attorneys’ fees.
An attorney is a debt collector within the statutes if, among other things, he/she “regularly collects or attempts to collect” debt. Whether collection activity is “regular” has been considered by many courts around the country. Factors courts have considered include:
(1) the total volume of the attorney’s collection activity over a relevant period;
(2) the amount of revenue derived by the attorney from collection work as a gross number, and/or the percentage of collection-related revenue over a relevant period;
(3) the percentage of collection matters that the attorney has handled over a relevant period;
(4) the systems and employees that the attorney has in place to assist in collection;
(5) whether there is any pattern to the collection activity;
(6) whether the business of the attorney’s clients requires regular collection work;
(7) whether the attorney markets collection services;
(8) whether collection is a “substantial” part of the attorney’s practice;
(9) whether the attorney also represents debtors; and
(10) whether the attorney maintains any affiliations or memberships related to debt collection. Resolution of the issue is fact specific.
In sum, an attorney who sends out an occasional dunning letter or files an isolated collection suit is not an FDCPA debt collector. By the same token, an attorney who spends 50% of his/her time on collection of consumer debt is clearly covered by the statute. What is more difficult is predicting where a court will draw the line in a case in which reasonable minds can differ. Attorneys with ancillary collection practices concerned about potential FDCPA exposure would do well to review the statute and the local decisions regarding debt-collector status
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