Creditors Beware! The FDCPA Evolves
Events of the past year show that the Federal Fair Debt Collection Practices Act (FDCPA) is one of the most volatile areas within the evolving world of collections. In 1996 President Bill Clinton signed into law new reforms which will require creditors, agencies and collection attorneys to reevaluate their procedures and training to avoid liability.
Creditors are not immune from liability. Two years ago a Texas jury handed down a verdict against a major creditor, Household Credit Services, finding it liable for $11 million dollars in damages in a class action suit for the abusive practices of its collection agency. The FDCPA provides for the award of damages and attorney's fees. Prosecution of FDCPA violations is cropping up as a new litigation growth area which is attracting the interest of attorneys because of the provisions for the award of attorney's fees. The attorney's fee provision is the driving force behind many of the suits being filed.
A case recently decided by the United States Supreme Court, Heintz v. Jenkins, led to some of the new reforms to the FDCPA. One change is that the "mini-Miranda" (This is an attempt to collect a debt and any information obtained will be used for that purpose) is no longer required in "all communications" from the debt collector to the debtor.
The disclosures need only be made in the initial communication, whether oral or written. Subsequent communications only require disclosure that the communication is coming from a debt collector (We are debt collectors), which is a new disclosure requirement. Formal pleadings are specifically exempted from the "mini-Miranda" requirements. Unfortunately it is unclear what does and does not qualify as a "formal pleading." Litigation within the gray areas is sure to continue.
In summary, the changing FDCPA legislation and case law, coupled with the potential liability of creditors for the errors of those they hire to collect debts on their behalf makes it imperative that creditors retain only qualified, ethical professionals to handle retail debt collection. Hiring an attorney or agency that does not strictly comply with the FDCPA is a move fraught with danger. The complexity of retail collections requires the expertise of someone intimately familiar with the FDCPA.