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Fair Debt Collection: 16.4.3 Substantive Prohibitions

Debt collectors that fall under state credit repair statutes are likely to have made no attempt to comply with the statute’s substantive requirements. Typical requirements of state credit repair statutes include:

Fair Debt Collection: 16.4.4 Private Remedies

Almost all state credit repair statutes provide a private right of action to consumers. Some do so both by making a violation actionable under the state UDAP statute and by creating a special cause of action.

Fair Debt Collection: 16.5.2 Unauthorized Practice of Law by Collection Agencies

States have taken very different positions as to what activities of a collection agency constitute unauthorized practice of law.702 Alabama considers demands for payment that do not threaten suit not to constitute the practice of law.703 Rhode Island prohibited any debt collection activities by third parties unless they were admitted to practice in the state, but this restriction was found to be an unconstitutional burden on interstate commerce.704

Fair Debt Collection: 16.5.5.1 Remedies for Unauthorized Practice of Law

Courts are divided as to what remedies are available to consumers affected by a collection agency’s or creditor’s unauthorized practice of law. Most suits involving these issues are brought by bar associations or state attorneys general. Several courts have held that a consumer sued by a collection agency has no implied private right of action under a statute prohibiting unauthorized practice of law, because the statute was designed to protect the creditor, not the consumer.754

Fair Debt Collection: 16.5.5.2 Remedies for Ethical Violations

Some courts have held that a violation of an ethical rule, particularly by an adverse party’s attorney, does not, in and of itself, give rise to a private cause of action.770 Some even hold that violation of an ethical rule cannot be used as an element of a cause of action, for example, by establishing the standard of care for a negligence claim771 or by showing outrageous conduct for a claim of intentional infliction of emotional distress.772

Fair Debt Collection: 16.6 State Criminal Statutes

A debt collector’s misconduct may be so extreme that it violates state criminal statutes or local criminal ordinances. Local criminal law may prohibit telephone abuse, unauthorized practice of law, larceny by trick, or simulation of official documents.779 Courts have convicted debt collectors of extortion and other crimes, even though the debts were legally due.780

Fair Debt Collection: 16.7 Enjoining Abusive Debt Collection Practices

Injunctive relief is available in most states to persons suffering or about to suffer irreparable injury for which there is no adequate remedy at law. Class relief is more likely to be available through injunction than through damage actions because damage actions are more likely to involve individual issues.

Fair Debt Collection: 16.8.3 Privacy Laws

State laws and regulations protecting privacy may protect consumers from misuse of information by creditors and collectors.798 These statutes and regulations may protect privacy in general, or specific kinds of information, such as banking, health care, or receipt of public benefits.799 Privacy laws are discussed in detail in NCLC’s

Fair Debt Collection: 16.8.4 State Loan Broker Laws

Sometimes a collector will encourage the debtor to take out a loan—particularly a home equity loan—to pay the debt in question. The collector may even refer the debtor to a specific lender, or act as a go-between, for example by setting up a three-way call with the debtor, the lender, and the collector. In this situation, the collector may be violating state laws that require loan brokers to be licensed. The definitions and exemptions in these statutes vary widely, however, so the specific statutory language should be parsed carefully.

Fair Debt Collection: 16.8.5 State Laws Regulating Telemarketing, Autodialing, and Artificial Voice Messages

Most states have laws regulating telemarketing.801 These laws may, however, apply only to solicitations for the sale of goods or services, not to debt collection.802

In addition, many states have laws similar to the federal Telephone Consumer Protection Act803 that restrict the use of autodialers and artificial voice messages. These laws may apply to at least some debt collection situations.

Fair Debt Collection: 16.8.6 State Garnishment Laws

Laws allowing creditors to obtain court orders garnishing judgment debtors’ wages or other property create a significant potential for misuse and abuse. Some states, recognizing this, provide specific statutory remedies when debtors are subjected to wrongful garnishment.804

Fair Debt Collection: 11.2.2.1 Generally

State long-arm statutes subject nonresident individuals or corporations to the in personam jurisdiction of local courts on the basis of their having performed some act affecting the state. The plaintiff has the burden of establishing jurisdiction.34 Federal procedure uses the long-arm statute of the forum state,35 which may allow fairly extensive service on nonresidents.

Fair Debt Collection: 11.2.2.3 Tort Tests in Long-Arm Statutes

Courts broadly construe provisions of long-arm statutes, allowing jurisdiction over parties who commit torts in whole or in part within the state as providing a basis for jurisdiction over FDCPA defendants.55 These cases follow similar holdings for claims under state tort and related state statutes.56 Tort-based personal jurisdiction in libel, slander, and misrepresentation cases in particular can provide useful analogies for supporting jurisdiction in debt collection cases.

Fair Debt Collection: 11.2.5 Federal Court Joinder of Creditors Subject to State Claims

The doctrine of supplemental jurisdiction over parties has given many federal courts a rationale for exercising supplemental jurisdiction over parties otherwise not subject to the federal claim in the case.85 Supplemental party jurisdiction gives the court discretion to allow the consumer to join in federal court a creditor not covered by the FDCPA, under a state claim closely related to an FDCPA claim.86 The most appropriate case for joinder is when the creditor and the debt collector are joint tor

Fair Debt Collection: 16.1.3 Litigation Privilege

Courts are divided on the question of whether California’s broad statutory litigation privilege bars claims under the state debt collection statute that arise from litigation, such as suit on a time-barred claim or pre-litigation misrepresentations to induce settlement. Some courts have found some or all claims barred.22 Other courts,23 however, including the first published state appellate decision,24 hold that statutory claims are not barred.

Fair Debt Collection: 16.1.4 State Governmental Immunity

Government entities may be immune when they are collecting their own debts,43 or the debt may not fall within the statute’s scope.44 States may also have special sovereign immunity statutes that protect state employees.45 Absolute judicial immunity is likely to protect persons acting under court order, such as guardians ad litem, from state statutory claims based on their attempts to collect debts.46 One cour

Fair Debt Collection: 16.2.2 Constitutionality of State Debt Collection Statutes

In Harris v. Beneficial Finance Co.,60 the Florida Supreme Court upheld the Florida debt collection statute, a relatively broad and protective state statute, against a creditor’s claim that the statutory prohibition of employer contacts infringed upon its right of free speech under the First Amendment and that the remedy of $500 minimum statutory damages deprived it of property without due process of law.

Fair Debt Collection: 16.2.3.1.1 “Claim” vs. “debt”; “credit”

Debt collection statutes are frequently limited in their coverage to a “claim” 68 or a “debt.” 69 A number of courts hold that the term “debt” includes rent70 and condominium and homeowner association assessments.71 If the statute merely requires a “claim” or a “debt” it will also probably apply to collection of dishonored checks72 and to collection of obligations