Fair Debt Collection: 10.3.3 Applicability of FDCPA § 1692i Protections in Different Types of Proceedings
Under FDCPA § 1692i, a “legal action on a debt against any consumer” includes a lawsuit against a consumer to collect alleged consumer debts.27
Under FDCPA § 1692i, a “legal action on a debt against any consumer” includes a lawsuit against a consumer to collect alleged consumer debts.27
Abusive debt collection conduct is proscribed by many state debt collection statutes. Many decisions have applied this prohibition to telephone harassment. Particular violations include:
The Consumer Financial Protection Bureau’s survey of large credit card issuers found that contingency fees that allow third-party collection agencies to retain a percentage of what they recover were the most common payment structure.279 The average contingency fee was 15.7% in 2020, with a range of 9.5 to 23% with higher fees awarded for accounts that are believed to be more difficult to collect.280 Most issuers also reported paying performance-based incentives.
The text of FDCPA § 1692j says:
Furnishing certain deceptive forms. (a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.
Federal courts have wrestled with the issue of when a flat-rate relationship with a collector triggers liability for a creditor through FDCPA §§ 1692a(6) or 1692j. In Nielsen v. Dickerson, the court found a collection firm liable under FDCPA § 1692j when it furnished a form letter that gave the consumer the false impression that the firm was meaningfully involved in the case.76 Similarly, in Sokolski v.
By implication, a letter on a lawyer’s letterhead would imply greater participation than a letter on a collection agency’s letterhead because of the stronger remedies available to attorneys. The Third Circuit recognized this:
Creditors are notified officially of the automatic stay in the notice of the meeting of creditors.300 Unfortunately, from the debtor’s perspective, this notice is not always adequate for several reasons. First, the notice may not be mailed until weeks after the petition is filed. Second, when it is mailed, it goes only to creditors listed in the schedules or statement.
Bankruptcy clients, often because of their precarious financial situation, fall victim to many consumer scams and abusive lending and collection practices. Laws that protect consumers from these practices and remedies that may be pursued by attorneys in enforcing these laws are covered extensively in NCLC’s Consumer Law Practice Series. This Chapter provides an overview of the dispute and discovery rights found within many federal and state consumer protection statutes.
This Chapter provides an overview of bankruptcy law. It gives practitioners a general understanding of the legal issues that arise in a consumer bankruptcy case, but it is not a complete bankruptcy guide. A far more detailed discussion of bankruptcy law is provided in NCLC’s Consumer Bankruptcy Law and Practice (13th ed. 2023), updated at www.nclc.org/library.
Each bankruptcy case is in some ways unique. Determining the best course of action for any individual requires a thorough understanding of that client’s specific financial situation. Therefore, the first step in preparing a bankruptcy case is to gather the necessary information. After the information is collected, the facts can be analyzed to determine whether bankruptcy is the best option for the client or whether other possible avenues for relief are available.
Once it has been decided that bankruptcy is appropriate in a particular case, most of the remaining work required to initiate the case is relatively routine. A good deal of it involves the preparation of the necessary papers for the initial filing. This Chapter uses a sample case to illustrate how to prepare the basic forms used in a typical chapter 7 bankruptcy case. Portions of the forms are reprinted in this Chapter to highlight particular issues.
The Bankruptcy Code requires debtors in some circumstances to produce various tax returns. Sometimes these tax returns must be filed with the court. Fortunately, many of the tax return requirements are imposed only if an interested party or the court makes a formal request. Such requests are not generally made in routine cases. The one requirement that all debtors must comply with—providing a copy of the debtor’s most recent tax return to the trustee before the meeting of creditors—is usually satisfied without much difficulty.
If a creditor makes a timely request for a tax return or transcript that is to be provided to the trustee, the debtor must give a copy to the creditor at the same time it is provided to the trustee. 11 U.S.C. § 521(e)(2)(A)(ii). Bankruptcy Rule 4002(b)(4) states that the debtor must comply with a creditor’s request for a tax return if the request is made at least fourteen days before the first date set for the meeting of creditors.
If a proper request is made the debtor may also be required to file with the court copies of tax returns (or transcripts) that are filed with the IRS during the bankruptcy case or for tax years ending during the case. 11 U.S.C. § 521(f)(1)–(3). At the request of the court, the United States trustee, or a party in interest an individual debtor must file with the court:
For safeguarding the confidentiality of tax information, Bankruptcy Rule 4002(b)(5) provides that tax returns or transcripts provided to the trustee, or to creditors who request them, are subject to the procedures promulgated by the Director of the Administrative Office.
If the debtor fails to provide a required return or transcript to the trustee or to a creditor who timely requests it, the case may be dismissed, unless the debtor shows that such failure was due to circumstances beyond the debtor’s control. 11 U.S.C. § 521(e)(2)(B). Dismissal under section 521(e)(2) is not automatic. An interested party must file a motion seeking dismissal.
In chapter 7 cases the debtor is required to prepare and file a statement of intention (Official Form 108) regarding property securing debts and leased personal property within thirty days after the petition date, or on or before the date of the meeting of creditors, whichever is earlier. The court, pursuant to section 521(a)(2)(A), may extend the deadline for cause. After the meeting of creditors, the debtor must perform the stated intention. Section 521(a)(2)(B) states that the debtor must perform the intention within thirty days after the first date set for the meeting of creditors.
Section 522(f)(1) permits the debtor to avoid (1) judicial liens on any property claimed as exempt, and (2) nonpossessory, nonpurchase-money security interests in household goods and certain other property claimed as exempt. This section is discussed in Chapter 8, infra.
Effective December 1, 2011, in chapter 13 cases, creditors must provide debtors and their attorneys notices of changes in required payments and notices of fees, expenses, and charges if the creditors’ claim is secured by a security interest in the debtor’s principal residence and the debtor is curing a default on the mortgage loan through the plan. See Bankruptcy Rule 3002.1. Notices of payment changes must be sent at least twenty-one days before a payment in the new amount is due.
To receive a discharge the debtor must submit proof of completion of an “instructional course concerning personal financial management.” 11 U.S.C. § 727(a)(11). A similar requirement is imposed on chapter 13 debtors. 11 U.S.C. § 1328(g). To satisfy the requirement the proof of the course’s completion must show that the debtor took the course after the petition was filed.
The certification of completion of the course must be prepared by the debtor using Official Form 423 and filed with the court. As of the publication of this book, the actual certificate from the provider is not submitted to the court, however, a rule change likely to take effect in December 2024 will modify this requirement to permit submission of the certificate from the provider in lieu of Official Form 423. In a joint case each spouse must complete and file a separate certification.
Most approved providers charge between $25–$50 for the education course. Section 111(d)(1)(e) requires approved providers to provide the course without considering the consumer’s ability to pay. If the debtor cannot afford the fee, they should request that the agency provide the course free of charge or at a reduced fee. It may be helpful if the agency is informed that the debtor is being represented pro bono or if the court has approved the debtor’s filing fee waiver request, as most providers will waive the course fees for such debtors.
Similar to the prepetition credit counseling requirement, there are limited exceptions to the debtor education requirement for debtors who are (1) disabled or incapacitated, if that renders them unable to complete the course, (2) on active military duty in a combat zone, or (3) if the courses are not available in the debtor’s district. 11 U.S.C. §§ 727(a)(11), 1328(g) (incorporating 11 U.S.C.
Obtaining the discharge is normally a simple matter once all of the steps discussed above are completed. In a chapter 7 case the discharge order is usually entered soon after the time period for objections to discharge has passed, which is sixty days after the first date set for the meeting of creditors. See Bankruptcy Rule 4004.