Fair Debt Collection: 2.5.7.6 Do Not Send Demand Letters to Unknown Debt Collectors
Many experienced consumer attorneys do not send demand letters before filing an FDCPA suit.
Many experienced consumer attorneys do not send demand letters before filing an FDCPA suit.
The online companion material to this treatise contains sample complaints and examples of other FDCPA complaints filed by practitioners.
Attention should be paid to obtaining proper service of process on an attorney collector. Service on the attorney at the address on the attorney’s collection letter may not be valid if the attorney does not maintain offices at that address.87 The attorney’s address can be checked through the state bar association as well as lawyer directories and other sources.
Creditors, debt buyers, or those collecting on behalf of creditors or debt buyers often seek to enforce a mandatory arbitration clause found in the credit agreement between the original creditor and the consumer. These clauses require debtors to bring legal claims in private arbitration as opposed to litigation in court.
Interrogatories, admissions, and a request for production of documents should be filed with the complaint or soon thereafter to maintain the momentum of the case and to obtain critical evidence while it is still fresh and available.
Most debtor harassment cases are settled by negotiations prior to trial. A lawyer who has not successfully tried a case of this type should know what can be accomplished at trial before negotiating a settlement.92 It is essential to know the probable range of damages that may be awarded in a case of this type before entering into negotiations.
In FDCPA suits and in actions under state debt collection statutes, the legal proscription may be so clear and narrow, particularly when liability may be established by a debt collection letter or other document, that factual issues can be determined early in a case. In such cases, liability issues may be decided by partial summary judgment, and only the issue of the damages may need to be tried or negotiated.94 A sample motion and supporting memoranda on summary judgment are available online as companion material to this treatise.
As described in § 11.4.5, infra, there are benefits to seeking a jury trial in an FDCPA or other debt collection harassment case.
Section 11.7, infra, examines some of the complex issues that arise where a debt collector makes an offer of judgment or settlement.
Some types of income, such as Social Security and public assistance benefits, are exempt from creditors’ postjudgment remedies and that exemption follows those funds into bank accounts in most circumstances.45 However, it is not unusual for a creditor to have those funds frozen until the debtor establishes the exemption in court. Freezing the account of a low-income household can be devastating even for a short time as there are usually no reserves for medications, rent, food, heat, etc.
Probably the most common consumer strategy (but not necessarily the best) is to work out payments with those collectors who have most effectively harassed them. Many collection agencies and some creditors will take an initial position that they must receive payment of the balance in full. They will urge the consumer to borrow from a loan company or relatives to pay off the debt.
Another strategy to stop collection harassment is for the consumer (or lawyer) to write an e-mail or letters to state and federal agencies responsible for enforcing the laws against debt collection abuse. While the government agency is not likely to investigate unless it has other complaints against the same collector (which probably cannot be known beforehand), sending the collector a copy of the complaint letter may produce good results.
If collection letters ask for more than is due or some other possible mistake is on the bill (for example, wrong account, wrong person, insurance paid the bill), the consumer should write to the collector and request that the mistake be corrected.
A more intensive strategy to stop collection harassment is for the consumer’s lawyer to write the collector requesting the collector to stop contacting the consumer. As described at § 2.5.7.6, infra, demand letters should not be sent to debt collectors unless the debt collector’s SLAPP suit practice or policy is known.
Whether a harassed debtor should use one or more of the five strategies discussed above, or whether that debtor instead should document the collection misconduct and institute suit or file bankruptcy will depend upon a number of considerations. For example:
Client’s objectives
When legal, evidence of collection abuse and of the client’s credibility might be obtained by the consumer recording a collection telephone call. This option is only available in certain states, because in other states recording a phone call without consent is a criminal offense. There are also legal ethical considerations if an attorney advises the client to record a telephone call.
Because it may be a long time between the initial interview and trial, it is a good idea to obtain a statement of the client’s story, signed by the client. The statement may be used at trial to refresh the client’s memory.65 The effect of this statement on the client-attorney privilege and the work product rule is beyond the scope of this subsection but should be considered by counsel.66
Debt collection harassment cases that are truly “fee-generating” may have to be referred to private attorneys pursuant to the Legal Services Act67 and implementing regulations.68 Increasing numbers of private attorneys have been accepting clients on a contingent-fee basis in debt collection abuse cases,69 although there are generally far more cases than there are attorneys willing to take them.
An important first step in developing a case for debtor harassment is preparing a chronology of the events involved in the harassment. Events seemingly insignificant to the claim may prove significant later, may aid a witness’s memory, or may indicate discrepancies in evidence. There are usually a substantial number of documents connected with a consumer transaction; these are particularly useful for pinpointing significant dates in a chronology.
One of the biggest impediments to using survey evidence in FDCPA cases is the high cost of an expert designing and conducting the survey. See the discussion at § 11.6.3, infra.
A working knowledge of the law and practice of proving damages is crucial in both the negotiation and the trial stage of a debt collection abuse case. An attorney who has not developed the evidence of damages in a case has little idea of where to start and terminate negotiations.
A common and costly mistake made by an attorney in a debt collection abuse case is to pay insufficient attention to the nature and extent of the client’s actual damages. Ask about the stress the consumer suffered and how long the distress continued. When the abuse is egregious and the resulting distress, lasted many days the damages may be valued in five figures.
As discussed in § 11.8.2, infra, injuries and symptoms related to stress include shock, crying, loss of sleep, insomnia, nightmares, night sweats, anxiety, nervousness, fear, worry, loss of happiness, severe distress, hypertension, loss of concentration, instability, hysteria, trembling, irritability, humiliation, embarrassment, intimidation, loss of the tranquility of old age, indigna