Debtor Notices - The Latest FDCPA Entrapment Mechanism for Collection Agencies and Law Firms

Questions to and answers from Joe Messer regarding Debtor Notices and how to deal with them.


We’ve heard that notices from debtors are creating real problems for collection agencies and law firms.  Fill us in on what’s happening.

Consumer attorneys are always looking for ways to nab defendants.  Many consumer firms are “mills”, which are looking for a steady diet of lawsuits. Over the years they’ve come up with ways to supply themselves with new claims. Historically consumer firms have given scripts to debtors to try to get collectors to say things which violate the Fair Debt Collection Practices Act (FDCPA).  This has become known as “call baiting”.  For example, the debtor would ask “Could I go to jail if I don’t pay”? “Could I lose my house?” “Will I get sued if I don’t pay?” etc.

The latest trend is written notices, sent on behalf of debtor clients, or prepared by the attorneys and sent by the debtors.  These are the trickier notices since alarms usually go off when attorney letters are received, but not necessarily when letters come from debtors.


What types of notices are your clients receiving?

The age old trick is the one liner from a consumer:  “I refuse to pay”.  Or sometimes those words are buried in a long letter with gobble gook text.  The problem with this one is that it triggers Section 1692c, which requires collectors to cease communications.  Section 1692c reads in relevant part:

If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except—

(1) to advise the consumer that the debt collector’s further efforts are being terminated;

(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or

(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.

This one is a little easier for a collection law firm to respond to because the firm can respond by sending the debtor notice that they intend to file suit, provided they would normally do so on such an account.  The collection law firm should then file suit.  But if they wouldn’t normally do so – say because the debt was too small - it could be risky to take the course of action.

Another letter that we’ve seen (orchestrated by the RC Law Group) comes from the debtor and reads as follows:

To Whom It May Concern:

I dispute the [insert name of law firm] collection account on my credit report that has a balance of $2075.00 and an open date of 4/26/2016 and refuse to pay this account.

This one sets up a § 1692c claim by stating that the debtor refuses to pay the account.  But more importantly if the law firm has reported the account to a credit reporting agency it sets up a possible “false, deceptive or misleading representation” claim under § 1692e(8).  That section reads in relevant part:

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.

RC Law Group will then have the debtor check their credit report and file a lawsuit if the law firm hasn’t reported the debt as disputed.  This one is like shooting fish in a barrel. 

There are various variations on this, all available online.  Just Google “letter to stop debt collectors” and you will find one that states in relevant part:

Dear Collector: I am writing to request that you stop calling me. The federal law requires you to cease all communication with me after being notified in writing that I no longer wish to communicate with you (Fair Debt Collection Practices Act [FDCPA] Section 805(c): CEASING COMMUNICATION). I demand that you stop calling me at home, at work, on my cell phone and at any other location.

This one clearly triggers § 1692c, which requires the collector to cease communications.   

But what if it said only “I demand that you stop calling me at work and on my cell phone”, but doesn’t demand that you stop calling them.  Can you call them at home? Yes, if the letter doesn’t contain any other cease and desist language.  What if they don’t have a home number and only a cell phone?  This is dicey.  To be safe I’d stop calling them and file a collection lawsuit.

Buried in another letter is the statement:

“Do not call me at work.”

This could be an attempt to set up a claim under §1692c(a)(3), which states in relevant part:

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt—

(3) at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.

Personally I don’t think “Do not call me at work” would trigger liability for a collector who called the debtor’s place of employment.  But a letter which states “I’m not allowed to take personal calls at work. Do not call me at work” would trigger liability under §1692c(a)(3) for a collector who called the debtor’s place of work after receiving such a letter.

Notices triggering liability under §1692c(a)(3) don’t need to be in writing.  Once the collector learns that the debtor’s employer prohibits the debtor from receiving calls at work – however they learn that – the collector will have liability for making such a call.


What are Plaintiff’s attorneys trying to achieve?

A constant stream of claims which allows them to make $3,000 to $5,000 or more per hit, with very little effort on their part.


Is there a way to spot these notices?

 Centralize your incoming mail and train a smart person who will read all letters thoroughly how to spot trick letters and bring them to the attention of those in your organization who know how to respond to them. There should be at least one back up for this person so the wheels don’t fall all when they are on vacation or out sick.

Try to reduce the various ways debtors can communicate with your organization.  Do you really need a general email?  For some reason faxes are problems.  They end up in “scan files” and don’t roll off the machines like they used to.  So they get missed.  If you are going to keep fax lines your people need to religiously police them for incoming notices.


What should our member law firms be doing about them?

Obviously respond appropriately, but share the notices you are regularly receiving with other member firms.  Or maybe let NARCA know about them so they can announce the problem.  It’s not uncommon for one of our clients to receive 15 to 20 identical letters a day.  Obviously these are being orchestrated by a consumer law firm.  Wouldn’t it be nice to have a heads up ahead about these letters ahead of time?  If they were to be announced on a NARCA listserve this might be helpful.


What if a law firm misses a notice?  Is there a way to avoid FDCPA liability?

Yes. That’s where the FDCPA’s bona fide error defense comes in.  Under §1692k(c):

A debt collector may not be held liable in any action brought under the FDCPA if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.


Have there been any important case law developments in this area?

Yes.  Recently the U.S. District Court for the Eastern District of Virginia ruled in favor of the collector in Keonte Gathers v. CAB Collection Agency, Inc. 3:17-cv-261-HEH. The plaintiff, represented by RC Law Group, had sent the collector a dispute letter and subsequently examined her consumer report and found that the collector hadn’t reported the debt as disputed.   Following Spokeo the Court held that the Plaintiff had failed to allege a concrete injury-in-fact sufficient to confer Article III standing.  The Court dismissed the complaint with leave to re-plead.

Also in Gebhard v. LJ Ross Associates, Inc. (Case No. 15 -2154 U.S. Dist. Ct. New Jersey) the court ruled in favor of a debt collector who received a cease and desist letter at 9:58am, and hadn’t processed the letter before a collector called the debtor at 10:10am that same day.   Obviously this is a unique situation, but a case that may help collectors in similar “close call” situations.


Can you give us a road map for trying to avoid these problems?

Limit points of outside contact.

Have good, well trained people respond to letters.

Give them the authority to follow-up to make sure the agency is properly responding.

Implement written, well thought out procedures for processing and reacting to notices so in case a mistake is made the agency can assert the bona fide error defense.

If you are dead in the water don’t waste time.  Settle the case as quickly and inexpensively as possible.  If, however, you should win, don’t pay ransom to settle the lawsuit.  Otherwise you can expect to be sued time and time again on the same type of claim.