Attorneys who add consumer collections to their practice may think they’re not subject to the requirements of the Fair Debt Collection Practices Act.
Too often, lawyers think they are not in the collections business, so they don’t qualify as “third party collection agents” under the act. But attorneys are bound by provisions of the FDCPA, says solo lawyer Mary L.C. Daniel of Winchester, Va., and they must follow the letter of the act to help avoid a costly violation suit.
For example, Daniel says, lawyers doing debt collection on consumer (as opposed to commercial) accounts must provide the so-called civil Miranda language on all correspondence related to the debt. The language includes provisions that the correspondence is an attempt to collect a debt, and that all information gleaned can and will be used in furtherance of collection. Failure to include this warning on debt collection correspondence is a per se violation of the law, Daniel says.
“An attorney starting to do collections must understand the definition of a consumer debt, be able to quote from the [FDCPA] and know how it’s interpreted in your federal jurisdiction,” says Daniel, who does both commercial and consumer debt collection.
Daniel says she has a large rubber stamp containing the “Miranda” language. She tells her employees that, if in doubt, they should just go ahead and use the stamp.
Training to a Tee
Nearly as important for attorneys is to make sure that staff members engaged in collection work are well-trained and well-supervised, according to Manuel H. Newburger, who practices in Austin, Texas.
“When I advise firms on collections, I tell them they need good hiring, good training and solid enforcement of the rules for all staff,” says Newburger, who travels the country giving training sessions on collections practice in between representing defendants who are being sued for collections law violations.
Occasionally, a firm will seek Newburger’s advice about an employee whose collection rate is very high but who, the firm suspects, may be overstepping the rules. “They’ll tell me they can’t afford to fire the guy. I tell them, ‘You can’t afford to keep him.’ ”
There are plenty of pitfalls in the collection act where human error alone leads to a violation, Newburger says. The key is limiting the risk of getting sued.
Sterling DeRamus agrees that proper training and policing of employee behavior is key. The Birmingham, Ala., lawyer has sued other attorneys whose employees violated the act.
“I sued a lawyer once because one of his employees called my client and threatened criminal prosecution over a debt. It’s amazing how uninformed some of these collectors are on the law,” DeRamus says.
Lawyers who are sued for violations of the act tend to underestimate their exposure, Newburger says. “There’s this notion out there among attorneys that the statute doesn’t mean what it says, simply because the attorneys feel that compliance would be inconvenient or silly.”
When a law firm receives notice that it is being sued for violating the FDCPA, the first reaction is often to fight back, Newburger says. But, he adds, firms must first assess their exposure by investigating the claim and then figure out the potential cost of defending it. Filing counterclaims can be very costly because plaintiffs who succeed are entitled to recover attorney fees under the law.
Newburger sums it up this way: “The biggest mistake you can make is litigation by testosterone.”