Thursday, September 3, 2009

Is that an attorney working on your file, or are you just happy to see me?

As many debtors know, attorneys are frequently used as debt collectors by companies. That makes good sense, since if the debtor doesn't pay and the creditor decides to sue, they've already got an attorney ready to go on the case.

But attorneys cost money, and it seems likely that creditors don't want to have to pay lawyers all that money if the debtors aren't going to pay, or aren't going to pay the full amount.

On the other hand, not only do attorneys know how to sue someone, but just having a lawyer involved can be enough to get some debtors to cough up money. So what's a creditor to do if he or she wants the benefit of having a lawyer but not the cost of having a lawyer?

Fake it.

That's what some creditors do, at least, and some of them have gotten zinged for it under the Fair Debt Collection Practices Act (FDCPA.)

The FDCPA prohibits creditors and debt collectors from, in essence, pretending an attorney is involved in trying to collect a debt if that lawyer isn't actually involved. It says so right in the law:

§ 1692e. False or misleading representations

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:
(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.

While that alone is pretty clear -- a debt collector can't pretend he or she is an attorney or pretend a letter is from an attorney if it's not, that little phrase has led to a whole area of law about when an attorney is or is not actually involved in collecting a debt.

An attorney has to be meaningfully involved in the effort to collect a debt. Courts have noted the effect of a letter from an attorney, and the urgency and drama it conveys, and have also noted that when you, the debtor, get a letter from a lawyer, that the message that's being sent is that a lawyer, somewhere, looked things over, decided that the debt was valid, and is ready to take legal action -- that is, sue you -- about the debt.

That's a pretty strong message being sent. So courts decided that if debt collectors want to send that message, they darn well better make sure a lawyer actually did look over things and make some kind of judgment and have some "genuine involvement" in deciding what to say and how to say it and who to say it to.

Let me give you a brief example of when a lawyer is NOT meaningfully involved. In a 2002 case, Nielsen v. Dickerson, a lawyer was sent lists of names and debts by a credit card company. That lawyer then reviewed the list to see if any of the names had filed bankruptcy, if they lived in certain states where he couldn't write a letter, or if they had received other letters. If the answer to those questions was no, then the lawyer sent a form letter filled in with specific information about that debtor's account. The creditor had the right to approve or disapprove of any letters, and the lawyer himself never saw much, if anything, about the underlying accounts.

That is a violation of the law, because the lawyer didn't do anything more than lend his name to the creditor -- he more or less just let the creditor use his letterhead. And when that happens, the lawyer and the creditor can be sued under the FDCPA.

So if you get a letter from an attorney about a debt you owe, or they claim you owe, don't freak out. That lawyer may or may not have any more information about your matter than you do, making it a good idea to simply call the person and find out what's going on. And a better idea? Call your own lawyer and have them investigate.

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