June 1, 2016 – America runs on credit and debt is a fact of economic life. But when debts go unpaid, lawyers go to work. Some attorneys specialize in debt collection, and nearly all attorneys have the occasional client who fails to pay for legal work.
As discussed in this State Bar of Wisconsin PINNACLE® book, Collections and Bankruptcy in Wisconsin, attorneys who set out to collect money owed are often deemed debt collectors, and are subject to special regulations imposed by both state and federal law – regulations that lawyers transgress at their peril. Regulations that are not always obvious, not often clear.
That’s when Collections and Bankruptcy in Wisconsin comes into play. For more than a decade now, Wisconsin lawyers have relied on its experienced attorney-authors for safe guidance through the complex realm of debt collection.
First There’s the WCA
Debt collection under Wisconsin’s Consumer Act (WCA) includes any action, conduct, or practice of soliciting claims for collection or in the collection of claims owed. Under the WCA, a creditor collecting its own accounts is a debt collector and the creditor’s collection activities related to consumer transactions are subject to the WCA. Attorneys seeking to collect a debt on behalf of a client are deemed debt collectors under the WCA.
In general, debt collectors must act reasonably when attempting to collect debts. The WCA identifies specific prohibited practices in collecting alleged debts arising out of consumer transactions, practices generally related to conduct deemed to abuse, threaten, harass, embarrass, or mislead the debtor.
Violation of the WCA can be costly. Remedies include actual damages, including damages caused by emotional distress or mental anguish, regardless of whether the person suffered an accompanying physical injury. The injured person may recover penalties equal to the greater of twice the amount of the finance charges in connection with the transaction, in an amount not less than $100 or more than $1,000, or actual damages (including incidental and consequential damages).
And There’s the FDCPA
The federal Fair Debt Collection Practices Act (FDCPA) applies to the collection of consumer obligations, or alleged consumer obligations. The FDCPA, like the WCA, specifically identifies various prohibited practices and regulates communications between the debt collector and the customer or third parties. Unlike the WCA, the FDCPA generally applies only to third-party collectors regularly engaged in debt collection and not to creditors attempting to collect their own debts.
The FDCPA characterizes attorneys regularly engaged in consumer debt collection for clients as debt collectors, though it only regulates pre- and post-litigation activities, not litigation activities. Wisconsin federal courts have held that claims asserted by a plaintiff in a state court action were subject to the FDCPA. The FDCPA also may apply to other communications sent to the consumer even if the communication does not contain an explicit demand for payment.
Whether attorneys are regularly engaged in consumer debt collection requires a fact-specific inquiry. In one case the federal court for the Western District of Wisconsin determined that an attorney was not a debt collector under the FDCPA when debt collection comprised less than one percent of the attorney’s practice and he handled an average of fewer than two collection matters a year. And other jurisdictions have applied the FDCPA to attorneys who have handled as few as eight or 10 such matters within a five-year period.
Collections and Bankruptcy in Wisconsin is available to members in print for $149 and to nonmembers for $189. It is also available via Books UnBound™.
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As with all PINNACLE publications, this volume will be updated regularly, and purchasers who subscribe to automatic supplementation receive future updates at 10 percent off the regular price.