Sept. 14, 2016 – Are you a lawyer who regularly engages in debt collection activities on behalf of clients? If so, be aware that your legal pleadings are subject to the Fair Debt Collection Practices Act, under a recent decision from the Seventh Circuit Court of Appeals.
A Seattle-based law firm was attempting to collect student loan debts from various consumers on behalf of a debt collection agency. The law firm filed a complaint in state court. The consumer-defendants responded with a complaint in federal court, alleging the law firm included a misleading and deceptive paragraph in the state court complaint.
The consumers said the complaint violated the Fair Debt Collection Practices Act (FDCPA). A federal district court in Illinois dismissed the consumers’ claim.
But in Marquez et al. v. Weinstein, Pinson & Riley P.S., et al., No. 15-3273 (Sept. 7, 2016), a three-judge panel for the U.S. Court of Appeals for the Seventh Circuit reversed, concluding that legal pleadings are subject to the FDCPA and the provision included in the state law complaint violated FDCPA as deceptive and misleading.
Pleadings Subject to FDCPA
Under 15 U.S.C. § 1692e, a debt collector “may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
Joe Forward, Saint Louis Univ. School of Law 2010, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6161.
The three-judge panel noted that in Heintz v. Jenkins, 514 U.S. 291 (1995), the U.S. Supreme Court held that the FDCPA applies to attorneys who “’regularly’ engage in consumer-debt-collection activity, even when that activity consists of litigation.”
The debt collecting lawyer in Heintz was sued based on a demand letter, not provisions within a legal pleading, but the panel said the distinction doesn’t matter.
“Nothing in the broad language of Heintz would support an interpretation that would apply the FDCPA to attorneys whose debt collection activity consisted of litigation, but limit it only to those representations made by those attorneys outside of that litigation,” wrote Judge Illana Rovner for the three-judge panel.
After Heintz, the panel noted, Congress enacted an FDCPA amendment, at 15 U.S.C. § 1692e(11), that “exempted legal pleadings from a specific provision in the FDCPA,” but the exemption only applied to that provision, not the FDCPA as a whole.
“By providing that sub-section 1692e(11) did not apply to a formal pleading made in connection with a legal action, the implication is that § 1692e as a whole other than § 1692e(11) applies to formal legal pleadings,” Judge Rovner wrote.
“We hold that representations may violate § 1692e of the FDCPA even if made in court filings in litigation,” wrote Rovner, noting that “the dangers addressed in the FDCPA arise in the context of pleadings just as in other forms of communication.”
State Court Complaint Violated FDCPA
The panel next addressed whether the law firm’s state law complaint actually violated the FDCPA, as a matter of law, such that dismissing the case was an error.
The state court complaint included a provision (paragraph 12) that said, pursuant to 15 U.S.C. § 1692g(a), “the debt referenced in this suit will be assumed to be valid and correct if not disputed in whole or in part within thirty (30) days from the date hereof.”
But the summons told consumers they had to file an appearance by a specified date approximately 30 days after the complaint’s issue date, and an answer within the time frame set out in other subsections that did not exist. The form contained an error.
A different paragraph said the consumers had to file an answer if the amounts at issue exceeded $10,000, and the answer had to be filed no more than 10 days from the appearance date designated on the summons.
The panel said paragraph 12 is “misleading to the unsophisticated consumer both as to the proper timing to respond to the complaint and as to the manner of response.”
“For each plaintiff in this FDCPA action, the time period for ‘disputing the debt’ was shorter than the time period provided by law for the answer,” Judge Rovner wrote.
“Paragraph 12 thus effectively shortened the time period provided in the summons for the consumer to answer, because the consumer had been told in paragraph 12 that he only had the 30-day period to dispute the validity or correctness of the debt.”
The panel noted other reasons why paragraph 12 of the law firm’s complaint was deceptive and misleading to the unsophisticated client. Thus, the court reversed the district court and remanded the case, allowing the consumers’ claim to proceed.