The Federal Fair Debt Collection Act is a powerful federal statute that imposes real penalties on debt collection activities. The statutes was enacted largely in response to abuses of the credit card industry. Similarly, the federal Unfair and Deceptive Trade Practices Act contains prohibitions against using unfair and deceptive tactics in the collection of debts.
For years mortgage lenders and particularly the law firms hired to pursue mortgage collections didn’t worry about these statutes because prior federal cases had ruled that law firms and mortgage collection activities were not governed by the laws. That all changed when the United States Supreme Court issued its opinion in:
JERMAN v. CARLISLE, MCNELLIE, RINI, KRAMER & ULRICH LPA ET AL. (6th CIRCUIT)
Decided April 21, 2010
Which found that:
A debt collector who acts with ” actual knowledge or knowledge fairly implied on the basis of objective cir-
cumstances that such act is [prohibited under the FDCPA]” is subject to civil penalties enforced by the FTC.
This decision is important to keep in mind for a variety of reasons:
1) Most states have state laws which are similar to the Fair Debt Collections and Unfair and Deceptive Trade Practices Acts;
2) The Fair Debt and Unfair statutes contain attorney’s fee provisions in them;
3) Actions founded on violations of the Acts are independent of the foreclosure claims;
4) Virtually all the foreclosure mills and their lender clients are engaging in a wide range of actions that violate the Acts, particularly when homeowners are not represented by counsel;
5) Evidence suggests that many of the creditors are engaging in substantive violations of the laws with the practices they have developed and now institutionalized (such as improper assignment execution).
Importantly, these claims will eventually be brought before the very circuit court judges and their staff who are currently the victims of the abuses by the foreclosure mills. How much disrespect and abuse do judicial assistants face from foreclosure mill attorneys and their staff? How sloppy, disorganized and reckless is the paper practice they sling before the courts every day? How many times do JA’s and judges catch the mills setting hearings and making representations that are either totally false or not totally truthful at the very least?
The bottom line is all that sort of conduct is prohibited by the statutes cited above. Heretofore, the foreclosure mills could get away with it (and in fact they institutionalized such tactics and practices) because prior interpretations of the laws gave them a pass. With this new decision, the landscape has changed.
Study the Fair Debt Collection and Unfair and Deceptive Trade Action statutes (state and federal) and begin incorporating those facts into your discovery and pleading!