CASWELL BELL & HILLISON LLP
FRESNO, CALIFORNIA

WATCH YOUR LANGUAGE, DEBT COLLECTORS

In a letter to a debtor intended to prompt payment of $250 in debts, a collection agency’s choice of words entangled it in protracted litigation under the federal Fair Debt Collection Practices Act (FDCPA).  The theme of the dunning letter was honesty, or the lack thereof, on the debtor’s part.  In all capital letters, the letter informed the debtor: “YOU ARE EITHER HONEST OR DISHONEST.  YOU CANNOT BE BOTH.”  It proceeded to question the debtor’s good intentions in allowing the account to become past due and in supposedly ignoring all prior requests for payment.

Stop here to confirm how the term “debt collector” is defined.  It does not refer to an individual or a business that is collecting its own debts.  Instead, it refers to a person who uses an “instrumentality of interstate commerce” (such as the mail or the phone) “to collect debts owed or due another.” 

The debtor struck back with a lawsuit under the FDCPA that was at first dismissed by a federal trial court, but then reinstated when the debtor appealed.  The letter violated the FDCPA in more than one respect.  A debt collector may not falsely represent or imply, in order to “disgrace” the consumer, that the consumer committed any crime or other misconduct.  It was true that a check written by the consumer did not clear, but there was no evidence as to why this happened, or that the debt collector had, in fact, previously made communications to the consumer that were ignored.

Since there could have been an innocent, or at least honest, explanation for the unpaid bills, the letter’s comments impugning the consumer’s honesty and claiming that other collection attempts were ignored could be shown to be both false and intended to shame the debtor into payment.  This violated not only the letter of the FDCPA, but also its underlying rationale that even defaulting debtors deserve to be treated in a reasonable and civil manner.

The same letter also ran afoul of the prohibition in the FDCPA against using “unfair or unconscionable” means to collect or to attempt to collect a debt.  By way of example, the Act lists eight forms of conduct that constitute unfair or unconscionable means.  The letter in question did not fit neatly into any of the examples, but the debtor’s claim could still proceed because the list was not meant to be exhaustive.

It was conceivable that impugning a debtor’s honesty and good intentions could be regarded as an unfair or unconscionable collection method.  Since, by law, a court views a claim under the FDCPA through the eyes of an unsophisticated debtor, the plaintiff was planning to support her claims by conducting a consumer survey to determine if such debtors would find the letter she received to be false, misleading, unfair, or unconscionable.

The practical lesson to be derived from this case is that debt collectors should steer away from any inclination they may have to try to enhance the impact of collection communications by casting aspersions on the debtor’s character and intentions.  Collection letters should stick to the provable facts and should be direct and simple.  Opting for spicy language over plain vanilla only invites legal indigestion.

© Caswell Bell & Hillison LLP          Attorneys and Lawyers, Fresno, California