Consumer Debt Collection Laws
The Fair Debt Collection Practices Act (FDCPA), codified at 15 U.S.C. §§ 1692–1692p, is the primary federal statute regulating collection of consumer debts. Some, but not all, of the FDCPA is mirrored in the Texas Debt Collection Act (TDCA), codified at Tex. Fin. Code ch. 392. Both Acts apply only to the collection of “personal, family, or household” debts, which would include all residential mortgage obligations. See 15 U.S.C. § 1692a(5); Tex. Fin. Code § 392.001(2).
Debt collectors need to be mindful of the fact that what makes a debt “personal, family, or household” is the nature of the debt at the time it is created, not the nature of the debt at the time of the foreclosure. Thus, a property that was purchased as a residence but is now being used as a rental property will still be the subject of a “consumer” debt under the FDCPA. See Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 874–75 (7th Cir. 2000).
This chapter focuses primarily on the FDCPA. That is because it is the statute that adds specific disclosure requirements, only one of which is mirrored in the TDCA. The TDCA allows recovery of actual damages, injunctive relief, and attorney’s fees pursuant to Tex. Fin. Code § 392.403, and punitive damages under appropriate circumstances. See Ledisco Financial Services, Inc. v. Viracola, 533 S.W.2d 951, 957 (Tex. App.—Texarkana 1976, no writ). It is also a tie-in statute to the Texas Deceptive Trade Practices–Consumer Protection Act. See Tex. Fin. Code § 392.404. However, actual damages often are absent from cases that involve mere notice letter violations. The FDCPA allows for recovery of actual damages, statutory damages, and attorney’s fees. 15 U.S.C. § 1692k(a). An individual plaintiff may recover statutory damages of up to $1,000, and a class may recover statutory damages of up to $500,000 or one percent of the defendant’s net worth (whichever is less), and those statutory damages are recoverable even in the absence of actual damages. 15 U.S.C. § 1692k(a).
§ 7.1:1Applicability to Attorneys
The FDCPA defines a “debt collector” as—
any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. . . For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.
15 U.S.C. § 1692a(6). Under this definition attorneys who regularly collect consumer debts are subject to the FDCPA. This applies even to attorneys whose activities are limited solely to collection litigation. Heintz v. Jenkins, 514 U.S. 291, 294 (1995).
The TDCA defines “debt collector” so broadly that both attorneys and creditors are included within the definition. See Tex. Fin. Code § 392.001(6). The TDCA also contains a separate category of “third-party debt collector” definition:
“Third-party debt collector” means a debt collector, as defined by 15 U.S.C. Section 1692a(6), but does not include an attorney collecting a debt as an attorney on behalf of and in the name of a client unless the attorney has nonattorney employees who:
(A)are regularly engaged to solicit debts for collection; or
(B)regularly make contact with debtors for the purpose of collection or adjustment of debts.
Tex. Fin. Code § 392.001(7). The TDCA imposes special requirements on third-party debt collectors. See Tex. Fin. Code §§ 392.101, 392.202, 392.304(a)(5).
§ 7.1:2Foreclosure as Debt Collection
The applicability of the FDCPA to attorneys does not resolve the question of whether foreclosure is a debt collection activity that triggers the Act. The plain language of the statute excludes from “debt collector” status persons whose business has the principal purpose of enforcing security interests, but only to the extent that such persons do not otherwise satisfy the definition of a debt collector and only if they do not run afoul of 15 U.S.C. § 1692f(6). Kaltenbach v. Richards, 464 F.3d 524, 527 (5th Cir. 2006). Section 1692f(6) forbids taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if—
(A)there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B)there is no present intention to take possession of the property; or
(C)the property is exempt by law from such dispossession or disablement.
15 U.S.C. § 1692f(6). Attorneys and trustees who seek payment of mortgage debts or who try to foreclose in violation of section 1692f(6) are debt collectors, even when performing nonjudicial foreclosures. Burnett v. Mortgage Electronic Registration Systems, 706 F.3d 1231, 1236 (10th Cir. 2013).
Courts have split on whether foreclosure is “debt collection” that is subject to the FDCPA. Multiple federal appellate courts have applied the FDCPA to foreclosure-related activities. See, e.g., Wallace v. Washington Mutual Bank., F.A., 683 F.3d 323, 326 (6th Cir. 2012); Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386 (7th Cir. 2010); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 376 (4th Cir. 2006), abrogated by Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019). As the Sixth Circuit Court of Appeals has stated:
Furthermore, in the words of one law dictionary: “To collect a debt or claim is to obtain payment or liquidation of it, either by personal solicitation or legal proceedings.” Black’s Law Dictionary 263 (6th ed. 1990). The Supreme Court relied on this passage when it declared the following in a case concerning the Act’s definition of “debt collector”: “In ordinary English, a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings is a lawyer who regularly ‘attempts’ to ‘collect’ those consumer debts.” Heintz [v. Jenkins], 514 U.S. [291,] 294 (emphasis added). Thus, if a purpose of an activity taken in relation to a debt is to “obtain payment” of the debt, the activity is properly considered debt collection. Nothing in this approach prevents mortgage foreclosure activity from constituting debt collection under the Act. See Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Colo. 1992) (explaining that “foreclosure is a method of collecting a debt by acquiring and selling secured property to satisfy a debt”). In fact, every mortgage foreclosure, judicial or otherwise, is undertaken for the very purpose of obtaining payment on the underlying debt, either by persuasion (i.e., forcing a settlement) or compulsion (i.e., obtaining a judgment of foreclosure, selling the home at auction, and applying the proceeds from the sale to pay down the outstanding debt). As one commentator has observed, the existence of redemption rights and the potential for deficiency judgments demonstrate that the purpose of foreclosure is to obtain payment on the underlying home loan. Such remedies would not exist if foreclosure were not undertaken for the purpose of obtaining payment. See Eric M. Marshall, Note, The Protective Scope of the Fair Debt Collection Practices Act: Providing Mortgagors the Protection They Deserve From Abusive Foreclosure Practices, 94 Minn. L. Rev. 1269, 1297–98 (2010). Accordingly, mortgage foreclosure is debt collection under the FDCPA.
Glazer v. Chase Home Finance LLC, 704 F.3d 453, 461 (6th Cir. 2013), abrogated by Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019).
In Texas, however, a federal court has held that the FDCPA’s distinction between collecting a debt and enforcing a security interest means that an entity’s foreclosure activities do not count as debt collection for the purposes of determining whether it is a “debt collector” under section 1692a(6). See Enis v. Bank of America, N.A., No. 3:12-CV-0295-D, 2013 WL 1721961, at *8 (N.D. Tex. Apr. 22, 2013). That decision, however, fails to address the implications of the FDCPA’s venue provision governing suits to enforce interests in real property securing consumer obligations. See 15 U.S.C. § 1692i(a)(1).
It may be tempting for attorneys to rely on the Enis decision and assume that the FDCPA does not apply to lawful foreclosure activities. However, if the question is ultimately resolved to the contrary, reliance on case law that is later overturned will not provide a defense to a FDCPA suit, because a misinterpretation of the FDCPA will never support the bona fide error defense provided by 15 U.S.C. § 1692k(c). See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010). It seems clear that until the United States Supreme Court resolves any current split among courts the most prudent course of action for attorneys who conduct foreclosure proceedings is to follow the FDCPA. Nevertheless, there can be no doubt that attorneys who send “breach” or “cure” letters are subject to the FDCPA as those letters always demand money from the consumer to pay off or cure delinquency on the mortgage debt.
Attorneys should also be mindful of the fact that the TDCA is much broader than the FDCPA, including as “debt collectors” creditors collecting their own debts. See, e.g., Fraley v. BAC Home Loans Servicing, LP, No. 3:11-CV-1060-N-BK, 2012 WL 779130, at *5 (N.D. Tex. Jan. 10, 2012), rec. adopted, 2012 WL 779654 (N.D. Tex. Mar. 9, 2012); Marquez v. Federal National Mortgage Ass’n, No. 3:10-CV-02040-L, 2011 WL 3714623, at *4 (N.D. Tex. Aug. 23, 2011). Texas courts also hold that the TDCA applies to foreclosure activities. Omrazeti v. Aurora Bank FSB, No. SA:12-CV-00730-DAE, 2013 WL 3242520, at *18 (W.D. Tex. June 25, 2013); Akintunji v. Chase Home Finance, L.L.C., No. H-11-389, 2011 WL 2470709, at *3 (S.D. Tex. June 20, 2011).
§ 7.2Basic Requirements of FDCPA
The FDCPA contains two primary notice requirements, one of which is mirrored in the TDCA and one of which is not. Section 1692g(a) requires what is commonly known as a validation notice. See 15 U.S.C. § 1692g(a). This provision has no state law counterpart. Section 1692e(11) mandates what is known in the collection industry as the “mini-Miranda” notice. See 15 U.S.C. § 1692e(11). This provision is mirrored in the TDCA at Tex. Fin. Code § 392.304(a)(5).
§ 7.2:1Least Sophisticated Consumer Standard
Courts evaluate potential FDCPA violations under an unsophisticated or least sophisticated consumer standard. Goswami v. American Collections Enterprises, Inc., 377 F.3d 488, 495 (5th Cir. 2004). The plaintiff-debtor is presumed to be neither shrewd nor experienced in dealing with creditors. Goswami, 377 F.3d at 495. The least sophisticated consumer standard serves the dual purpose of protecting all consumers, including the inexperienced, the untrained, and the credulous, from deceptive debt collection practices and protecting debt collectors against liability for bizarre or idiosyncratic consumer interpretations of collection materials. Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232, 1236 (5th Cir. 1997). The unsophisticated consumer standard serves the same purposes and apparently would lead to the same results in most cases, except that it is designed to protect consumers of below average sophistication or intelligence without having the standard tied to the very last rung on the sophistication ladder. Taylor, 103 F.3d at 1236. To date, the Fifth Circuit Court of Appeals has declined to choose between the two standards. McMurray v. ProCollect, Inc., 687 F.3d 665, 669 n.3 (5th Cir. 2012).
Within five days of a debt collector’s initial communication with a consumer in connection with the collection of a debt the collector must send the consumer a notice containing—
(1)the amount of the debt;
(2)the name of the creditor to whom the debt is owed;
(3)a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4)a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5)a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
15 U.S.C. § 1692g(a). Each portion of the validation notice contains pitfalls for the foreclosure attorney.
Total Amount Due: The “amount of the debt” is the total amount due at the time the notice is sent. A notice that does not state that full amount is deficient, even if the sender was unable to obtain that amount. See Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 875 (7th Cir. 2000). If the balance includes sums other than principal and interest (such as attorney’s fees or other irregular charges) those charges should be specifically identified in the notice. If the debt is subject to accruing interest or other charges some courts have indicated that the notice should contain the following additional disclaimer:
Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800-[phone number].
Miller, 214 F.3d at 876; Dragon v. I.C. System, Inc., 483 F. Supp. 2d 198 (D. Conn. 2007).
In at least one Texas case, the court of appeals held that a creditor could be liable for wrongful foreclosure by failing to inform the borrower that a payoff number had a deadline. See Waterfield Mortgage Co. v. Rodriguez, 929 S.W.2d 641 (Tex. App.—San Antonio 1996, no pet.). Unfortunately, the rule against overshadowing the validation notice (addressed below) makes setting a payment deadline problematic. The disclaimer suggested by Miller and Dragon may solve this problem.
Identification of Creditor: Under the FDCPA, a “creditor” is—
any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
15 U.S.C. § 1692a(4). In preparing the validation notice care should be taken to ensure that the creditor is correctly identified.
First Thirty-Day Notice: The first of the thirty-day notices refers to the assumption by the debt collector that the debt is valid. There is no general assumption of validity of the debt by others, and the letter should not imply any such assumption. The statute requires reference to assumption by the debt collector, not the creditor, a court, or any other entity.
The first thirty-day notice also does not refer to a requirement that the debtor dispute the debt in writing, and in drafting an FDCPA compliant letter, no reference should be made to such a requirement. See 15 U.S.C. § 1692g(a)(3). The imposition of a writing requirement to avoid the collector’s assumption of validity violates the FDCPA. See Camacho v. Bridgeport Financial, Inc., 430 F.3d 1078, 1081 (9th Cir. 2005); see also Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282, 285–86 (2d Cir. 2013) (following Camacho); Osborn v. Ekpsz, LLC, 821 F. Supp. 2d 859, 869 (S.D. Tex. 2011) (same).
Second and Third Thirty-Day Notices: In contrast to the first of the thirty-day notices, the second and third thirty-day notices must refer to a writing requirement because it is necessary for a consumer to dispute the debt in writing in order to properly invoke his rights under this section. See 15 U.S.C. § 1692g(a)(4), (5). Even if the debt collector’s policy is to honor oral disputes, the validation notice used in the debt collector’s letter should still contain the appropriate writing requirements, as this is necessary to ensure the consumer properly understands his rights under the Act. McCabe v. Crawford & Co., 272 F. Supp. 2d 736, 743–44 (N.D. Ill. 2003). The first and second thirty-day notices must also refer to disputing all or part of the debt. Simply referring to disputing the debt is insufficient.
Overshadowing Prohibited: Multiple courts have held that the validation notice must not contain statements that are overshadowed or contradicted by other notices following the validation notice during the thirty-day period. Russell v. Equifax A.R.S., 74 F.3d 30, 34–35 (2d Cir. 1996); Miller v. Payco-General American Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991); Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225 (9th Cir. 1988). Placement of the validation notice on the reverse side of a form letter will not be considered sufficient notice. The validation notice disclosures must be of a type size and color that will render them legible. They must be large enough to be easily read and prominent enough to be noticed by even the “least sophisticated” debtor. See Russell, 74 F.3d at 34–35 (discussing “least sophisticated consumer” standard). See discussion at section 7.2:1 above.
When crafting a notice letter related to acceleration or foreclosure, an attorney must recognize that a notice provision such as the twenty-day period referenced in Texas Property Code section 51.002 is merely the minimum and not a maximum. If a validation notice is combined with a section 51.002 foreclosure notice, the letter should be crafted so that the deadline for section 51.002 purposes does not overshadow or contradict the thirty-day validation notice.
Timing of Validation Notice: The validation notice must be given within five days of the initial communication with the consumer. 15 U.S.C. § 1692g(a). A communication in the form of a formal pleading in a civil action is not an initial communication for purposes of the validation notice deadline. 15 U.S.C. § 1692g(d). However, the FDCPA does not define “formal pleading.” While an original petition is certainly a formal pleading, it is not clear that discovery or other motions will fall under this exception. It is similarly unclear whether an application for an expedited foreclosure order under Tex. R. Civ. P. 736 is a formal pleading. Until the Texas courts determine whether a rule 736 application is a “formal pleading,” the safe course of action may be to assume that it is not.
§ 7.2:3Disputes and Requests for Validation
If a consumer notifies the debt collector in writing within the thirty-day validation period that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector may not continue attempting to collect the debt, or any disputed portion thereof, until the debt collector “obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.” 15 U.S.C. § 1692g(b). See form 7-1 in this manual for an affidavit for verification of debt. Upon the consumer’s written request within the thirty-day period, the debt collector must provide the consumer with the name of the original creditor, if different from the current creditor. 15 U.S.C. § 1692g(a), (b).
The Act does not specify what quantity or type of information is required to validate a debt. Certainly, if the dispute pertains to forgery, fraud, or identity theft, the response should address those specific claims and include copies of documents purportedly signed by the consumer such as the note and the deed of trust. However, a response to a general dispute may be sufficient if it includes an account history or copies of relevant statements and a representation that the collector has checked with the creditor and verified that the consumer owes the amount asserted. See, e.g., Clark v. Capital Credit & Collection Services, Inc., 460 F.3d 1162, 1173–74 (9th Cir. 2006); Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999); Anderson v. Frederick J. Hanna & Associates, 361 F. Supp. 2d 1379, 1383 (ND Ga. 2005).
§ 7.2:4The Debt Validation Notice
A debt collector must disclose in the initial oral or written communication with the consumer what was commonly known as the “mini-Miranda” warning, which is that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose. 12 C.F.R. § 1006.18. The full requirements of the notice for the validation of debt can be found at 12 C.F.R. § 1006.34.
In all subsequent communications with the consumer the debt collector must disclose that the communication is from a debt collector. 15 U.S.C. § 1692e(11). The TDCA imposes an identical requirement upon third-party debt collectors. See Tex. Fin. Code § 392.304(a)(5).
§ 7.2:5Additional “Safe Harbor” Provisions
The following “safe harbor” disclaimers have been approved by various courts to address the situations noted.
If a suit may be filed during the validation period:
The law does not require me to wait until the end of the thirty-day period before suing you to collect this debt. If, however, you request proof of the debt or the name and address of the original creditor within the thirty-day period that begins with your receipt of this letter, the law requires me to suspend my efforts (through litigation or otherwise) to collect the debt until I mail the requested information to you.
Bartlett v. Heibl, 128 F.3d 497, 502 (7th Cir. 1997).
When a citation or summons will be served during the validation period:
This advice pertains to your dealings with me as a debt collector. It does not affect your dealings with the court, and in particular it does not change the time at which you must answer the complaint [or other legal pleading]. The summons is a command from the court, not from me, and you must follow its instructions even if you dispute the validity or amount of the debt. The advice in this letter also does not affect my relations with the court. As a lawyer, I may file papers in the suit according to the court’s rules and the judge’s instructions.
Goldman v. Cohen, 445 F.3d 152, 157 (2d Cir. 2006) (quoting Thomas v. Law Firm of Simpson & Cybak, 392 F.3d 914, 919–20 (7th Cir. 2004)).
Whether interest will continue to accrue on a debt:
As of the date of this letter, you owe $ ___ [the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800-[phone number].
Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 876 (7th Cir. 2000).
The FDCPA permits a debt collector to try to locate a consumer. However, the information that may be sought is limited. The term location information means a consumer’s place of abode and his telephone number at such place, or his place of employment. 15 U.S.C. § 1692a(7). This should be sufficient information to enable service of process.
When communicating with any person—other than the consumer—for the purpose of obtaining location information, the debt collector must identify himself, state that he is confirming or correcting location information concerning the consumer and, only if expressly requested, the identity of the debt collector’s employer. 15 U.S.C. § 1692b(1). A location communication must not disclose that the consumer owes a debt. 15 U.S.C. § 1692b(2). Furthermore, in making location calls a debt collector must not—
•communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
•communicate by post card;
•use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt;
•communicate with any person other than the consumer’s attorney, at any time after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.
See 15 U.S.C. § 1692b(3)–(6).
The FDCPA contains a number of provisions dealing with the timing of communications and the persons to whom collection-related communications may be directed as discussed below. See 15 U.S.C. § 1692c. For the purposes of section 1692c, the term consumer includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator. 15 U.S.C. § 1692c(d).
§ 7.4:1Communications at Inconvenient Times
Unless the consumer gives prior consent directly to the debt collector, or a court of competent jurisdiction gives express permission, a debt collector may not communicate with a consumer in connection with the collection of any debt at any unusual time or place or at a time or place known to be inconvenient to the consumer. 15 U.S.C. § 1692c(a)(1). The debt collector is required to assume that the convenient time for communicating with a consumer is after 8:00 a.m. and before 9:00 p.m., local time at the consumer’s location. 15 U.S.C. § 1692c(a)(1).
A debt collector must not communicate with the consumer at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication. 15 U.S.C. § 1692c(a)(3).
If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the debt collector is to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except—
(1)to advise the consumer that the debt collector’s further efforts are being terminated;
(2)to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3)where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
15 U.S.C. § 1692c(c). If the consumer gives such notice by mail, notification is complete upon receipt. 15 U.S.C. § 1692c(c).
Though section 1692c(c) seems to imply that a consumer could block the pursuit of litigation through a refusal to pay or a demand that communications cease, the Supreme Court has rejected that idea. See Heintz v. Jenkins, 514 U.S. 291, 296–97 (1995).
§ 7.4:3Communications with Consumers Who Have Attorneys
If the debt collector knows the consumer is represented by an attorney with respect to the debt and has knowledge of, or can readily ascertain, such attorney’s name and address, the debt collector may not communicate with any person other than that attorney. Knowledge of prior representation with regard to a different debt does not necessarily preclude the debt collector from communicating directly with the consumer on a subsequent collection matter. Robinson v. Trans-world Systems, Inc., 876 F. Supp. 385, 390 (N.D.N.Y. 1995). Furthermore, a debt collector must have actual knowledge. The creditor’s knowledge of legal representation is not imputed to its attorney. Schmitt v. FMA Alliance, 398 F.3d 995, 997–98 (8th Cir. 2005).
However, the debt collector may communicate with the consumer if the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer. 15 U.S.C. § 1692c(a)(2). Although the Act does not define what constitutes a “reasonable time,” the question is probably irrelevant in the case of attorney debt collectors. The more restrictive provisions of Tex. Disciplinary Rules Prof’l Conduct R. 4.02 would prohibit communicating with a represented person even if the person’s attorney is nonresponsive.
A letter directed to the consumer’s attorney should be addressed specifically to the attorney and not addressed to the consumer in care of the attorney. In Clark’s Jewelers v. Humble, 823 P.2d 818 (Kan. App. 1991), the debtors hired an attorney who directed the collection agency to communicate solely with him. The agency continued to write to the debtors, in care of the attorney, rather that addressing its correspondence to the attorney himself. The court of appeals held that this conduct violated the Act as it was a direct communication with the debtors. Clark’s Jewelers, 823 P.2d at 820–21.
§ 7.4:4Third-Party Communications
Except as provided for location calls, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, the consumer’s attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector. 15 U.S.C. § 1692c(b).
Tex. R. Civ. P. 736, the expedited foreclosure rule for certain loans, was originally drafted with this problem in mind. Former rule 736(8)(B) stated the following:
(B) Form of Order. The order shall recite the mailing address and legal description of the property, direct that foreclosure proceed under the security instrument and Tex. Prop. Code § 51.002, provide that a copy of the order shall be sent to respondent with the notice of sale, provide that applicant may communicate with the respondent and all third parties reasonably necessary to conduct the foreclosure sale, and, if respondent is represented by counsel, direct that notice of the foreclosure sale date shall also be mailed to counsel by certified mail.
Tex. R. Civ. P. 736 (1998, amended 2012) (emphasis added). Because the rule has since been amended, attorneys would be wise to include in their court orders such consent because the authority to communicate is no longer expressly enumerated in the rule.
§ 7.4:5Disclosure of Mortgage Information to Surviving Spouse
Section 343.103 of the Texas Finance Code requires a mortgage servicer and lender to provide information on a home loan within thirty days of receiving a request by the surviving spouse of a mortgagor of the home. The requirements for the surviving spouse to prove his status are set out in section 343.103(c), and section 343.103(d) requires notice in the request letter that reads, “THIS REQUEST IS MADE PURSUANT TO TEXAS FINANCE CODE SECTION 343.103. SUBSEQUENT DISCLOSURE OF INFORMATION IS NOT IN CONFLICT WITH THE GRAMM-LEACH-BLILEY ACT UNDER 15 U.S.C. SECTION 6802(e)(8).” See Tex. Fin. Code § 343.103(c), (d).
A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. 15 U.S.C. § 1692d. The terms harassment or abuse include expressly, but are not limited to—
(1)the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person;
(2)the use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader;
(3)the publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of 15 U.S.C. §§ 1681a(f) or 1681b(3) (the sections governing who is a consumer reporting agency and who may be given credit reports);
(4)the advertisement for sale of any debt to coerce payment of the debt;
(5)causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with the intent to annoy, abuse or harass any person at the called number; or
(6)except as provided in section 1692b (acquisition of location information), the placement of telephone calls without meaningful disclosure of the caller’s identity.
15 U.S.C. § 1692d(1)–(6). The corresponding statute under the TDCA is Tex. Fin. Code § 392.302.
§ 7.6False 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. The terms false, deceptive, or misleading include expressly, but are not limited to—
(1)the false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any state, including the use of any badge, uniform, or facsimile thereof;
(2)the false representation of—
(A)the character, amount, or legal status of any debt; or
(B)any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt;
(3)the false representation or implication that any individual is an attorney or that any communication is from an attorney;
(4)the representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector intends to take such action;
(5)the threat to take any action that cannot legally be taken or that is not intended to be taken; [recognized as repealed by implication by Townsend v. Quantum3 Group, LLC, 535 B.R. 415 (M.D. Fla. 2015)]
(6)the false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to—
(A)lose any claim or defense to payment of the debt; or
(B)become subject to any practice prohibited by the subchapter governing debt collection practices;
(7)the false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer;
(8)communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed (Note that an oral dispute is sufficient for a consumer to invoke the provisions of this section 1692e(8). Brady v. Credit Recovery Co., 160 F.3d 64 (1st Cir. 1998).);
(9)the use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any state, or which creates a false impression as to its source, authorization, or approval;
(10)the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer; [recognized as repealed by implication by Townsend, 535 B.R. 415]
(11)except for communications to acquire location information under section 1692b, the failure to disclose clearly in all communications made to collect a debt or to obtain information about a consumer “that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose”;
(12)the false representation or implication that accounts have been turned over to innocent purchasers for value;
(13)the false representation or implication that documents are legal process;
(14)the use of any business, company or organization name other than the true name of the debt collector’s business, company or organization;
(15)the false representation or implication that documents are not legal process forms or do not require action by the consumer; or
(16)the false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by 15 U.S.C. § 1681a(f).
15 U.S.C. § 1692e(1)–(16). The corresponding statute under the TDCA is Tex. Fin. Code § 392.304. At the time of publication, this section of the Texas Finance Code is not affected by the ruling in Townsend, 535 B.R. 415.
Suing for legal fees or other charges that are neither agreed to by the debtor nor otherwise authorized by law will be a violation of the Act. See Newman, 912 F. Supp. at 1369. Even when a note provides for fees those fees may not be demanded before judgment unless the note allows for fees upon placement of the account, rather than when “awarded by the court” or to “the prevailing party.” Compare Bernstein v. Howe, No. IP 02-192-C-K/H, 2003 WL 1702254 (S.D. Ind. Mar. 31, 2003), with Shapiro v. Riddle & Associates, P.C., 351 F.3d 63 (2d Cir. 2003), and James v. Olympus Servicing, L.P., No. 02 C 2016, 2003 WL 21011804 (N.D. Ill. May 5, 2003).
Section 1692g(a) of the FDCPA does not require a validation notice to itemize the components of the amount of the debt. However, if the current balance includes attorney’s fees, collection costs, title fees, or sums other than principal, interest, and late fees those other charges should be itemized. See Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 566 (7th Cir. 2004). Failing to include such a breakdown could make an unexplained balance misleading and deceptive.
In connection with a residential mortgage foreclosure, the failure to give a statutorily required notice of intention to accelerate and of opportunity to cure has been held to violate section 1692e. Crossley v. Lieberman, 868 F.2d 566, 571 (3d Cir. 1989).
A letter to a consumer that references a creditor as “plaintiff” and makes demand for “plaintiff’s damages and costs” when no suit has yet been filed has been held to violate section 1692e. Crossley, 868 F.2d at 571.
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. The term unfair practices includes expressly, but is not limited to—
(1)the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law; [recognized as repealed by implication by Townsend v. Quantum3 Group, LLC, 535 B.R. 415 (M.D. Fla. 2015)]
(2)the acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit;
(3)the solicitation by a debt collector of any postdated check or other postdated instrument for the purpose of threatening or instituting criminal prosecution;
(4)depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument;
(5)causing charges for communications (including, but not limited to, collect telephone calls and telegram fees) to be made to any person by concealment of the true purpose of the communication;
(6)taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if—
(A)there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B)there is no present intention to take possession of the property; or
(C)the property is exempt by law from such dispossession or disablement;
(7)communicating with a consumer regarding a debt by post card; or
(8)using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.
15 U.S.C. § 1692f(1)–(8). The corresponding statute under the TDCA is Tex. Fin. Code § 392.303. At the time of publication, this section of the Texas Finance Code is not affected by the ruling in Townsend, 535 B.R. 415.
A debt collector’s filing of suit on a time-barred debt without first making reasonable inquiry on whether limitations have been tolled is an unfair or unconscionable means of collecting a debt. Kimber v. Federal Financial Corp., 668 F. Supp. 1480, 1487 (M.D. Ala. 1987).
If the consumer owes multiple debts and makes a single payment to be applied to one or more of the debts, the debt collector may not apply the payment to any debt which the consumer is disputing. Furthermore, if the consumer has given specific directions as to how the payment should be applied, the debt collector must apply the payment in accordance with such instructions. 15 U.S.C. § 1692h.
§ 7.9Venue for Foreclosure Actions
Venue for an action to enforce an interest in real property that secures a consumer’s obligation must be brought only in a judicial district or similar legal entity in which such real property is located. 15 U.S.C. § 1692i(a)(1). This provision is consistent with Tex. Civ. Prac. & Rem. Code § 15.011 (action must be brought in the county where the real property is located).
A suit that does not seek to foreclose but that seeks a judgment for a postforeclosure deficiency must be brought in the judicial district or similar legal entity in which such consumer signed the contract sued upon or in which such consumer resides at the commencement of the action. 15 U.S.C. § 1692i(a)(2); see also Tex. Bus. & Com. Code § 17.46(b)(23) (making it a violation of the Texas Deceptive Trade
Practices–Consumer Protection Act’s (DTPA’s) “laundry list” to file suit in a different county than that which would be mandated by section 1692i). If the DTPA was in conflict with 15 U.S.C. § 1692i, the venue provisions of the FDCPA would preempt the state law venue provisions to the contrary. Martinez v. Albuquerque Collection Services, Inc., 867 F. Supp. 1495, 1501 (D. N.M. 1994).
Mayer, John. “Fair Debt Collection.” In Texas Bar College Summer School Course, 2016. Austin: State Bar of Texas, 2016.
Stevenson, Casey S. “Fair Debt Collection Practices Act.” In Collections & Creditors’ Rights Course, 2019. Austin: State Bar of Texas, 2019.