I did an interview with Steve Koval where we discussed many aspects of dealing with debt collectors and suing debt collectors under the Fair Debt Collection Practices Act (FDCPA). We have the first part of the interview here and the second part is also on our blog. Here is the third part. The final part is here.
John: We should probably define some of these terms very quickly.
A debt collector is somebody other than the original creditor. It’s a collection agency, or what we see a lot of is debt buyers. They are people that go and buy up defaulted or very old debt.
Threatening by a debt collector when they can’t, or won’t, carry out that treat violates the Fair Debt Collections Practices Act.
The second area that you mentioned, and this is probably the biggest area that we see here in Alabama, is debt collectors illegally contacting third parties.
Steve, walk us through what a third party is, and when is it’s allowable for a debt collector to call a third party to get location information. Walk us through that whole process, if you will.
Steve: I think I’ll use an example. I had a client who was a service member. He was in the Navy.
There were actually multiple violations. One was that they threatened him with arrest, which they should not have done.
Focusing on the third-party communication, they called his parents. This is an adult, someone who is in our Armed Services. They’re calling the parents and saying, “Your son owes this much money to this party. If you don’t pay the bill for your child, one, we’re going to have him arrested, and two, we’re going to contact his commanding officer.”
That example I just gave is several violations. As far as the third-party communications, one, they contacted his parents. The parents weren’t on this credit card. They had no ties to this except that they were my client’s parents. Two, they threatened to contact a third party. A threat like that is a violation, even if they don’t do it. The threat itself is a violation of the law.
If you were married, subsequently got divorced and they’re calling your ex-wife, they may not realize they’re calling your ex-wife, but it doesn’t matter. They can’t call your ex-wife and give her that information. Again, that’s an improper third-party communication.
If you’re married and they talk to your current wife, that’s not against the law. Debt collectors are allowed to talk with spouses.
John: I’ll go back to the ex-wife or ex-husband. I know you saw this a lot practicing in family law. They contact the ex-spouse and that person says, “I’m not married to Bob anymore. Leave me alone.” I’m sure you see this where the debt collector says, “It doesn’t matter. You were married at one time. I’m going to keep calling you.”
Steve: That’s similar to the case I was just talking about with the Armed Services. I actually had two clients. My clients were both the person in the Navy and their parents because the parents also brought a suit. They kept calling the parents and harassing them.
It would be the same thing with the situation you’re talking about. The ex-husband, who may not even know that the ex-wife is being called, has a claim under the Fair Debt Collection Practices Act because they’ve been contacting a third party about his private matters.
The ex-wife is getting these daily phone calls harassing her to get forwarding information, or they’re telling her that somehow she’s liable on this debt. She had nothing to do with it except that she was married at one point to this guy.
Maybe she was obligated on the credit card. Let’s just assume it was a credit card, and that she was a co-obligor or a joint signer. She’s not an authorized user, but if she’s one of the obligated parties to pay, then that’s a different story. Often, that’s not the case.
If we can digress for just a second, John, while we’re talking about divorced folks. I did a lot of this work for a long time.
There’s a very common misconception. When folks get divorced, they usually divide up the debts and the assets. These days the focus is more on debts, because usually there aren’t a lot of assets.
If you were jointly obligated on a credit card with your ex-husband, but the divorce decree says that the husband is going to pay, the creditor or person who gave you the credit really doesn’t care about that. They’re not a party to that divorce decree.
They do have the right to go after you. Don’t assume that just because the divorce decree says one thing that you can’t be sued on it.
If you can, you want to monitor and make sure that those payments are being made. The reason is that, one, it will damage your credit and two, there may ultimately be a lawsuit against you, and collection activity as well.
John: I think that’s a critical point. We as lawyers that practice in this area know that a lot of lawyers don’t know that. My background is in personal injury and wrongful death cases. For years, I didn’t know this stuff. I had no idea that calling a third party was illegal. I think most lawyers are that way.
If most lawyers don’t know this is the case, then for regular folks who aren’t lawyers, this is a very confusing thing. You have a judge up there saying, “All right, Mr. ex-husband, you aren’t responsible for the Discover Card.” It seems like, “The judge said that, so I’m not responsible.” As you said Steve, the Discover Card wasn’t there in that courtroom. They’re not bound by that order. That’s kind of a trap that a lot of people fall into.
We’ll touch on this a little later, how divorce often leads to debt collection abuse just by the nature of going through such a traumatic event.
I want to come back for just a second to third parties. What is your insight into why a debt collector collecting debt on a 40-year-old man or woman would call their parents, or their brother or sister? Why do they do that?
Steve: It’s very effective. It reminds me of on TV. You see these crime programs where someone’s going to shoot somebody. The person who’s about to be shot says, “I don’t care if you shoot me.”
Then the criminal thinks about it and he points the gun at a loved one of that person. Then they say, “Okay, I’ll tell you whatever you want. I’ll give you all my money, whatever it is.” That’s sort of the same approach with this.
Somebody may tolerate phone calls from a debt collector coming to themselves. Either they don’t answer their phone, or it just doesn’t particularly bother them.
Man, don’t start calling my parents or my brother! One reason is, particularly with parents, most parents are going to be very upset if they find out that their child is in trouble. They think, “Oh my gosh, poor Steve! He can’t pay his bills. We have to offer to help him out.”
In a nutshell, yes, it’s very effective. That is why they do it. It really gets the attention of the person who owes the money. It’s coercion. It’s illegal, and it’s a really rotten thing to do to somebody. Why they do it is because it works like a charm.
John: I think that’s absolutely right. If somebody has borrowed money from you and not paid you back, let’s say it’s your family member and you see them at Thanksgiving, it’s kind of a little awkward. Who’s going to bring that up? The same thing happens when they call our brothers, sisters, parents or adult children. It’s kind of this thing that hangs in the air. It makes everything awkward.
You tell your parents, “I’m going out of town for the weekend,” and they say, “Steve, are you sure that you can afford that?” It really affects people. It’s one of the biggest things that we see here.
Steve: It’s a horrible thing.
John: A mutual friend of ours is a great lawyer that sues debt collectors up in Minnesota, Pete Barry. I think you remember this illustration he gave where he said, “Just because something is effective does not mean it’s proper.”
It would be effective to kick down your door and put a shotgun to your kid’s heads. That would get massive payment, but that doesn’t make it right.
Steve: That’s why Congress passed this law. It’s to say what the proper boundaries are for debt collection.
John: I left out one really important common third-party communication. That is to the employer.
I’ve been doing this for a while, but some of this stuff still surprises me. It just still kind of shocks me, because to me it’s so over the top. Even if you don’t know the law, you would think, “Can they really do that? It doesn’t seem like they should be able to do that.”
This kind of fits into the same category. Usually it starts with threats. They say, “I’m going to call your employer and tell them that you’re a deadbeat and you don’t pay your bills.” That’s illegal. You can’t threaten to do something like that.
What shocks me is they actually do it. You were talking about the discomfort at Thanksgiving dinner. You only see those relatives a few times a year. You have to go face your boss every day, after your boss knows that you’re having financial problems.
It’s human nature, and your boss may look at you a little bit differently and think, “Is this a person I really want to promote if they can’t manage their finances or if they’re under duress? Can I trust them? Are they going to steal from me now?” These are the kinds of things that could go through someone’s mind. It’s a really serious
Steve: It can really poison the atmosphere, or someone could lose their job they get a phone call like that. They may not know that’s why they lost their job, but it’s a very serious violation, and it happens quite a bit.
John: I’m sure you’ve seen this. A collector will continuously call the receptionist, supervisor or coworker. That expression is, “We’re going to do an office party on _____.” When they call the neighbors, it’s a block party. They have all these cute little terms for what they do.
The other thing is when they send what they call a fax verification.
Steve: I get those.
John: The thing that amazes me is that they know they’re breaking the law, and they’re not even subtle about it. There’s a permanent record of it. That goes to their arrogance.
We’re not talking about all collectors, but the abusive collectors are so arrogant as to say, “I want you to have absolute proof that I’m breaking the law. That’s how confident I am that you don’t know what your rights are, and you won’t do anything about it.”
I think we could probably have a whole call just on third parties.
Steve: The fax verification is a good one. I’ve got one of those pending right now. It’s exactly what you just said, the arrogance. At least if it’s a phone call and it’s not recorded, they can lie about it.
We’ll get to that later. That is what they’ll do. They’ll either say, “I don’t remember,” or just flat-out lie. That often happens. If your client has a fax in hand that shows who it was sent by, it’s kind of hard to deny that.
John: A collector can call a third party, but they can only get three pieces of information: your home address, your home phone, and your place of employment.
I’ve never seen a fax verification that asks for home address or home phone. These are sent to your employer, so they obviously know who your employer is. It will say, “How much does _____ make? When did _____ start working?” None of that is allowed.
It’s amazing what these guys will do. It all goes back to what you said. This is one of the absolutely most effective ways to get you to pay money. Maybe you owe it, but even if you don’t, you say, “I’m going to lose my job! I have to pay this.”
Steve: I can’t tell you how many clients I have who either did not owe a debt or knew that the amount being collected against them was too high, but they paid it anyway just because they couldn’t handle the harassment or the worry.
They thought, “They said they were going to call my boss. It’s a $300 bill. Even though I don’t owe the whole thing, I have to pay this because I can’t take the risk that they may actually call.”
I can’t guarantee a client that they won’t call because they may.
I don’t think I’ve ever had one of those that didn’t already know where my client lived and had my
client’s phone number. On its face, there’s absolutely no legitimate legal reason for them to be contacting them.
The only reason you can do that is to get location information. If you know where my client lives and you’ve already called my client, so you have my client’s phone number, why do you need location information?
I don’t think I’ve ever seen a legitimate request for location information. It’s always just another way to harass and coerce money out of the consumer.
John: We’ve talked about threats. All these things interrelate. The reason we will sue a debt collector for threatening to contact an employer is because they do it. We’re trying to minimize the damage.
Illegal threats are a very common thing. Contacting third parties is common. I believe the next one you mentioned is when a consumer will send a letter that says, “I refuse to pay,” or “Please cease and desist all contact with me.” Then the collector continues to contact them.
We should mention two quick things. First, there are lots of exceptions in the law. Steve and I are not going to be able to cover those, so we’re going to leave some of those unspoken. For example, they can send you a letter after the cease and desist that just says, “We’re going to stop collection activity.”
We’re just trying to hit the high points to give everybody who’s listening a taste of what’s out there so if something strikes a chord with you, you can say, “Let me talk to a lawyer who does this type of work to see if this applies to me.”
Briefly, why do companies continue to call after a cease and desist? Is it intentional? Is it incompetence? Is it a combination of those?
Steve: The answer is yes. It depends on the company, but usually it’s a combination.
I had a case where my client was a little bit savvier than many consumers. He sent his cease-and-desist letter by FedEx. I had the receipt and letter. We sued.
Even after suing, they said, “We don’t think it was one of our employees who signed for the letter. We’ve looked at the signature, and it doesn’t match someone who works here.” I said, “What are you telling me? Did someone from an office across the street intercept this letter?”
The point I’m trying to make is that you do have to send these letters in a way that you can document. I’m exaggerating a little bit here, but they will always say that they didn’t get it. Sometimes even when you have proof that they got it, they will say they didn’t get it. You have to send it by certified mail, FedEx, UPS or something like that.
As to why they do it, they don’t really care because most people aren’t going to hire an attorney to sue them. They make so much more money by violating the law than if they don’t. It’s just a cost of doing business.
They look at the statistics and say, “We could comply with this FDCPA law and make $1 million this year, or we could not comply with the law and make $3 million. We’ll have to pay out a few hundred thousand in claims, maybe, but we’re still $1 million-plus ahead.”
The economics of this actually make sense, from a very narrow financial interest point of view. The penalties on some of this stuff haven’t changed for 30 years. For example, $1,000 30 years ago in today’s dollars would be $3,000 or $4,000. I remember seeing the statistics.
If all they do is send a collection letter after they aren’t supposed to, it’s probably going to be considered a statutory violation, and the damages allowable to a consumer are up to $1,000. If the debt collector’s exposure is only $1,000 plus court costs and attorney fees, they may not really care because they think, “We could make more money.”
The other reason that you alluded to is that some of these places are just very sloppy. What they’re putting their energy into is squeezing money out of consumers, not processing the requests that they are not to contact people. A lot of these things routinely get thrown away right into the garbage.
John: You’ve got to be able to prove that they received it.
We had a debt collection company sign a green card.
Steve: Do you want to say what that is? People are going to think it’s immigration?
John: When you send certified mail, there’s a green card that whoever you send that to has to sign. That’s the proof that it was delivered.
They told the judge, “That’s not our signature.” It was the exact same thing as you mentioned. The client fortunately, a year before, had sent another green card to them. The identical signature was there.
Steve: It must have been the same interloper in the office, stealing the mail.
John: The judge was scratching his head up there, saying, “You’ve had the same person steal your mail over a 12-month period? I don’t find that believable.”
Sometimes clients will say, “Do I really need to spend $6 on certified mail?” Always get that green card back. You can sometimes save a dollar by not doing it, but splurge on it. It’s the best $6 you’ll spend.
If they will lie in court over getting certified mail or a FedEx package, you can absolutely believe they will lie if you just send them a regular piece of correspondence or letter. That is something we see a lot of. I assume you have this same experience.
If you’re dealing with a company that will ignore a cease-and-desist letter, that gives you some insight into their character. Normally there is some other stuff that goes with it. They will call the employer and neighbors and make the threats. You’ve just been told that this is an abusive company if they ignore your cease and desist.
As we’re talking, we need to keep in mind that normally it’s not just one of these. It’s like a buffet line. An abusive collector says, “I want some of that. I’ll take some of that and that over there.”
Steve: When John and I bring lawsuits, we set forth all the claims that our client has against the debt collector. It’s very rare that the debt collector only did one thing wrong. It’s usually multiple things. There are exceptions to that.
If they’re sloppy or abusive in one area, usually they’ll do multiple things, like the story I was talking about with the guy in the Navy. They threatened arrest, they contacted third parties, and they threatened to contact their commanding officer. They did a whole bunch of things. It wasn’t just one discreet thing.
John: Let’s see if we can finish up these broad areas. The next one you mention is that abusive debt collectors will use profanity, racial slurs, and very derogatory terms. Give us some examples of that, and answer the threshold question, “Is it really wrong to just cuss somebody out?”
Steve: It’s very wrong. That’s always a violation. Some are clearer than others. Some may be subtler, but when someone calls you a lousy, good-for-nothing deadbeat, that’s a violation of the law. They cannot do that.
Even clearer is when you start hearing four-letter words. I’m not going to give an inventory of every single bad thing they can call you. Use your imagination. If they make any reference to your ethnicity, race, religion or anything like that, that’s way over the line. That’s a violation.
I have a case pending right now. It’s probably my favorite case right now, not because I like what they did but because I hope we’re going to slam this debt collector very badly for the outrageous thing they did.
My client is Hispanic. He’s a very nice, hardworking guy. The debt collector was so stupid that he left a voicemail. He knew it was being taped. He left a voicemail message on my client’s phone using a very derogatory term for his ethnicity and used the f-word many times in the recording.
It was a really nasty phone call, and it really upset my client and his wife. My hope is that they’ll have to pay dearly for that call. It’s a relatively easy case to prove because we’ve got the recording.
John: It goes back to that arrogance. It’s one thing if you’re going to break the law and be smart about it. They are so confident that the consumer is just going to take the abuse.
Steve: Sometimes when you’re dealing with minorities, the debt collectors have the wrong belief, “A Hispanic person isn’t going to assert their rights,” which is a completely stupid thing to think. Nevertheless, I’m sure that’s what was going on in this case.
You were talking about the arrogance. The individuals who are making the calls and doing the grunt work don’t make a lot of money. A lot of it, or all of it, is on commission. They’re placed under a tremendous amount of pressure. I’m not in any way trying to justify what they do, but they take shortcuts in their minds. A shortcut is doing something illegal.
In the case I was talking about, my client doesn’t owe the debt that the abusive message was left for. It’s a very small amount. It’s not thousands of dollars. I think it’s $100 or $200. To collect $200 or so, this individual debt collector subjected his company to what I hope will be thousands of dollars worth of liability.
John: What the FDCPA provides is up to $1,000. Also, if we can prove that we’ve been harmed, we can be compensated for that. That, quite often, is emotional distress.
That’s the danger for these collectors. Certainly, cussing somebody out or using racial slurs and things of that nature, like calling parents and employers, is very distressing, which is the very reason they do it. You can be compensated for that, and the collector can be forced to pay your attorney fees.
There’s a price to be paid, but that price is only paid when we stand up and say, “Wait a minute! This is not right. I’m going to understand what my options are. Then I’m going to take action.”
The last one you mentioned at the beginning of the call was just the pure number of calls.
Some people on the phone with the collector say, “I don’t have any money. I’m sorry. I get paid next month. Call back then.” The collector says, “Okay,” and hangs up. Then they call back two minutes later. The consumer says, “What are you doing?” The collector says, “Do you have the money now? I’m going to keep calling you until you get it.”
Steve: That’s a very common one. There’s no valid reason for doing that except to make someone’s life hell. The Fair Debt Collection Practices Act does not allow a debt collector to make someone’s life hell. That’s a very clear case of harassment.
What we tell clients or prospective clients to do is to keep a log of all these phone calls. If you’re not recording them, you need to take notes and write down everything that person says. Keep it in a safe place with the time and date they called.
Particularly if you’re getting calls on the hour, you’re not going to be able to remember them all. This all goes to proving that they were harassing you.
It’s not enough to say, “They called me. I can’t remember exactly when. I can’t remember exactly what they said. It was a lot. They harassed me.” That’s generally not enough. You have to have records, or access to records, that will back up what you’re saying.
John: This is a good way to do that. Most of us have caller ID. If it’s on our cell phone, we’re going to have caller ID. They may not leave a message. The phone may just ring constantly.
Take a picture of the caller ID and send it to a safe place, like your lawyer or somebody else, so if you drop your phone in a pool, you’re not going to lose those pictures. Capture that caller ID information.
Steve, I’m sure you’ve had an experience where initially the collector will swear, “We called four times. That’s it.” Then when you get them in deposition and they’re facing perjury if they lie, and they see that the plaintiff, the consumer, can prove there were 100 calls, they say, “We just found these other 96 calls!”
Steve: Unfortunately, that’s very true.
John: Just like with the cease and desist where we want to be able to prove that they received the letter, we want to be able to prove that the calls were made.
That will be very helpful.
Steve and I have known each other for two or three years. We generally run into each other at national seminars where there is training going on for consumer lawyers. At the last one we went to in March, Steve and I were presenting and training lawyers from around the country on this stuff. We got to talking, and that’s where this came from. We thought, “Maybe this would help one person, if they could be a part of our conversation and we could share some things.”
If you have any additional questions, feel free to call me at (205) 879-2447. You can also go to my website, www.AlabamaConsumer.com.
Steve: My website is www.KovalFirm.com. My phone number is (404) 350-5900.
John: I practice in Alabama. Steve is in Georgia. I know we have people here from all over the country. There are some restrictions. We can only practice where we’re licensed, and there are some differences in the law depending on where you are even though this is a federal law.
Certainly there is state law. Steve, maybe we can talk a little bit about some of the interesting things you have in Georgia.
If you don’t live in Georgia or Alabama, go to www.NACA.net, National Association of Consumer Advocates. It’s an organization of consumer lawyers from all over the country. There is a headline across the top that says, “Find a lawyer.” You can click on there. It gives you all sorts of search capabilities by city, state and practice area. That’s a good starting point.
What we always recommend is sitting down to meet with a lawyer. Talk to them. Make sure you feel comfortable.
Steve, I’m sure this was true when you did family law, and I know it’s true when I do personal injury cases. This can be a long journey. You want to make sure you have the right connection. It’s the same thing in these consumer cases when we’re suing abusive debt collectors.
You need to make sure you feel comfortable and feel that whatever lawyer you’re talking to gives you a lot of practical, useful information. I hope we’re doing that here. If anybody has any specific questions, feel free to contact us. If you have some suggestions of things you would like us to talk about on our next teleseminar, just email Steve or me, or pick up the phone to call us. Let us know. We’ll be happy to talk about it.
Steve: If your rights have been abused or debt collectors are doing things that they shouldn’t be doing, I think it’s very important to stand up to that. It empowers people.
Most of the people who come to me don’t realize how this federal law works. They just want the abuse to stop. They don’t even think, “I can actually get money or damages for what they did to me.”
It’s like turning the tables on them. They’re threatening to sue you or do all this stuff to make your life miserable. Generally, when you file suit against them, all that stuff stops. Then you’re chasing them and they’re on the run. It really empowers people.
Every client I’ve had has been very happy they did that. It’s not just about the money. It’s psychological. There’s a shift. You realize that you don’t have to be a victim of abuse.
John: That’s a great point. We definitely need to talk about that some more on the next call.
This can be a very stressful event, having a debt collected. It can be so bad that we don’t even answer our calls anymore.
Steve: From anybody. You’re afraid.
John: You get that bad feeling deep in your gut. You think, “The phone is ringing,” or you see the voicemail light flashing. Being able to sue an abusive debt collector and stop the abuse is an opportunity to turn the page or close the chapter, however you want to think about it.
This is important, not only for you but for other consumers. If enough of us start taking action, eventually these debt collectors will say, “It’s not worth it to break the law.” We can actually do some good.