The Fair Debt Collection Practices Act (FDCPA) protects consumers from abusive and harmful debt collection practices. It guards against unfair collection tactics such as harassing phone calls in the middle of the night or improper demand letters.
So why has the American Bar Association urged Congress to modify it to exclude attorneys’ litigation activities? The problem is the FDCPA was never intended to cover attorneys who pursue debts in court where they are already under the supervision of a trial judge who protects against potential abuses. Therefore, creditor attorneys—unlike all other attorneys—are subject to two conflicting sets of rules and standards, resulting in unfair “gotcha” lawsuits, higher costs for small businesses that rely on attorneys to collect legitimate debts, and more expensive credit for everyone.
When the FDCPA was first enacted in 1977, attorneys who engaged in legal activities were exempt. However, Congress removed the exemption in 1986 based in part on a belief that the revised act would only cover collection activities conducted by attorneys outside of the courtroom. Congress assumed that court-related collection lawsuits would continue to be policed solely by the judges presiding over individual cases and by the state supreme courts and bars that license attorneys.
This made sense because for centuries, all attorneys—regardless of their legal specialty or the types of clients they represent—have been regulated and disciplined primarily by the state courts and bars, not Congress, federal agencies or private litigants.
State courts and bars have extensive authority and tools to punish attorney misconduct, especially when a formal lawsuit has been filed and is before a trial judge. For example, state court and bar rules prohibit attorneys from filing frivolous lawsuits; taking legal actions to harass or intimidate defendants; or making false or deceptive claims in affidavits, motions and other litigation documents. Any attorney violating these or other court rules can be severely punished by the state court or bar, including with monetary sanctions, license suspension or even disbarment.
Why FDCPA is Unfair to Attorneys
Unfortunately, despite Congress’ intent, courts have applied the FDCPA to all attempts by attorneys to collect debts for their clients, even their litigation activities. As a result, many attorneys pursuing legitimate collection lawsuits for clients are now unfairly sued for technical FDCPA violations that cause no harm to consumers.
For example, if a creditor attorney who is suing to recover a debt that is in dispute takes a witness’ deposition to gather facts before trial without the express permission of the consumer refusing to pay the debt or the court, the attorney can be sued under the FDCPA. Similarly, an attorney can be sued for attempting to settle a case after a consumer sends a letter refusing to pay a debt. Or even for merely asking debtors to certify the accuracy of their discovery answers.
Such activities are common, harmless parts of the standard litigation process and are allowed by court rules.
In addition to being unfair, these FDCPA abuses increase attorneys’ malpractice insurance rates, discourage attorneys from accepting collection cases and make it harder for Main Street businesses to hire the local counsel they need to collect unpaid debts and stay in business. And by making it harder to collect valid debts, all consumers are forced to pay more for credit.
Bipartisan legislation known as H.R. 5082, sponsored by Reps. Alex Mooney (R-W.Va.) and Vicente Gonzalez (D-Texas), would stop these abuses while restoring the state courts’ proper role of overseeing attorneys engaged in litigation. But because the bill would not exempt attorneys’ collection activities that occur before a suit is filed or that are not related to a court case—such as improper demand letters and phone calls—consumers would still be fully protected at all stages of the collection process.
The technical reforms in H.R. 5082 are also consistent with the Federal Trade Commission’s annual recommendations to Congress from 1998 through 2006—a period spanning both Democratic and Republican administrations—that Congress exclude creditor attorneys’ litigation activities from the act.
Now is the time to restore the FDCPA to what Congress intended and the FTC has long recommended. The ABA wants all consumers protected by the law, but when formal litigation to collect a valid debt is necessary, state traditional court regulation and oversight provide the best solution.
Bob Carlson is president of the American Bar Association, the world’s largest voluntary professional organization with more than 400,000 members. He is a shareholder with the Butte, Mont., law firm of Corette Black Carlson & Mickelson P.C. This article responds to an Insight by St. Johns University School of Law professors questioning ABA’s support of H.R. 5082.