consumer law

Debt Collection Lawsuits May Break the Law/Westbrook Law of Grand Rapids, Michigan

Huge numbers of lawsuits are filed by debt collectors and debt buyers in Michigan’s district courts every day.  Some of the larger debt buyers may file hundreds of lawsuits per year in a single district court.  These are relatively small-dollar cases, seeking anywhere from $100 up to $5,000 or more, typically on past due credit card accounts that have been written off and sold by the original creditor (in the case of a legitimate debt), to a debt buyer, and then possibly re-sold to a string of other debt buyers.

Many people who have been sued by debt collectors do not know what to do.  The debt may seem legitimate, or may even be legitimate.  Frequently these defendants simply do not contest the lawsuit, a default judgment is entered against them, and ultimately their bank accounts or wages are garnished to pay the debt collector.  The problem is that the plaintiff–the debt collector who filed the lawsuit–might have broken the law when it filed the lawsuit, or might not even have had the right to any payment at all.

The Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., prohibits debt collectors from making false or misleading statements or using unfair methods to collect consumer debts.  This includes statements made and methods used in lawsuits to collect debts.  If the plaintiff claims amounts are owed that are not actually owed, that is unlawful under 15 U.S.C. § 1692e.  If the plaintiff has filed a time-barred claim–which is typically the case if no payments have been made on the debt in six or more years–that is also a violation.  Debt collectors’ legal complaints frequently contain deceptive and misleading statements that could give rise to defenses to the debt, as well as counterclaims for monetary damages.

The following common practices among debt buyers are all grounds for relief under the FDCPA:

  • Misrepresenting the original creditor to whom the debt was owed;
  • Seeking more money than what is actually owed;
  • Including non-recoverable fees and costs in the amount sought in the lawsuit;
  • Improperly including certain fees and costs in garnishments;
  • Misrepresenting that the complaint was prepared by an attorney of law firm, when in fact it was prepared by a non-lawyer;
  • Providing false or misleading contact information;
  • Including false, misleading or fabricated documentary evidence as support for the complaint.

Many consumers sued by buyers of old defaulted debt feel they cannot afford an attorney to defend their case.  This is not necessarily true, particularly when a consumer lawyer finds that there is a viable counterclaim against the debt collector under the FDCPA.  This is because, as a remedial consumer protection statute, the FDCPA provides for the payment of attorney fees by the debt collector if a violation is proven.

If you have been sued by a debt collector, contact us for a consultation free of charge.

Spokeo v. Robins/Westbrook Law of Grand Rapids, Michigan

Many laws designed to protect individuals from corporate abuses rely in part on the imposition of “statutory damages.”  This typically means that if the plaintiff can show a violation of the law, there is some minimum amount of money that must be awarded.  These are exceptions to the general rule that a plaintiff’s recovery is limited to the amount of actual damages proven.

Statutory damages are an important part of the enforcement mechanisms in the Fair Debt Collection Practices Act (“FDCPA”), Fair Credit Reporting Act (“FCRA”), Real Estate Settlement Procedures Act (“RESPA”), Truth in Lending Act (“TILA”) and many other consumer protection laws.  This is because the availability of statutory damages acts as a deterrent to violations of the law that are destructive, but whose economic impact on any individual may be difficult to prove or speculative.  For example, where a statute such as the FCRA or FDCPA gives a consumer the right to receive certain information, a company’s failure to comply might not give rise to any provable “actual” damages.  Enforcement of those rights then depends upon statutory damages.

The United States Supreme Court was presented with a  far-reaching challenge to statutory damages in the recent case Spokeo v. Robins.  In that case, the plaintiffs in a class action had alleged that a web site used for personal investigations and background checks had violated the Fair Credit Reporting Act by failing to maintain procedures to ensure accuracy of its reports.  The plaintiff class sought statutory damages under the FCRA.  The defendant argued that because the plaintiff had not shown any “actual damages,” he lacked “standing” to bring the lawsuit under Article III of the Constitution–even though the FCRA itself provides for a cause of action that seeks only statutory damages.  Without standing, the plaintiff’s case could not be maintained.

The Spokeo case was on appeal from the United States Court of Appeals for the Ninth Circuit, which had held that violation of the FCRA itself was enough of an “injury” to satisfy the Article III standing requirements.  The United States Supreme Court disagreed in part, finding that the Ninth Circuit had failed to correctly analyze whether a “concrete” injury had been adequately alleged by the plaintiff.  The Court remanded the case for a new determination of this issue.

On its face, the Spokeo decision might appear harmful to the interests of consumers, given that many important protections in the FCRA, FDCPA, RESPA and TILA are only effectively enforceable through statutory–not actual–damages.  However, within the Court’s opinion are indications that those protections remain viable.  For example, the opinion acknowledges that a consumer’s injury need not be “tangible” in order to provide a basis for Article III standing.  It also notes that “risk of real harm” can satisfy the injury requirement for standing.  This is an especially important note in the context of statutes giving consumers the right to accurate information, where the failure to provide that information creates a real risk of harm.

In the coming months and years, it is expected that many corporations will rely on and attempt to expand on Spokeo to constrain consumer rights.  Vigilant consumer advocates should be cognizant of this and work to ensure that the courthouse doors are not closed to their clients.