Fewer Lawsuits Mean Better Days Ahead: FDCPA Lawsuits Filed Against Collectors Down 10% in 2013

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If the mutual goal of both consumers and debt collection industry insiders is better communication, there is light at the end of the tunnel for 2013’s heated exchanges between the two sides.  The numbers prove it: 2013 saw 10% fewer cases filed under the Fair Debt Collection Practices Act (FDCPA) by consumers and their attorneys against a debt collector. 

This data, compiled and released by WebRecon LLC, shows a decline in lawsuits that has been happening for two years straight and is showing every sign of continuing this trajectory.  Specifically, 10,320 FDCPA lawsuits were present on federal district courts dockets in 2013, which is a 10.2% decline from 2012’s numbers.  2012’s numbers showed a 6.8% decline from 2011. 

Lawsuits filed by consumers against debt collectors, collections attorneys, and ARM companies saw a rapid rise in 2005 and peaked in 2011, following the brutal economic aftermath of the 2008 world financial crisis.  Fewer lawsuits claiming FDCPA violations means the industry is stabilizing and finding its footing on a path to higher customer satisfaction. 

There are multiple reasons for this but much credit can be given to the willingness of both sides to negotiate best practices in the industry.  Additionally, the recent outspokenness of key players in ARM during the CFPB’s Advance Notice of Proposed Rulemaking (ANPR) shows a willingness on behalf of the debt collection industry to meet consumers halfway. 

Despite the gains being made and the decline of FDCPA lawsuits on federal court dockets, lawsuits alleging ARM violations of the Telephone Consumer Protection Act (TCPA) have risen rapidly in 2013—up almost 70% from 2012’s numbers.  However, as this statute was originally written for telemarketers, there remains open debate concerning the scope and range of this Act as it relates to debt collection industry best practices.

FTC: When It Comes to the TCPA and FDCPA, Everything Counts

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For an industry that relies so heavily on communication devices to reach their targets, debt collectors have been carefully watching how the Federal Trade Commission interprets and enforces laws relating to their business for decades.  Collection agencies and collection attorneys have been paying particular attention to the Federal Debt Collections Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA) because the language of both acts – the first written in 1977 and the latter amendment created in 1991 – predate many modern technologies, especially text messaging and ringless voicemail.

The FTC has no rulemaking authority, but frequently uses its enforcement authority to telegraph how it plans to interpret rules and regulations going forward.  Recently, the FTC brought the first case against a collection firm based in Glendale, California that involved the sending of text messages and found that the firm had violated the clear disclosure rule of the FDCPA when it used text messages that made no reference to debt and did not obtain prior permission from the consumer.  The company in question agreed to a $1 million settlement and to accept guidelines for future collection attempts.

The ruling was enlightening because the FTC chose its words very carefully to state that it does not matter where the transmission was targeted (i.e., a land-line phone or device).  In fact, the FTC underlined the issue in a post to its web site, writing ‘Regardless of the means you choose — mail, phone, text, or something else — the law applies across the board.’

Thus, the FTC’s policy going forward is relatively clear: There will be no tolerance for “loopholes” regarding text messages or so-called “ringless voicemail” messages that bypass a mobile phone’s ringer and allow direct recording to voicemail.  The FTC clearly intends to regard any communication without clear and prominent disclosure as a violation of the FDCPA and/or the TCPA.

Is it legal to send debtors a text message in an effort to collect on a debt?

How the TCPA and FDCPA are Affecting Consumer Collections in a High Technology Environment

No matter who is making an effort to collect on a debt, there are very specific laws that must be followed.  The Telephone Consumer Protection Act (TCPA) sets forth some very specific provisions that may make it very difficult for a company to use automated technology to collect on debt.

One example of how the TCPA affects collections is that it prohibits automated recordings or any artificial voices to call any cellular phone without getting the express permission from the Debtor.  In an age when home telephone service is becoming obsolete, and most Americans carry only a cell phone, this law can cause a serious impediment to any automated collection efforts.  If an agency does violate the TCPA—the penalties are severe-$500.00 per automated call plus attorneys fees and maybe even punitive damages or a class action lawsuit.

In addition, the FDCPA requires a (FOTI) message be left when leaving any message  which basically states that certain identifying information be provided when leaving a message with a debtor – name of caller, name of entity, and the phone number or address of the entity – leaving the indebted party unlikely to return the message and pay the debt . It also opens up the collecting entity to potential third part disclosure lawsuits as well.

Despite an ever-automated world, federal regulations such as the TCPA and FDCPA are making automated collections more and more difficult.  This means that your business or the collection firm you have hired will need to use more non-automated resources, such as having staff on hand to place the calls, and lawyers with specific knowledge of collection law.  This will ensure that in the process of collecting the debt, no fines will be incurred, and the settlement will be worth the time, effort, and money expended to retrieve the debt.

Do Debt Collectors REALLY Need to Follow Their Industry Regulations?

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You don’t need me to tell you the debt collection field is filled with unscrupulous individuals looking to make a quick buck by taking advantage of the desperation of both their clients and their debtors. Left to their own devices, most debt collectors would employ every thug tactic they could think of in order to get debtors to pay up. Thankfully the debt collection field is highly regulated and any law firm or agency looking to collect debts needs to comply with these laws to the letter if they want to stay in business.

The two primary sets of regulations relating to the debt collection field are the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA). Let’s take a minute to outline what these acts state when it comes to how we can perform our duties.

The TCPA was primarily designed to rein in telemarketers, but it applies to debt collection agencies and firms as well. Under the TCPA, no debt collection professional is allowed to do the following actions:

• Call between 9 p.m. and 8 a.m. local time
• Call individuals on the Do Not Call list
• Refuse to provide their agency’s identifying information
• Solicit using automated messages
• Engage more than 2 lines of a business with automated calls

Each instance of breaking one of these regulations can result in a fine of $500 - $1,500 a piece, making the TCPA costly to violate!

The FDCPA works in much the same way, but isn’t limited exclusively to regulating telephone calls. Under the FDCPA, debt collectors can’t misrepresent themselves, their intentions, or their capabilities. The FDCPA also prevents collectors from being able to embarrass or harass their debtors through a variety of once-common practices.

For legal, financial, and ethical reasons, it’s wise to ONLY work with debt collectors who follow these regulations as closely as possible!

How the FDCPA and TCPA Effect Collections

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The Fair Debt Collections Practices Act, or the FDCPA, and the Telephone Consumer Protection Act, or TCPA, both effect technologically based collections agencies negatively. There are many provisions set forth in these acts that make it difficult for a technology based collection agency to use auto dialers, automated messaging systems, and automatically printed statements or collection notices. These regulations must be followed, yet it is difficult to follow all of them using this technology for collections.

For example, the TCPA mandates that you must provide your name, the name of the entity, and the phone number or address of the entity on any automated messages. This can be detrimental to collections efforts, as people are not likely to return your call if they know who is calling and why.

Another example of how the TCPA negatively affects technology driven collections agencies is that it prohibits automated recordings or artificial voices to call any cellular phone. This is detrimental to technology based collections agencies, because many Americans only carry a cell phone. Home telephone service is becoming a thing of the past. If you cannot contact a cell phone by automated means, you may as well give up on the automated means all together.

The provision about cell phones in the TCPA hurts countless agencies that do not even realize they are calling a cell phone. However, the way the law is written, each offense can cost the agency five hundred to fifteen hundred dollars per occurrence. This is a hefty price to pay for the cost of doing business. No agency can afford it. Therefore, most collections clients cannot be contacted by automated means.

The FDCPA also gives limitations to technology driven collection agencies. For one thing, you cannot contact someone by phone if they request no contact by that means. This cannot happen if you have an automated system, and it can be argued that by not giving someone the opportunity to deny contact you are violating the act.

Another way the FDCPA limits automated collections is by the fact that various statements must be made in every contact. The collections agent must make it clear that the call is from a debt collector, and that any information provided will be used to collect on that debt. Including this type of personal information in an automated call is nearly impossible.

As you can see, there are many reasons why technology driven collections agencies are becoming a thing of the past. Between the TCPA and the FDCPA, there are so many regulations that must be followed that automated systems are nearly obsolete. You may need to consider other means for collecting your debts.

How the TCPA can affect you in the collection of your accounts?

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The federal law Telephone Consumer Protection Act of 1991 (TCPA) affect the collection of accounts. It restricts the use of automatic dialing systems, artificial or prerecorded voice messages and SMS received by cell phones to send unsolicited advertisements.

According to the TCPA, you may not call residences before 8 a.m. or after 9 p.m. local time. This limits the collection time for the collection agencies and law firms since this is also the working time for most people.

2nd solicitors even collection agencies must maintain a “Do Not Call” (DNC) list and must be honored for 5 years. The major limitation of this law, as enacted was that it was ineffective at proactively stopping unsolicited calls in that the consumer had to request of each telemarketer to be put onto that telemarketer's do-not-call list. This burden was lifted by the Do-Not-Call Implementation Act's establishment of the National Do Not Call Registry and adoption of the National Do-Not-Call list by the Federal Communications Commission (FCC) in 2003.

3rd solicitors, collectors, telemarketers must provide their name, the name of the person or entity on whose behalf the call is being made, and a telephone number or address at which that person or entity may be contacted. This rule is an advantage for the collections agencies for a callback on the customers.

4th calls cannot be made to residences with artificial voices or recordings. Both the FCC and the Federal Trade Commission (FTC) prohibits artificial voices or recordings by telemarketers, collection agencies and solicitors to land lines and cell phones, even when the caller has an established business relationship with the customer, unless that customer specifically agrees in writing to receive such calls. Certain exemptions would remain, including those for tax-exempt charities, health care organizations, political campaigns, etc.

5th facsimile (fax) transmissions that are unsolicited are also prohibited. If a violation of the TCPA has been made, customers are entitled to collect damages directly from a collection agencies or law firms for $500 to $1,500 for each violation, or recover actual monetary loss, whichever is higher.