FDCPA amendment could roll back consumer rights

Last week, a bill was introduced in the U.S. House of Representatives that proposes to amend the Fair Debt Collection Practices Act. If passed, the bill will exempt attorneys from the FDCPA if they are: “serving, filing, or conveying formal legal pleadings, discovery requests, or other documents pursuant to the applicable rules of civil procedure” or “communicating in, or at the direction of, a court of law or in depositions or settlement conferences, in connection with a pending legal action to collect a debt on behalf of a client.” In other words, the bill would provide a safe-harbor from the FDCPA for attorneys engaged in litigation. The text of the bill can be found here.

InsideArm.com, a collection industry website, portrays the proposed bill as a technical amendment to the FDCPA that won’t affect a consumer’s rights. I disagree. According to the U.S. Supreme Court in Heintz v. Jenkins, 514 U.S. 291, 115 S.Ct. 1489 (1995), the FDCPA applies to debt collection attorneys who regularly engage in consumer-debt-collection activity, even when that activity consists of litigation. And several circuit courts have either expressly held or implied that false statements made in litigation can be actionable under the FDCPA.

For example, in Hemmingsen v. Messerli & Kramer, P.A., 674 F.3d 814 (8th Cir. 2012), the court held false statements made in litigation–even if not made directly to the consumer–could violate the FDCPA. Similarly,  in Sayyed v. Wolpoff & Abramson, 485 F.3d 226 (4th Cir. 2007), a case involving false statements made in legal documents, the 4th Circuit held that the FDCPA applied to such litigation activity. The Sixth Circuit implied the same thing in Miller v. Javitch, Block & Rathbone, 561 F.3d 588 (6th Cir. 2009).

The Fourth, Sixth, and Eighth Circuits encompass 16 states and are the supreme law in those states unless the U.S. Supreme Court says otherwise. So to argue that the proposed FDCPA amendments don’t affect existing consumer rights is false, at least in the 16 states in the 4th, 6th, and 8th circuits. What the bill actually does, then, is give collection attorneys a free pass under the FDCPA to lie to consumers, judges, and court personnel as long as those lies occur in the course of litigation.