A creditor may seek to collect an outstanding debt in several ways. However, because of “abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors,” (15 U.S.C.
Whether a mistake of law made by a debt collector allows it to avoid liability by asserting a bona fide error defense under the Fair Debt Collection Practices Act.
In 2006, Respondents Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A. et al. (“Carlisle”) served Petitioner Karen Jerman with a notice of collection, which included a provision requiring the debtor to dispute the debt in writing. Carlisle based the provision on their understanding of current Sixth Circuit case law interpreting the Fair Debt Collection Practices Act (“FDCPA”). The district court concluded that the FDCPA, which governs debt collection practices, does not require the plaintiff to dispute the debt in writing and consequently the notice violated the Act. However, the court granted Carlisle immunity under the FDCPA’s “bona fide error defense,” which protects debt collectors from penalties for unintentional violations of the FDCPA. Jerman contends that the defense does not include violations resulting from legal errors such as misinterpretations of the statute. Carlisle counters that the Sixth Circuit ruling should be upheld because the plain language of the statute includes legal errors under the defense. This decision will potentially resolve a circuit split on this issue. It may also impact professional responsibility standards for attorneys involved in debt collecting and the incentives of individuals to bring suit against debt collectors where areas of the law are unsettled.
Whether a debt collector's legal error qualifies for the bona fide error defense under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692.
The Fair Debt Collection Practices Act (“FDCPA”) governs debt-collection policies but also protects debt collectors who unintentionally violate the Act. A debt collector may avoid liability for an FDCPA violation by “show[ing] by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 28 U.S.C. § 1692(k)(c).
In 2007, Petitioner Olivea Marx defaulted on her student loans. Her debt was assigned to Respondent General Revenue Corporation (GRC) for collection. In their attempts to collect the debt, Marx claims that GRC called her multiple times a day and sent a fax to her employer. Marx sued GRC under the Fair Debt Collection Practices Act (FDCPA), claiming that GRC’s attempts to collect her debt were acts of harassment in violation of the FDCPA. The District Court dismissed Marx’s claims and ordered her to pay GRC the costs of its defense. Marx argues that the FDCPA allows only an award of costs to defendants only if the plaintiff filed the suit in bad faith. In response, GRC argues that a court may award costs under Rule 54 of the Federal Rules of Civil Procedure as there is no prohibition under the FDCPA. If Marx wins, consumers face less risk of carrying the costs of defendants in lawsuits against abusive debt collecting practices. If GRC wins, debt collectors are less vulnerable to abusive negotiation tactics of attorneys who bring meritless claims that would be less expensive to settle than to litigate.
The Fair Debt Collection Practices Act (FDCPA) provides that, "[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs." 15 U.S.C. § 1692k(a) (3). Federal Rule of Civil Procedure 54(d) provides that, "[u]nless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney's fees should be allowed to the prevailing party."
The first question presented is whether a prevailing defendant in an FDCPA case may be awarded costs where the lawsuit was not "brought in bad faith and for the purpose of harassment." 2. The FDCPA defines "communication" as "conveying of information concerning a debt directly or indirectly to any person through any medium." 15 U.S.C. § 1692a(2). The statute generally bars debt collectors from communicating "in connection with the collection of any debt, with any person other than the consumer." § 1692c(b).
An exception to this bar allows a debt collector to "communicat[e]" with a debtor's employer solely to acquire "location information" about the debtor, but provides that a location information inquiry shall "not state that [the] consumer owes any debt" and not "indicate[] ... that the communication relates to the collection of a debt." § 1692b.
The second question presented is whether the FDCPA's strict limits on communications with third parties cease to apply when a debt collector, contacting a third party in connection with the collection of a debt, does not indicate the reason for the communication.
Is it unlawful for a creditor to file an accurate proof of claim for a time-barred debt in a bankruptcy proceeding?
This case provides the Supreme Court with the opportunity to resolve a conflict over the interplay between the Fair Debt Collection Practices Act (“FDCPA”) and the Bankruptcy Code. The parties disagree over whether a creditor may file an accurate proof of claim for a time-barred debt in a bankruptcy proceeding. Petitioner, Midland Funding, LLC (“Midland Funding”) argues that the Bankruptcy Code creates a right to file time-barred claims and that filing such claims does not violate the FDCPA. Midland Funding asserts that filing claims for time-barred debts helps to fulfill the objectives of the Bankruptcy Code, such as collectively addressing all claims against the bankruptcy estate. Respondent, Aleida Johnson, argues alternatively that filing time-barred claims is an unfair, misleading practice that violates the FDCPA and does nothing to further the goals of the bankruptcy process. Johnson contends that creditors file stale claims solely in hopes of taking advantage of malfunctions in the legal process and that these claims waste judicial resources.
In 2014 Respondent, Aleida Johnson, filed for bankruptcy under Chapter 13 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Alabama. See Johnson v. Midland Funding, 823 F.3d 1334, 1335 (2016). Petitioner, Midland Funding, LLC, had previously purchased Johnson’s $1,879.71 defaulted credit card debt.
Does the Fair Debt Collection Practices Act apply when an attorney, acting on behalf of a creditor, engages in non-judicial foreclosure proceedings that should be treated as debt collection?
This case asks the Supreme Court to decide whether the definition of “debt collection” in the Fair Debt Collection Practices Act (“FDCPA”) includes non-judicial foreclosure proceedings and whether the Act therefore applies to attorneys carrying out non-judicial foreclosures. Respondent McCarthy & Holthus LLP (“McCarthy”) pursued a non-judicial foreclosure of property owned by Petitioner Dennis Obduskey, who defaulted on a loan secured by the property at issue in the foreclosure. Obduskey subsequently filed suit against McCarthy, challenging the foreclosure and citing the FDCPA. The Tenth Circuit held that the FDCPA did not apply because non-judicial foreclosures do not qualify as a debt collection activity and are instead considered the enforcement of a security interest. Obduskey contends that non-judicial foreclosure proceedings are attempts to collect a debt because they demand that the debtor pay by threatening to take away his home and, if foreclosure is completed, liquidate the debt by selling the home. The outcome of this case has significant implications on how protected borrowers are and how much liability attorneys, creditors, and trustees face.
Whether the Fair Debt Collection Practices Act applies to non-judicial foreclosure proceedings.
In 2007, Petitioner Dennis Obduskey obtained a loan from Magnus Financial Corporation in the amount of $329,940 to purchase a home in Colorado. Obduskey v. Wells Fargo, 879 F.3d 1216, 1218 (10th Cir. 2018). Wells Fargo serviced the loan, which was secured by the property.
Are lawyers, appointed by the state attorney general to collect debts owed to the state, exempt from the provisions of the Fair Debt Collection Practices Act when collecting such debts; and if not, does using official letterhead of the Attorney General constitute a violation of the Act?
The Supreme Court will consider whether the Fair Debt Collection Practices Act (“FDCPA”) applies to lawyers, known as “special counsel,” appointed by a state Attorney General to collect debts owed to the state, during the performance of their duties. Various lawyers and their firms, appointed as special counsel by the Ohio Attorney General, argue that special counsel are properly defined as state “officers,” making special counsel exempt from the FDCPA. Pamela Gillie and Hazel Meadows, Ohio debtors, counter that special counsel are not “officers” but independent contractors subject to the FDCPA’s requirements. Gillie and Meadows also argue that use of Attorney General letterhead by special counsel to collect a debt is a “false, deceptive, or misleading representation” in violation of Section 1692e of the FDCPA. The Court’s decision could alter state sovereignty to collect debts and the power of state attorneys general.
1. Are special counsel—lawyers appointed by the Attorney General to undertake his duty to collect debts owed to the State—state “officers” within the meaning of 15 U.S.C. § 1692a(6)(C)?
2. Is it materially misleading under 15 U.S.C. § 1692e for special counsel to use Attorney General letterhead to convey that they are collecting debts owed to the State on behalf of the Attorney General?
As Ohio’s chief law enforcement officer, the Attorney General (the “OAG”) is charged with collecting debts owed to state entities under Ohio law. Gillie v. Law Office of Eric A. Jones, LLC, 37 F. Supp. 3d 928, 931 (S.D.
