Debt Collection Flashcards
Ways to collect an outstanding debt
(1) Direct communications with debtor,
(2) Filing a lawsuit,
(3) Seeking to take possession of or to sell property securing the debt, or
(4) Hiring a debt collection service
FDCPA (Federal Debt Collection Practices Act)
(1) Allows debtors to challenge improper collection practices
(2) Provides path to determine validity and accuracy of asserted debts, and
(3) Establishes ethical guidelines for the collection of consumer debts
Only applies to 3rd party debt collectors
FDCPA Prohibitions
- (1) ‘any false, deceptive, or misleading representation or means in connection with the collection of any debt.’”
- (2) harass or annoy, threaten with arrest, or threaten legal action unless litigation actually is being contemplated
- (3) in first communication, required to notify about the ability to challenge the validity of a debt and the right to ask the collection agency to “validate” the debt
- (4) Contact directly if they know debtor has counsel
- (5) Contact before 8am or after 9pm
- Does not prohibit contacting debtor on holidays or weekends unless they “know or have reason to know that doing so would be ‘inconvenient’ to the debtor.”
Cease and desist, collector options
(1) Alert the debtor that the debt has been cancelled,
(2) Stop contacting the debtor about the debt, or
(3) Bring a lawsuit against the debtor
Violation can lead to damages including attorney’s fees
FDCPA Enforcment
- Administrative enforcement and private right of action
- Private action may recover
- Actual damages
- Statutory damages
- Attorney’s fees
- Costs for violations of the terms of the FDCPA
1 year stat. of limitations
Venue for FDCPA Actions
(1) Where the real property is,
(2) where the consumer signed the contract, or
(3) where the consumer resides
Heintz v. Jenkins
ALL lawyers are debt collectors subject to the FDCPA and WCPA (Wisconsin consumer protection act)
Bartlett v Heibl
(1) a template dunning letter from the court
(2) a letter can violate the FDCPA for failing to explain how debtor rights work together
(3) no need for debtor to have even read the letter
(4) strong policy of seeking to not confuse the debtor
Nielsen v. Dickerson
(1) a dunning letter signed by an attorney must have that attorney’s input
(2) sophisticated entities will not be let off for a mistake of law on an FDCPA violation claim
Bona fide mistake defense requirements
(1) Mistake of law or fact
- Majority view is no mistakes of law, only to clerical and factual errors
- Growing minority accepts mistakes of law
(2) Debt collector must prove, by a preponderance of the evidence, that the violation of the FDCPA was not intentional
- 7th circuit - intent to commit the act
- 6th circuit - intent to violate the statute
Avila - The defense is only allowed when the law is unsettled/ambiguous, not when it is reasonably clear
Causes of lender liability
(1) breach of contract,
(2) negligence or negligent misrepresentation,
(3) breach of fiduciary duty,
(4) breach of the duty of good faith and fair dealing,
(5) fraudulent misrepresentation or fraudulent concealment, and
(6) breach of the federal and state securities laws
Debtor Use of Lender Misrepresentation
Allegations of fraud or misrepresentation may be used
- (1) as a defense to the enforcement of any debt, promissory note, guaranty or other contract, or
- (2) as grounds for seeking affirmative damages against a party in tort
Elements Misrepresentation
(1) A representation of fact was made;
(2) The representation was false;
(3) The defendant made the representation
(a) fraudulently
(b) recklessly, or
(c) negligently
and
(4) The plaintiff believed such representation to be true and relied thereon to its detriment
Causes of action against lenders arising out of contract fall into three major categories
(1) Breach of an oral commitment to lend or to renew a loan;
(2) Breach of an express agreement; or
(3) Breach of the lender’s obligation of good faith and fair dealing.
breach of oral or written contracts require the plaintiff to establish
(1) the existence of the agreement, and
(2) that the terms are definite enough to be enforceable.
Evidence of indebtedness is evidence of a contract
Valid Contract Requires
(1) An objective manifestation of intent
(2) Necessary manifestation of assent in oral or written agreements
(3) (Also consideration and acceptance)
Therefore, a lot of litigation here revolves around interpretation of commitment letters
Binding agreement may be found even if certain terms are left open for further negotiation
T/F: In WI, modifications of existing written agreements DO NOT require new consideration to be enforceable
True
T/F: Oral commitments can not be implied
False
Circumstance that prevents claim of breach of good faith
when the allegedly offending conduct is specifically authorized by the terms of the contract (First Bank of Whiting)
7th and 6th circuit split on contract claims
K.M.C. Co., Inc. v. Irving Trust Company - 6th circuit holds must have a reasonable basis to terminate credit to comply with good faith
Kham & Nates Shoes v. First Bank of Whiting - 7th circuit uses a contract standard, rather than an objective standard
Small claims cases
- 10k cap for contract and 5k for tort
- 90 days or less (large claims looking at up to a couple years)
- Venue is important. Bring the case where the debtor resides.
- Need to serve the defendants
- Sheriff, or
- Private process
- If you win your case, the debtor needs to fill out a financial disclosure of assets
Evictions
- Need 5 day notice
- Service
- If you can’t personally serve, tack it on the door
- Tacking on the door only works for evictions service
- When you win the eviction, you will get a writ of restitution
- Gets the sheriff to evict
- Can put it on the door, gives resident time to move,
