Texas and Federal Debt Collection

Question 1

What are the three main differences between the Texas act and the federal laws?

Answer 1

(1) The TX act applies to creditors while the FDCPA generally applies to third-party debt collectors;
(2) The federal act specifies that a debtor receives a “validation notice” of the right to dispute the debt, while the TX act has no such requirement; and
(3) The federal law has specific place and time restrictions on phone calls while the TX act does not.

Question 2

TX: Define “Consumer”

Answer 2

An individual with a consumer debt

Question 3

TX: Define “Consumer Debt”

Answer 3

An obligation primarily for personal, family, or household purposes arising from a transaction or alleged transaction

Question 4

TX: Define “Debt Collector”

Answer 4

A person who directly or indirectly engages in debt collection and includes a person who sells or offers to sell forms represented to be a collection system intended to be used to collect consumer debts.

This is broader than the Federal act because it includes both creditors and debt collectors, while the FDCPA generally is aimed at third-party debt collectors only.

Question 5

TX: What is a “third-party debt collector” and what are its statutory duties as such?

Answer 5

(1) The definition of “third party debt collector” is the same as the FDCPA’s definition of debt collector, except there are additional requirements for attorneys to be considered a third-party debt collector.
(2) Attorneys aren’t considered third-party debt collectors unless they have nonattorney employees who are regularly engaged to solicit debts for collection or regularly make contact with debtors for the purpose of collection or adjustment of debts times. Attorneys are still liable as “deb collectors” whether or not they have the requisite nonattorney staff; if they don’t have the required staff, then they are still considered debt collectors, they just don’t have to do what third-party debt collectors have to do (like have a surety bond).

(3) All third-party debt collectors are obligated to obtain a surety bond and to maintain records of disputes by consumers about their debts and to correct inaccuracies (7-05) and to disclose in communications to debtors that they are attempting to collect a debt and any information obtained will be used for
that purpose.

Question 6

TX: What are 8 prohibited debt collection methods that fall under the “threats or coercion” category?

Answer 6

(1) use of violence or other criminal means to cause harm to a person or property;
* (2) accusing falsely a person of fraud or any other crime;
(3) representing to any person other than the consumer that a consumer is willfully refusing to pay a nondisputed consumer debt when the debt is in dispute and the consumer;
(4) threatening to sell or assign to another the consumer’s obligation and falsely representing that the consumer consequently would lose a defense to the consumer debt or would be subject to illegal collection attempts;
* (5) threatening that the debtor will be arrested for nonpayment of a consumer debt without proper court proceedings;
(6) threatening to file criminal charges against a debtor when the debtor has not violated a criminal law;
* (7) threatening that nonpayment of a consumer debt will result in the seizure, repossession, or sale of the person’s property without proper court proceedings;
(8) threatening to take an action prohibited by law.

Question 7

TX: What are threats that are NOT prohibited?

Answer 7

(1) It is permissible to inform a debtor that the debtor could be arrested after proper court proceedings if the debtor has violated a Texas criminal law;
(2) It is permissible to threaten to file a civil lawsuit;
(3) It is permissible to exercise or threaten to exercise a statutory or contratual right of seizure, or repossession, or sale that doesn’t require court proceedings.

Question 8

TX: What are 4 prohibited debt collection methods that constitute “harassment?”

Answer 8

(1) using profane or obscene language or language intended to abuse unreasonably the hearer or reader (note this would apply to more than just the debtor);
(2) placing telephone calls without disclosing the name of the individual making the call and with the intent to annoy, harass, or threaten a person;
(3) causing a person to incur a long distance telephone toll, telegram fee, or other charge by failing to disclose the name of the person making the communication;
(4) causing a telephone to ring repeatedly or continuously, or making repeated or continuous telephone calls, with the intent to harass a person at the called number.

Question 9

TX: What are 5 notable “fraudulent, deceptive, or misleading misrepresentations” that have been tested on the BAR recently?

Answer 9

(1) failing to disclose clearly in any communication with the debtor the name of the person to whom the debt has been assigned or is owed when making a demand for money;
(2) misrepresenting the character, extent, or amount of a consumer debt, or misrepresenting the consumer debt’s status in a judicial or governmental proceeding:
(3) representing that a consumer debt may be increased by the addition of attorney’s fees, investigation fees, service fees, or other charges if a written contract or statute does not authorize the additional fees or charges;
(4) using a communication that purports to be from an attorney or law firm if it is not; and
(5) representing a debt is being collected by an attorney if it isn’t

Question 10

TX: What is a defense under the TDCA?

Answer 10

A defendant isn’t liable if actions resulted from bona fide error that occurred notwithstanding use of reasonable precautions.

Question 11

TX: What are the three areas that provide remedies under Texas law?

Answer 11

TDCA Remedies:

(1) Debt Collection Act by itself;
(2) Debt Collection Act violation as DTPA tie-in; and
(3) Straight DTPA violation

Question 12

TX: Remedies: Debt Collection Act by itself:

Answer 12

(1) Injunctive relief
* (2) “Actual damages”: any damages recoverable at common law, includes mental anguish but to recover mental anguish the case law requires plaintiff to show a substantial disruption of daily routine and that defendant acted with some kind of heightened culpability.
(3) Reasonable attorneys fees and costs

(4) Minimum damages of $100 for violations for third-party debt collector violating bond requirements or duty to correct files; and any debt collector representing that a consumer is willfully refusing to pay nondisputed debt
when it’s disputed.

Question 13

TX: Remedies: Debt Collection Act violation as DTPA tie-in.

Answer 13

A Debt Collection Act violation can be brought through the DTPA, which could increase damages because the consumer would pick up the ability to get DTPA additional damages. Note: there are several cases that hold a debtor would have to show “consumer standing” under the DTPA to bring a TDCA claim through the DTPA.

Commentators have criticized these opinions; however, the Texas Supreme Court hasn’t addressed the issue. So, you should hedge on that issue by noting some courts require standing to be met and then go ahead and discuss the tie-in remedies as though standing isn’t an issue.

(1) Actual damages (broader than ordinary DTPA economic damages);

(2) Additional damages: discretionary award by factfinder that can result in the
total damage award of no more that three times actual damages with a knowingly finding (defendant’s actual awareness of the falsity or unfairness of act);

(3) Reasonable and necessary attorneys fees and court costs;
(4) Taking a TDCA violation through the DTPA enhances available remedies as the TDCA doesn’t have the possibility of trebling damages.

Question 14

TX: Remedies: Straight DTPA

Answer 14

Note: It’s hard to figure how you would get consumer standing in a debt collection case; but if consumer standing is assumed and the call of the question is about Texas consumer laws. . .)

(1) Economic damages (compensatory damages for pecuniary loss);
(2) Mental anguish (substantial disruption of daily routine) with a knowingly finding (actual awareness);
(3) Additional (discretionary by factfinder) damages that may result in a total damage award of no more than three times economic damages predicated upon a knowingly finding and no more three times economic damages and mental anguish with an intentionally finding (defendant’s actual awareness and specific intent that consumer act in detrimental reliance);
(4) Reasonable and necessary attorneys fees and court costs.

Question 15

FDCPA: Definition of “Consumer”

Answer 15

A person obligated or allegedly obligated to pay a debt.

Question 16

FDCPA: Definition of “Debt”

Answer 16

Any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which money, property, insurance or services which are subject to the transaction are primary for personal, family, or household purposes.

Question 17

FDCPA: Definition of “Debt collector”

Answer 17

Any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects, directly or indirectly, debts owed or due or asserted to be owed or due to another.

Note:
(1) CREDITORS: although the FDCPA is primarily aimed at third-part debt collectors, a creditor can be treated as a debt collector if it, while in the process of collecting debt, uses any name other than its own would indicate a third person is collecting debt (TX act includes creditors)

(2) Attorneys:
(a) Act applies to lawyers if debt collection is the principal purpose of their practice OR if they regularly collect debts through litigation.
(b) Whether a lawyer “regularly” engaged in collecting debts will be decided on a case-by-case basis.

Question 18

FDCPA Location Information

Answer 18

(1) Debt collectors are generally forbidden from contacting third parties;
(2) There’s an exception for obtaining location information (consumer’s place of abode and telephone number, or place of employment)

(3) Restrictions on debt collector when contacting third parties
(a) Can’t identify employer unless asked
(b) Can’t say consumer owes a debt
(c) Can’t contact more than once unless requested by the person or unless debt
collector reasonably believes earlier response was erroneous or incomplete

Question 19

FDCPA “Mini Miranda” Warning

Answer 19

(1) Timing: in the initial written or oral communication.
(2) Contents: must disclose that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.

(3) All subsequent communications must disclose that the communication is from a
debt collector, except for formal pleading made in connection with a legal action

Note: Texas only requires statutorily defined “third-party debt collectors” to give these
warnings.

Question 20

FDCPA Validation

Answer 20

(1) Timing: within five days after initial communication, the debt collector must send a validation notice to the debtor.

(2) Contents: the written notice must contain:
(a) Amount of debt;
(b) Name of creditor to whom debt owed;
(c) A statement that unless consumer disputes the validity of the debt within thirty days, the debt collector will presume it to be valid (if consumer disputes debt then debt collector must cease collection until it obtains verification and mails the verification to the consumer; if the consumer doesn’t dispute the debt, it isn’t an admission of liability)
(d) A statement that, upon consumer’s request within thirty days, the debt collector will provide the consumer with the name and address of the original creditor, if different than current creditor

(3) Overshadowing
(a) A proper notice must be designed to give adequate information to consumers about their legal rights.
(b) A notice can contain all the required information but still violate the FDCPA because it was “overshadowed” by other material in the notice, which resulted in the consumer being misled about his or her legal rights.
(c) Most jurisdictions use the “least sophisticated consumer” test to determine whether there was overshadowing.

Question 21

FDCPA Communicating with Consumer

Answer 21

(1) Time restrictions: Generally a debt collector may not communicate with a consumer about a debt at any unusual time or place, and the FDCPA says that debt collectors shall assume that a convenient time for contact is after 8:00 a.m. and before 9:00 p.m. in the
absence of knowledge to the contrary.

(2) Place restrictions: Nor may a debt collector contact a consumer at his or her place of employment if the debt collector knows or has reason to know that the employer prohibits such communications (note: the Texas act doesn’t have specific time and place restrictions).
(3) A debt collector can’t contact a consumer if that consumer is represented by counsel and the debt collector could readily obtain the attorney’s name or address unless the attorney doesn’t respond within a reasonable time or unless the attorney consents to direct communication.

Question 22

FDCPA Defense

Answer 22

Bona Fide Error: a debt collector isn’t liable if the violation was unintentional and resulted from a bona fide error notwithstanding it maintaining procedures reasonably adapted to avoid such an error; doesn’t apply to mistakes of law, as recently held by SCOTUS.

Question 23

FDCPA Remedies

Answer 23

(1) Actual damages (won’t necessarily have to follow state-law rules on recovery
of damages; the state definition for “actual damages” isn’t used);

(2) Additional damages not to exceed $1000: debtor doesn’t need to show actual damages so a “technical” violation could yield $1000; however, these damages are discretionary and are awarded for the entire case, not for each violation;
(3) Reasonable attorneys fees and costs;
(4) The FDCPA doesn’t have any connection to the DTPA—it isn’t a tie-in to the DTPA.