As a
bankruptcy attorney, I am often referred clients who have extensive medical and
credit card debt from the attorney’s that are pursuing a personal injury claim
on their behalf. While it would be ideal
for the injury claim to be resolved prior to filing bankruptcy, often times the
debt collectors harass a client to the point that a bankruptcy case is filed
out of the client’s need to end the harassment, much to the chagrin of
their PI attorney. (If
this happens, it doesn’t have to be the end of your case, I will be writing on
this topic in coming additions, so in the interim contact a bankruptcy attorney
before you decide to withdraw)
Terms
to Understand:
Original Creditor- allegedly owed a debt (i.e credit card company,
medical provider, etc.)
Debt Collector: third party who purchased the debt or is
collecting on behalf of the original
So what can
you do for your client to stop the
collection harassment while you are trying to settle or litigate the case?
1. Send a Cease and Desist
Letter
As soon as you are made aware of the
collection attempts, and assuming that your representation includes negotiating
the alleged debt, send a cease and desist letter citing FDCPA 1692b(6) and 1692c(a)(2)
and requesting that all future communications be directed to your office. Keep in mind, if the original creditor is
calling, FDCPA may not apply and the original creditor is permitted to call
despite your notice, however, most will err on the side of caution and cease
its collection efforts upon receipt of an attorney representation letter. Further, if the contact is being made by a
law firm or general counsel, ethics rules prevent an attorney from having
direct communications with a person known to be represented by counsel (Nevada
Rules of Professional Conduct 4.2.) even if FDCPA does not apply.
Once a debt
collector is notified that the debtor is represented by counsel, they cannot
call or send communications directly to the debtor. Caveat- If the collector contacts the retained
attorney and the attorney does not respond, then direct communications may
resume, so be sure and respond in writing as soon as practicable if this occurs.
In the
event that future contact occurs after the cease and desist, your client will
likely have an FDCPA claim against the debt collector and may be entitled to
statutory or actual damages as a result.
This claim is independent from the underlying debt, so pursuit of such a
claim would not affect the status of unpaid medical bills subject to the PI
litigation. More importantly, a demand
for violation of FDCPA will usually result in all collection efforts promptly ceasing,
which ultimately is what you and your client want.
2. Educate Your Client
Inform your
client that if a debt collector contacts them, they should write down the date
and time of the call, the phone number the call came from and a summary of the
conversation. Should there be a
violation, a contemporaneous record of the contact will be very important. Have them state “I have an attorney, Her name
is___, she can be reached at ____ …..”
Most often the collector will hang up as soon as the client makes this
statement, if possible, the client should also tell the debt collector not to
call them again and to only communicate with counsel. IMPORTANT!
Tell your client they should never provide any personal information such
as social security number, date of birth, address, etc., to anyone that calls
them directly. Often debt collectors
will claim that they need to “verify” that they are speaking with the correct
person, the client’s response should always be “give me your name, phone
number, company name, address and facsimile number and I will have my attorney
respond to your request.” There are
scammers out there that obtain delinquent debt lists with the intent of
stealing identity or perpetrating some other type of fraud, so it is imperative
that such information not be given over the telephone to an unsolicited caller. This rule of thumb also makes it more
difficult for debt buyers to merge accounts among similarly named individuals,
despite variations in personally identifying information.
3. Empower Your
Client “Do you owe the debt collector,
or does the debt collector owe you?”
Violations
of the Fair Debt Collection Practices Act provide statutory damages for each
proven violation. Calls from a
pre-recorded message or an “auto-dialer” to a cell phone are violations of
TCPA, which also provides for statutory damages. If either occurs, refer your client to a
consumer rights attorney immediately. (Example of pre-recorded message to a
cell phone that violates TCPA and may also violate FDCPA: “This message is for ‘client’, if you are not’
client’ please hang up, pause… ‘client’ this is an attempt to collect a debt,
contact ABC collections at…” Example
of Auto-Dialer: Client answers the
phone and there is a delay while call is transferred to an actual person, or
hold music until a live person is available)
Make sure to advise your client to keep all detailed phone records,
as well as a copy of any voicemail messages as such proof will be needed should
litigation become necessary.
Any person
recording a conversation in Nevada must inform and get the consent from the
person being recorded (NRS 200.620).
Often, a debt collector may not mention that the call is being recorded,
or fail to provide the disclaimer until end of the call. Failing to notify at the very beginning of
the call creates a potential cause of action under FDCPA and NRS 649.250
against a debt collector. There are many
other provisions under FDCPA and Nevada Revised Statutes that protect consumers,
the above is simply a highlight of the easiest to remember and most prevalent
violations.
Lastly, have your client to go to: http://www.consumer.ftc.gov/articles/0149-debt-collection so they can read an unbiased, layman’s explanation of what debt
collectors can and cannot do. You can
also obtain client handouts for free go to: https://bulkorder.ftc.gov/ShowCat.aspx?s=cre-18 and give them to your
client at their initial consultation. Once your client has a better understanding
of debt collection and knows that violations could lead to money damages for
them, they will be less fearful of the calls, and will be more inclined to wait
out resolution of their case.
4. Negotiate… But Get it In Writing
If you are nearing
settlement or trial, contact the debt collector and start negotiating. Often, they will have limited delegated
authority to settle, and if you have limited funds, they will need to get their
client’s permission to settle for a lesser amount. The sooner you start negotiating the better
off you will be.
Many debt collectors
will refuse to provide a written offer of settlement, so draft a confirming
letter as to your conversation with the debt collector and send it via mail and
fax. Give them a timeframe to respond
and dispute your recitation of the discussion and do not send payment until the
timeframe has expired. If they fail to
respond or dispute, it will be persuasive evidence as to the terms agreed upon
and again there are provisions under FDCPA that may be triggered if the
collector deviates.
Lastly, make sure you
address credit reporting since the debt is in active collection. Some debt collectors will claim that they
cannot delete reporting, but that simply is not true. If there are claims against the collector and
a “settlement” is reached, then the entire collection account can be deleted. To get a deletion, the collector will likely
want more of a payoff, so it really comes down to the client’s needs and any
bad action by the debt collector.
If the above tips seem
daunting, or your office just does not have the capacity to handle these types
of client issues, then have a referral list for consumer rights attorneys
and/or bankruptcy attorneys that would be willing to assist your client with
debt defense, debt collection violations and as a last resort, bankruptcy. As I will explain in a future article,
bankruptcy is not the end of your PI case no matter which side you are on, so
reach out to the bankruptcy bar, ask questions and find an attorney who can be
a “life line” when these issues come up.
