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Students would be subject to past due account recovery penalties under new policy

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By Jeffrey A. Schreiber*
©2018 Schreiber/Cohen, LLC

       By the stroke of a pen in Kraus v. Professional Bureau of Collections of
Maryland, Inc., Case 17-CV-3402 (E.D.N.Y. November 27, 2017), a senior judge presiding over the U.S. District
Court for the Eastern District of New York, I. Leo Glasser, brought common sense to collections. This case will
be discussed herein. Portions of the Fair Debt Collection Practice Act (“FDCPA” or “Act” or “Statute”), a
federal law that governs collections, its legislative history, and some of the cases interpreting the Statute,
too will be discussed. The FDCPA was enacted by Congress to provide consumer debtors with a shield against
unscrupulous practices of debt collectors, and not to hand debtors a sword that can be used to obtain relief
from debts that they have incurred. Unfortunately, many debtors, their counsel, and courts have strayed far from
that Congressional purpose, and too often the Statute has been put to illegitimate use. Now this senior federal
judge has called out the misuse and abuse of the Statute and denied relief to a debtor whose sole reason for
bringing a FDCPA claim was to avoid payment of a just debt.

Effective March of 1978, the FDCPA, 15 U.S.C. 1692, et seq., was enacted by Congress. Prior to its
enactment, Congress found that “debt collection abuse by third party debt collectors was a widespread and
serious national problem.” S. Rep. 95-382, at 2 (1977) reprinted in 1977 U.S.C.C.A.N. 1695, 1696. The purpose of
the Statute is to “protect consumers from unfair, harassing, and deceptive debt collection practices without
imposing unnecessary restrictions on ethical debt collectors.” supra. Unfortunately, by interpretation, various
courts have expanded the Statute inconsistent with the spirit, if not the letter, of its legislative history.
Ethical debt collectors have become burdened with unnecessary restrictions, something that Congress sought to


       The enacted purpose of the Statute was “to
eliminate abusive debt collection practices,” while also ensuring that compliant debt collectors “are not
competitively disadvantaged.” 15 U.S.C. section 1692e Collection abuse takes many forms, including the use of
obscene or profane language, threats of violence, telephone calls at unreasonable hours, misrepresentation of a
consumer’s legal rights, disclosing a consumer’s personal affairs to friends, neighbors, or an employer,
obtaining information about a consumer through false pretense, impersonating public officials and attorneys, and
simulating legal process 15 U.S.C. 1692e. Witnesses before the Senate Consumer Affairs Subcommittee testified
that independent debt collectors were the prime source of egregious collection practices. “While unscrupulous
debt collectors comprise only a small segment of the industry, the suffering and anguish which they regularly
inflict is substantial.” Unlike creditors, who generally are restrained by the desire to protect their good will
when collecting past due accounts, witnesses accused independent collectors of being unconcerned with the
consumer’s opinion of them. The Committee concluded that “serious and widespread abuses…and the inadequacy of
existing state and federal laws make this legislation necessary and appropriate.”

       The Act prohibits harassing, deceptive, and unfair
debt collection practices. These include: threats of violence; obscene language; the publishing of ‘shame
lists;’ harassing or anonymous telephone calls; impersonating a government official or attorney; misrepresenting
the consumer’s legal rights; simulating court process; obtaining information under false pretenses; collecting
more than is legally owing; and misusing postdated checks supra. It was Congress’ intent to enable the courts,
where appropriate, to proscribe other improper conduct not specifically addressed in the Act. The legislation
prohibits disclosing a consumer’s personal affairs to third persons. Other than obtaining location information,
a debt collector may not contact third persons, such as a consumer’s friends, neighbors, relatives, or employer.
The Committee concluded that these contacts are not legitimate collection practices, may result in serious
invasions of privacy, and the loss of jobs.

       The Committee viewed the Act as “self-enforcing”
meaning that consumers, who have been subjected to collection abuses, will be enforcing compliance. A debt
collector who violates the Act is liable for actual damages as well as any additional damages the court deems
appropriate, not exceeding $1,000, plus attorney fees. Congress intended the award of compensation for injury
caused by the debt collector. The Statute provides that the court must take into account the nature of the
violation, the degree of willfulness, and the debt collector’s persistence. By doing so, one can only conclude
that Congress wanted Courts to consider both aggravating and mitigating circumstances. On the other hand, a debt
collector has no liability if he violates the act in any manner when a violation is unintentional and occurred
despite procedures designed to avoid such violations. Congress was even handed. It recognized that not every
situation is black or white but that grey areas exist. Consequently, based upon the legislative history,
Congress did not intend the FDCPA to be a strict liability statute even though Courts have interpreted it

       There are many cases imposing FDCPA liability on
attorneys. Unfortunately, some judges have expanded the statute, sometimes inconsistent with the Act’s
legislative history. An example of such an expansion is the adoption of the so-called “least sophisticated
debtor” standard. The FDCPA does not establish this standard. Rather, it is silent. Instead, the Ninth Circuit
Court of Appeals decided that, when evaluating whether language may be deceptive, “the court should look not to
the most sophisticated readers but to the least.” Baker v. G.C. Servs. Corp., 677 F.2d 775 (9th Cir.
1982). The court concluded that “the FDCPA does not ask the subjective question of whether an individual
plaintiff was actually misled by a communication. Rather, it asks the objective question of whether the
hypothetical least sophisticated debtor would likely have been misled. If the least sophisticated debtor would
likely be misled by a communication from a debt collector, the debt collector has violated the Act.” Guerrero v.
RJM Acquisitions LLC, 499 F.3d 926,934 (9th Cir. 2007) (emphasis added). Hence, the least
sophisticated debtor standard was born. The concept is not grounded in either the Act or its legislative
history. Nevertheless, most other courts have followed the Ninth Circuit. They have adopted this standard to
determine whether there has been a violation of section 1692e(1)-(16).

       The Seventh Circuit affirmed summary judgment
against a law firm for a FDCPA violation where the law firm assisted a bank’s collection efforts from certain
credit card holders.See Nielsen v. Dickerson, 307 F.3d 623 (7th Cir. 2002). In Nielsen, the attorney
received the debtors’ information from the bank, conducted a check of the data to screen out debtors that were
bankrupt or deceased, and then mailed delinquency letters to the debtors on the attorney’s letterhead. Although
the attorney was not authorized to resolve anything on the bank’s behalf, the delinquency letters contained the
attorney’s contact information, and advised the debtor to contact “us,” presumably the attorney, if any part of
the debt was disputed. The Court of Appeals affirmed that the attorney violated the FDCPA because the attorney
had a small and ministerial role. The language contained in the letter gave consumers the misimpression that the
attorney had exercised his professional judgment concluding that the debt was delinquent and ripe for legal
action. The court opined that “an attorney must have some professional involvement with the debtor’s file if a
delinquency letter sent under his name is not considered false or misleading in violation of the FDCPA.”
Nielsen, supra at 638. And thus, the “meaningful attorney involvement” rule, a concept not addressed in the
FDCPA, was born. This rule has been significantly expanded by other courts and the Consumer Financial Protection
Bureau (“CFPB”) by consent decree. See CFPB v. Hanna Associates, P.C., et al, Civil Action No. 1:14-cv-02211-AT
(N.D. Ga. December 2015); In the Matter of Pressler Pressler, LLP, et al., Admin Proceeding File No.
2016-CFPB-0009 (April 2016). Presently, the CFPB requires meaningful attorney involvement at every stage of a
law firm’s collection of a defaulted account.

       There are cases against lawyers for violation of
the FDCPA for mailing a validation letter that is either allegedly confusing and/or does not meet the least
sophisticated consumer test. Caprio v. Healthcare Revenue Recovery Group, LLC, 709 F.3d 142 (3d Cir, 2013);
Graziano and Wilson v. Quadramed Corp., 225 F.3d 350 (3d Cir. 2000); Smith v. Computer Credit, Inc., 167 F.3d
1052 (6th Cir. 1999); Russell v. Equifax A.R.S., 74 F.3d 30 (2d Cir. 1996). There are cases
proscribing a debt collector from collecting interest and fees on an unpaid balance when it is not disclosed
that the balance may increase accordingly. Avila v. Riexinger Associates, LLC, 817 F.3d 72 (2d Cir. 2016);
Miller v. McCalla, Raymer Padrick, Cobb, Nichols and Clark, LLC, 214 F.3d 872 (7th Cir. 2000). There
are cases in which the judge(s) disagree with Avila. Kraus, supra. There are cases in which a FDCPA violation is
alleged in “reverse Avila” cases; that is, the debt collector’s failure to disclose that prejudgment interest
may be owed by the consumer. See Altieri v. Overton, Russell, Doerr, and Donovan, LLP (2017 WL
5508372); Cruz, v. Credit Control Services, Inc., 2017 WL 5195225 (E.D.N.Y. Nov. 8, 2017); Bird v.
Pressler Pressler, L.L.P., 2013 WL 2316601 (E.D.N.Y. May 28, 2013). There are even alleged FDCPA violations
litigated because a mailing barcode, account number, partial account number, or an account number embedded in a
barcode, are visible through a glassine mailing envelope. To that end, courts have debated whether there exists
a “benign language exception” to 15 U.S.C. section 1692f(8), another concept fabricated by the courts. Courts
have gone both ways. See Anekova v. Van Ru Credit Corporation, et al., 201 F.Supp.3d
631 (E.D. Pa 2016); Douglass v. Convergent Outsourcing, Inc., 765 F. 3d 299 (3d Cir. 2014); Kostik v. ARS
National Services, Inc., 2015 WL 4478765 (M.D. Pa July 22, 2015). How far have we strayed from Congress’ intent
to protect consumers from “unfair, harassing, and deceptive debt collection practices without imposing
unnecessary restrictions on ethical debt collectors?” How have consumers been injured by some of these seemingly
technical, if not picayune, issues raised by consumer attorneys? Who has benefited most from these cases—the
plaintiffs or plaintiffs’ attorneys? Judge Glasser answers these questions. The following are excerpts from his


By this action, Plaintiff, Ms. Kraus (“Kraus” or “Plaintiff”) claimed Defendant, Professional Bureau of
Collections of Maryland, Inc. (“PBCM” or “Defendant”) violated 15 U.S.C. section 1692e by sending her an offer
to settle her debt for 40% of her account balance. The letter provided the amount owed on her account. It, however, did not state that the account balance might increase due to interest or other charges if not
timely paid. See Avila, supra. In Avila, the Second Circuit held that a debt collector
violates section 1692e if it notifies a consumer that an unpaid account balance may increase due to interest and
fees if not timely paid. Avila, however, also provides a safe harbor for a debt collector who fails
to disclose that interest or other charges may increase the outstanding balance. A letter that contains
language stating “that the holder of the debt will accept payment of the amount set forth in full satisfaction
of the debt if payment is made by a specified date” is exempt. So, the issue before the Kraus court
is whether Avila applies to the letter and, if so, whether the settlement offer in the letter brings
Defendant within the safe harbor of Avila The Court found that Avila applies to the letter
but that the letter falls within the safe harbor. Judgment was entered for Defendant but not before Judge
Glasser explained why the letter fits within the Avila safe harbor. The PCBM letter clearly stated
that Kraus’ account debt would be discounted by 40% if she paid the discounted amount prior to a specified date.
The purpose of Avila is to prevent a consumer from being misled by paying the amount contained in the
letter if, by the time she pays that amount, her debt may have increased due to interest or late fees.

Judge Glasser questioned what is the alleged harm in this case? He observes that tort law teaches that the
violation of a statute will subject the violator to liability if the person harmed is a member of a class the
statute was designed to protect, and the harm complained of is the harm the statute was designed to prevent.
Though this action is not a tort case, Judge Glasser states that the same principle applies. As to harm,
the Statute’s enacted purpose was to eliminate abusive debt collection practices. See 15 U.S.C. section 1692e;
S. Rep. 95-382, at 2 (1977). The judge rhetorically asks “where is the abuse here? The court sees none.”

At oral argument, the judge asked her lawyer why did Ms Kraus bring this case? He responded because she is
in financial distress. Kraus did not seek an attorney because she felt abused, deceived, or otherwise
aggrieved. Rather, she did so because she wanted help getting out of debt. Judge Glasser firmly
states that “the FDCPA is not a debt-relief statute and courts should not indulge thinly veiled attempts to use
it as one.” Id at 14.

Sadly, abuse of the statute is unsurprising given the development of the law in this area, and the Court suspects
such abuse is fairly widespread.  In 2006, the Court observed that the interaction of the least
sophisticated consumer standard with the presumption that the FDCPA imposes strict liability has led to a
proliferation of litigation in this district…Since then, the number of FDCPA cases filed yearly in this District
has more than quintupled.  And small wonder, when all required of a plaintiff is that he plausibly allege a
collection notice is “open to more than one reasonable interpretation, at least one of which is inaccurate. Clomon
v. Jackson
, 988 F.2d 1314, 1319 (2d Cir. 1993).  This standard prohibits not only abuse
but also imprecise language, and it has turned FDCPA litigation into a glorified game of “gotcha,” with a
cottage industry of plaintiffs’ lawyers filing suits over fantasy harms the statute was never intended to
.  With Avila, the circuit’s FDCPA jurisprudence lurches to ever more
plaintiff-friendly terrain.  Kraus, supra at 14-15 (emphasis supplied).

Can a letter be described as ambiguous (or deceptive or misleading) regarding interest if it says nothing about
interest?  The court takes the common sense approach and answers the question “no.”  “It makes as much
sense to say the letter in Avila was ambiguous regarding interest as to say it was ambiguous regarding
the date of the next presidential election or the existence of Bigfoot.”  Interest on a debt is a familiar
concept.  Even the hypothetical least sophisticated consumer is aware of it.  “A debtor who assumes
his account balance will never increase, simply because a collection letter provides no information regarding
interest, does so unreasonably, and this irrationality should not be rewarded by courts at the expense of
non-abusive debt collectors.” See Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 135 (2d Cir.
2010) as cited in Kraus, supra at 16. (“The hypothetical least sophisticated consumer is neither
irrational nor a dolt.  While protecting those consumers most [vulnerable] to abusive debt collection
practices, this Court has been careful not to conflate lack of sophistication with unreasonableness.”)

Judge Glasser struggles with how Avila protects consumers.  He questions whether these cases describe
genuine instances of debt collection abuse.  He is concerned that debt evasion is being facilitated for the
purpose of increasing profits among the plaintiffs’ bar. Kraus supra at 18.  Congress intended that
the FDCPA would provide a shield against the overly zealous debt collector.  By carrying the least
sophisticated debtor standard and strict liability concepts to illogical extremes, it appears that “Courts have
fashioned this shield into a sword” inconsistent with the Congressional intent of the Statute. Id.


       For decades since the FDCPA’s enactment, federal
courts have bent, distorted, contorted, misinterpreted and otherwise mischaracterized the statute, usually for
the benefit of the consumer, even where no measurable damage has been sustained.  The FDCPA is as much of a
strict liability statute as a garden variety breach of contract case.  A measure of damage needs to be
found in both.  This is, among other reasons, why the Kraus case is an oasis in a desert of federal
cases finding the defendant debt collector liable for an alleged (if not dubious) FDCPA violation even where the
debtor has not sustained any injury.  Maybe the Kraus case signals the pendulum swinging toward a
more common sense, judicial interpretation of the Statute consistent with Congress’ intent.  Hopefully,
hereafter, courts will apply the FDCPA to serious abuses in accordance with Congress’ intent and dismiss
specious or implausible cases.  At a minimum, plaintiffs with ulterior motives, such as seeking debt relief
by suing under the FDCPA, should no longer be tolerated.

* Mr. Schreiber is a renowned collection, bankruptcy, and FDCPA defense trial
lawyer.  He is the founding member of Schreiber/Cohen, LLC, a business and trial law firm, with offices
located throughout New England.  He is a magna cum laude graduate of Bowdoin College
and a graduate of Syracuse University College of Law.  After law school, Mr. Schreiber served as a judicial
law clerk to the late Hon. Leon J. Marketos, U.S. Bankruptcy Judge for the Northern District of New York. 
Prior to founding his own law firm, Mr. Schreiber was an associate in the business litigation department of
Burns & Levinson in Boston.  He served for seventeen years as a private panel Chapter 7 trustee and
Chapter 11 trustee appointed in cases pending in both the U.S. Bankruptcy Courts for the Districts of
Massachusetts and New Hampshire.  Mr. Schreiber is admitted to practice law in MA, NH, CT, VT, NY, PA, DC,
and IN.

[1] Congress was busy in the late 1970’s legislating federal laws aimed at protecting debtors.  Effective
October 1, 1979, Congress enacted the Bankruptcy Reform Act of 1978, 11 U.S.C. 101 et seq., significantly
expanding debtors’ rights and protections under bankruptcy law.  Prior to that date, Congress had not
significantly amended the federal bankruptcy laws since 1898.
[2] The terms “debt collector” and “lawyer” are used interchangeably as lawyers who
concentrate their law practices in collecting defaulted accounts from consumers are debt collectors within the
meaning of the FDCPA. Heintz v. Jenkins, 514 U.S. 291 (1995).
[3]Debt collectors are subject to a kind of Rule 11 on steroids. For example,
collection lawyers may not rely on the integrity of defaulted accounts referred by their clients.  Instead,
lawyers (not paralegals) are required to, among other things, inspect the integrity of each account’s original
account level documents twice:  once before accepting the defaulted account from the creditor, and again
prior to bringing a lawsuit seeking judgment to collect the claim.  Lawyers no longer may rely on the
veracity of client affidavits of indebtedness. Rather, lawyers must independently investigate and determine that
the information contained in each client affidavit is true and accurate prior to commencing a lawsuit. 
These procedures may not sound burdensome except that creditor clients often refer hundreds, if not thousands,
of defaulted accounts at one time, each one the basis of a prospective lawsuit.  Staffing for such a client
with sufficient lawyers charged with the task of reviewing each account individually, checking and double
checking the integrity of each account’s documentation, independently determining the veracity of each client
affidavit with the defaulted account to which it relates, without the assistance of paralegals, arguably are
burdens Congress did not contemplate.
[4] Section 1692g(a) of the Act states that the validation notice must include the
amount of the debt, the name of the creditor, a statement that the debt’s validity will be assumed unless
disputed by the consumer within 30 days, and an offer to verify the debt and provide the name and address of the
original creditor, if the consumer so requests.