The following two pieces appeared in issues of Compliance Weekly, a newsletter focused on compliance and breaking down the complexities of some of the legal cases affecting the industry. Compliance Weekly is produced by The Compliance Professionals Forum. You can sign up for this free newsletter here.
Can a collection agency be sued for an FDCPA violation by talking to a credit counselor? No! (But keep reading, it's not a definitive "no.")
A consumer, working with a credit counselor, called a collection agency (I.C. Systems) to discuss the consumer's credit report. There were items on there that the consumer felt should not be. So, after the plaintiff verified his information with the collector, and gave I.C. Systems permission to talk to his credit counselor, the counselor then asked, "Can the plaintiff dispute this account over the phone with you right now."
THIS SOUNDS LIKE A TRAP!
I hear you -- but it isn't, at least in this case. I mean, consumers have been known to use credit reporting questions to trap newer collectors into UDAAP violations. In this case, the consumer's account had already been recalled. I.C. Systems explained this, said that it couldn't be disputed because it had been recalled, and said it would be removed from the plaintiff's credit report within 30-60 days.
So, how did the suit come about?
The consumer tried to sue, basing it on "false, deceptive, or misleading representations" during the call.
What was false?
Great question. It has to do with the question about the dispute. The plaintiff really wanted to dispute the item on his credit report. The collection agency said, "You can't, because first of all the account had already been recalled; and then, also, the account had a zero balance."
But all this was said to the credit counselor on that call.
And that made a difference?
That made a difference. We can't be 100% sure -- and I am not an attorney -- that if the consumer had had this conversation by himself with the collection agency, if the suit could have continued. It's generally not a great practice for a collector to offer credit reporting advice of any kind, or to answer definitively any question about credit reporting.
It's also likely, though not a given, that if the consumer and his credit counselor were on the phone together, but it was the consumer who asked those credit reporting questions, that that would have affected the outcome.
However, in this case, the consumer brought on a third party, his credit counselor, who asked the question about the credit reporting -- and communications with a third party, especially in a call initiated by the consumer, are not covered by the FDCPA. So, no violation.
Katie Neill writes, "One thing many, if not all, of the alleged baiting calls have in common is that the calls are initiated by someone other than the debt collector. Many of these calls have the consumer on the line to authorize a third party representative to speak with the debt collector, and then the consumer goes silent while the conversation continues. Many of these calls include someone asking, on behalf of the consumer, whether the account can be disputed over the phone or if the dispute needs to be in writing. There is now a strongly worded defense against such tactics."
You can read the full case here: Sandoval v. I.C. Systems, 17-CV-3755, 2018 WL 1582218 (E.D.N.Y. Mar. 29, 2018)
A CPF member reached out with the following question:
I am looking for a resource on Power of Attorney. The credit repair companies send the POAs, but they are not notarized. Do you know if there is a resource of POAs and if they need to be notarized?
So, whether or not a Power of Attorney needs to be notarized depends on the state -- so there's no "one answer to rule them all" on this.
What there is, though, is a resource detailing requirements, state-by-state. It's now available for all CPF members. Click here. (The chart, to be clear, is not legal advice and may not be used as legal advice. It's just the hard work of my typing fingers and mouse-scrolling. Errors, corrections, etc.: send 'em my way.)
I was curious about the efficacy of collection agencies making it a practice to ask for all PoAs to be notarized in order to be accepted, and Editorial Review Board member (and my best friend, "Rozanne" category) Rozanne Andersen said, "Requiring notarization in documents not otherwise required to be notarized by law may be deemed overly burdensome or an unfair or deceptive practice. I wouldn’t recommend the practice for a third party debt collector in connection with the collection of consumer debt."