If a consumer hires a lawyer, what is the debt collector’s obligation?

This article focuses on what happens when a consumer tells a debt collector that the consumer has hired an attorney.  The cited law is generally applicable in Missouri.  In short, the debt collector must stop all collection attempts made to the consumer directly.  The debt collector must exclusively deal with the consumer’s attorney.

The relevant statute is 15 U.S.C. 1692c.  Section 1692c(a)(2) provides in relevant part:

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt…if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer.

15 U.S.C. § 1692c(a)(2); see also Courchene v. Citibank, No. 06-4026-CV-C-NKL, 2006 WL 2192110, at *1 (W.D. Mo. Aug. 1, 2006) (“The FDCPA…prohibits a debt collector from contacting a debtor where the collection agency knows the consumer is represented by an attorney.”); Shapiro v. Law Offices of Cohen & Slamowitz, LLP, No. 06 Civ. 3773(WCC), 2007 WL 958513, at *4 (S.D.N.Y. Mar. 28, 2007) (“The plain language of the FDCPA clearly states that a debt collector may have no contact whatsoever with a consumer once it becomes aware that he is represented by counsel.”) (emphasis in original).

The knowledge element requires a showing of actual knowledge on the part of the debt collector.  Schmitt v. FMA Alliance, 398 F.3d 995, 997 (8th Cir. 2005).  Furthermore, the knowledge must be specific to the debt at issue; knowledge that the consumer is currently or was represented as to other debts is insufficient.  Berndt v. Fairfield Resorts, Inc., 337 F. Supp. 2d 1120, 1132–33 (W.D. Wis. 2004) (citing Graziano v. Harrison, 950 F.2d 107, 113 (3d Cir. 1991)).  “As the Federal Trade Commission commentary on this provision explains, ‘[i]f a debt collector learns that a consumer is represented by an attorney in connection with the debt, even if not formally notified of this fact, the debt collector must contact only the attorney and must not contact the debtor.’” Goins v. JBC & Associates, P.C., 352 F. Supp. 2d 262, 272–73 (D. Conn. 2005) (quoting Federal Trade Commission, Statements of General Policy or Interpretation Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50097, 50104 (1988)).  Because such notice need not be formal, courts have consistently rejected the argument that such notice must be in writing.  See, e.g., Morrow v. Weinerman & Assoc., LLC, Civil No. 11–104 (RHK/LIB), 2011 WL 4472651, at *4 (D. Minn. Sept. 26, 2011); Goins, 352 F. Supp. 2d at 272–73.

In Bieber, the court rejected a distinguishable Section 1692c(a)(2) claim.  Bieber v. Associated Collection Servs., Inc., 631 F. Supp. 1410, 1417 (D. Kan. 1986).  There, the debt collector phoned the consumer.  Id.  The consumer told the debt collector that she was represented by counsel with respect to the debt the collector was calling about, and advised the debt collector to contact her attorney.  Id.  The debt collector then inquired whether the consumer was planning to file bankruptcy.  Id.  Nothing more was said during the conversation.  Id.  The court found that the debt collector’s lone question after receiving notice of the consumer’s representation was a “legitimate business inquiry” and “was not so extensive as to have been the kind of additional ‘communication’ prohibited by subsection c(a)(2).”  Id.

Moreover, although Section 1692c states that the consumer or his attorney may consent to direct communications with the consumer, neither exception can possibly apply here.  In Backlund, the court faced precisely this issue.  Backlund v. Messerli & Kramer, P.A., Civil No. 12–808 (JRT/JJK), 2013 WL 4050197, at * 4 (D. Minn. Aug. 9, 2013).  There, the debt collector sent the consumer two notices of default pursuant to a stipulation signed by the collector and the consumer.  Id.  The court noted that there is no Eighth Circuit precedent on this issue.  Id.  The court instead relied on the waiver/consent concept examined by the Ninth Circuit in Clark:

The Eighth Circuit has not considered whether consent may waive the protections of the FDCPA. However, in Clark v. Capital Credit Collection Services, Inc., the Ninth Circuit considered whether a collection agency’s phone call to Mrs. Clark in response to her request for information violated § 1692c(c)6 in light of letters sent by Mr. Clark to the collection agency directing them not to call Mrs. Clark. 460 F.3d 1162, 1168 (9th Cir.2006). The court found that although, in general, a party may waive “a benefit of a provision of a statute … enacted … for his protection,” not all rights are waivable and “waiver is not appropriate when it is inconsistent with the provision creating the right sought to be secured.” Id. at 1170 (internal quotation marks omitted). The court went on to find that “a debtor may waive the rights created by a cease communications directive.” Id. The waiver must, however, be knowing and voluntary, and the Ninth Circuit “will enforce a waiver of the cease communication directive only where the least sophisticated debtor would understand that he or she was waiving his or her rights under § 1692c(c).” Id. at 1170–71. The court concluded that “even the least sophisticated debtor would recognize that Mrs. Clark’s request for information constituted consent” for the return phone call “in order to provide the specific information she requested.” Id. at 1172.

Id.  Under the Clark analysis, the court in Backlund concluded that the stipulation constituted prior consent given directly to the debt collector.  Id.  Thus, the debt collector’s communications were exempted by Section 1692c.  Id.

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