FDCPA CFPB Foreclosure and Bankruptcy
Critical Interactions to UnderstandNick C Thompson
Foreclosure Defense v Chapter 13
Defending a foreclosure may save a home if you obtain a workout agreement or modification. But less than 10% were approved and most homes in foreclosure were eventually abandoned from 2008 to 2013.Chapter 13 is a tool allowing the Debtor to take up to 60 months to cure.If the Debtor can catch up the payments in Bankruptcy court the Debtor is far more successful at keeping the home. If litigation grinds on in state court the Debtor falls further behind in the mortgage. The amount the Debtor has to repay in a Chapter 13 increases. If there is litigation in state court a Chapter 13 becomes less likely to cure the arrears. If the home is to be saved the Debtor normally has to file a Chapter 13 early.
A personmayfile an answer to a foreclosure and bring Regulation X, Regulation Z or FDCPA claims in state court or a federal court
CFPB enforces, and drafts Regulation X, and Regulation Z. It is involved with FDCPA and UDAP actions.Bankruptcy court has judges who are more experienced with debt collection cases than state court judges.FDCPA cases often involve facts which are also violations of the stay which threaten the bankruptcy court itself. FDCPA uses a strict liability standard. If you prove a violation of any numerated section you have liability.
The Purpose of the FDCPA is to punish creditors for Unfair & Deceptive Practices
Recognizing an FDCPA case can be difficult, but the same behaviors that enable FDCPA violations cause people to file bankruptcy. It helps to use a checklist of the numerated violations to discover offenses.In general Debt collectors must treat Debtors with truth, fairness, dignity, and respect. What collectors engage in is often abuse, shame, blame, fear, harassment, deception and unfair tactics. These may also be UDAP claims.Many of the violations in an FDCPA case arise in or under the bankruptcy. They are also often contempt of the bankruptcy court stay 11 USC 362 or discharge order 11 USC 524 which threaten the court and trustee’s administration of the estate. It can add punitive damages. These cases should be brought as an adversary matter and not a motion for contempt to maximize damages and attorney fees.11 USC 524 is a violation of the discharge injunction brought after the case.
Filing FDCPA cases can repay a debtor for a bankruptcy and increase office profit
Even a small technical violation with only statutory damages of 1,000 will help pay the client fees for a bankruptcy. Most violators breech multiple sections but the $1,000 in FDCPA damages is per case.Even prosecuting 1-2 small technical violations per month will mean an attorney fee recovery fund which may fund a law office operation.During times when filings are down this will insure an office stays in business.
Elements of the FDCPA case. Is this a consumer debt.
Elements of an FDCPA case a FDCPA case is for a consumer debt.§ 1692 elements are §1692a (3)apersonobligated on a debt. See 6thCircuit case a business is a “person” defined by Federal definitions. This business paid for a consumer debt and was allowed to file an FDCPA claim.§1692a (5) obligated forpersonal, family, or household purposes.Collected by §1692a (6) a debtCollector, collection agency, lawyer or forms writer.Many FDCPA cases are also contempt of the bankruptcy court stay or discharge which can add punitive damages. FDCPA add other claims ex: contempt of stay or discharge and show how it effects the estate to insure claims arise under the core jurisdiction of the court.
In bringing the case Analyze the client
Is the client credible. If the client “improves the facts” don’t bring the case and rely on the client for evidence. Keep it simple and relying on documents if the client is weak. If the case is based on written “letters” there may be little or no need for client testimony for evidence.Is the client reliable. Will the client show up for trial or depositions? If not, you may want to keep it a small case.If the conduct is serious you may want to bring the case regardless before the judge and the poor irrational client may be the result of the harassment. Or you may wish to settle by letter early in the case.
Analyze the case
How does the client’s case present itself?Does the client and the acts of the collector cry out for punishment of the creditor? FDCPA is a strict liability statute to punish specific conduct. Like worker’s compensation no negligence or evil intent is required.Cases are intensely fact and story driven.Complaints should: explain what happened and then explain the harm to the 1) client 2) the administration of the court and 3) bankruptcy estate in the first paragraphs with bullet pointsResearch and ShowIf this is a part of a pattern or practice you may obtain punitive damages. FDCPA is for actual damages and attorney fees you must include other causes for punitive damages.
Analyze the Evidence
Interviewing the client is intensive fact gathering. An interview with real punitive damages case will take 3-4 hours with follow up fact and evidence gathering. A simple case such as sending a letter, fax, or filing a lawsuit letter after discharge will take 1-2 hours. Records are vital to the case.Letters and phone records establish the case.Former Employees are often fired and are impartial and credible witnesses who know the creditor.Attach other complaints to establish a pattern or practice by a creditor.
Bringing the case to the attention of the court
Cases should be brought as an adversary matter and not a contempt motion to maximize the damages and attorney fees. Violation of the stay under 11 USC 362. Violation of the Discharge 11 USC 524 (a) (2). 524 has no enforcement provision for a private right of action but damages may be awarded. See also §105 (a) for equitable powers.Facts are accepted by a judge far more easily if there is either no dispute of the fact or interpretation of the fact and the judge comes to his/her own conclusion.FDCPA cases may be hard to identify but many acts are numerated in the code.
Bankruptcy Jurisdiction must be proper
Jurisdiction 28 U.S.C. §1334(b). The jurisdictional statute thus offers three types of bankruptcy proceedings cognizable in bankruptcy court: “relating to,” “arising in,” and “arising under.”Arising in or under is the core jurisdiction for the bankruptcy court. If it effects the estate it is core.A case relating to but not effecting the estate will normally be dismissed for lack of jurisdiction.All circuits allow claims for abuse § 1692 (d), Most will allow for § 1692 (e) misrepresentation, and § 1692 (f) unfair and deceptive § 1692 (b) or (c) improper communication claims.
Contacting third parties §§1692 b(1)
Failing to identify themselves or failing to state they are confirming or correcting location.§1692 b(2) Stating that the debtor owes any debt to any 3rdparty§1692 b(3) Contacting any party more than once, unless requested to do so.§1692 b (4) Using postcards or notes§1692 b(5) any language or any symbols on any envelope or communication indicating it is a debt collection business.§1692 b(6) Any communication with the debtor after notice the debtor is represented by an attorney.1692 b
Prohibited Communication Practices §1692 c
§1692 c(a)(1) Contacting the Debtor using unusual time or places before 8 am after 9 pm.§1692 c(a)(2) Contact after the collector knows the client is represented by an attorney.§1692 c(a)(3) Contact at a place of employment when it knows it is prohibited.§1692 c(b) Contact with anyone except consumer, credit bureau or his attorney concerning the debt§1692 C (c) After any written notice the consumer refuses to pay the debt or wants communication to cease
HarassingCommunications §1692 (d)
§1692 (d) Any conduct where the natural consequence of is to harass, oppress or abuse any person§1692 (d)(1) Communication used to threaten violence or other criminal means to harm§1692 (d) (2) Profane or abusive language§1692 (d) (3) Publication of a consumer who allegedly refuse to pay a debt§1692 (d) (4) Advertise a debt for sale§1692 (d) (5) Repeated telephone communications§1692 (d) (6) Place phone calls without disclosing their identity
False or Misleading Communication §1692 (e) (over 16 acts)
§1692 (e) False, deceptive, misleading representation in connection with debt collection§1692 (e) (1) Representation of any affiliation with the US or a state including any badge, uniform or facsimile§1692 (e) (2) Character amount or the legal status of the debt§1692 (e) (3) Any individual is an attorney or the communication is from an attorney§1692 (e) (4) Nonpayment will result in an arrest or garnishment§1692 (e) (5) Threaten to take an action that cannot be legally taken or is not intended to be taken§1692 (e) (6) Sale or transfer of the debt which would cause a consumer to lose a defense or claim
Unfair Practices §1692 (f) (9 acts)
§1692 b (1) Failing to identify themselves or failing to state they are confirming or correcting location.§1692 b (2) Stating that the debtor owes any debt to any 3rdparty§1692 b (3) Contacting any party more than once, unless requested to do so.§1692 b (4) Using postcards or notes§1692 b (5) any language or any symbols on any envelope or communication indicating it is a debt collection business.§1692 b (6) Any communication with the debtor after notice the debtor is represented by an attorney.
30 Day Validation/Notices §1692 g (7 acts)
§1692 b (1) Failing to identify themselves or failing to state they are confirming or correcting location.§1692 b (2) Stating that the debtor owes any debt to any 3rdparty§1692 b (3) Contacting any party more than once, unless requested to do so.§1692 b (4) Using postcards or notes§1692 b (5) any language or any symbols on any envelope or communication indicating it is a debt collection business.§1692§ b (6) Any communication with the debtor after notice the debtor is represented by an attorney.
Miscellaneous Numerated FDCPA violations
§1692i(a) (2) Creditor brings an action outside where the debtor resides or where the Debtor signed the contract.§1692 j The Forms used by the creditor are designed compiled or furnished by the creditor to create the belief a person other than the creditor is collecting the debt.§1692 A Debt collector who purchases a debt is a Debt Collector covered by the act. He is not a creditor because a creditor must extend credit and creates the debt.15 U.S.C. §1692a (4). A Debt buyer in buying a defaulted debt becomes a debt collector by definition under 15 U.S.C. § §1692a (6).
Bona Fide Error as a Defense to FDCPA Overcoming with FRE 404(b)
A Bona fide error means the creditor:Had no notice.Made a simple mistakeThis was not a pattern, practice or habit (same factors which enhance damages)Pleading BFE allows you to obtain procedure manuals and admit similar complaints and personnel files and performance reviews. All of this extra work increases the attorney fee awards and damages. Remember: stay and discharge are injunctions a creditor must have notice to violate.
Various issues you may see
Creditors and collectors must be listed in the petition to be presumed to have knowledge under the statute. If there is no notice - there is no violation of the stay/discharge. The stay/discharge requires knowledge which may be presumed if the creditor was listed.Some courts hold Bankruptcy “occupies the field” Walls v Wells Fargo 276 F 3rd502 (9thCir, 2002) and Hubbard v National Bond, 126 BR 122 (D. Del, 1991) aff’d 947 F2d 935 (3rdCir, 1991)Others hold there is no conflict between FDCPA and Bankruptcy and it is not preempted. Randolph v IMBS, 368 F. 3d (7thCir, 2003).
When to not file a case
BFRCP 54(d) (1) Bringing a case in bad faith for harassment may allow a creditor damages. Settling a case may have a greater value for a creditor than one which was filed. Example: lawsuit filed after a bankruptcy due to an improper scrub where creditor and attorney attended the 341 and notice given.Standard practice for smaller collectors and banks is to check Pacer prior to collection. (Scrubingthe case) A Pacer scrub may miss a bankruptcy. If the attorney fails to list a collector there is no notice.Offer in Judgment under Rule 68 will limit the recovery.
Military lending act is an alternative
Military Lending Act Effective 10-3 allows special protection for MilitaryEffective 10-3 the Military lending act makes void any credit agreement, promissory note, or another contract prohibited by the Act. (10 U.S.C. § 987(f)(3).Knowingly violating the Act is a misdemeanor (10 U.S.C. § 987(f)(1)Class and private actions 10 U.S.C. § 987(f)(5) allow not less than $500 for each violation, punitive damages, equitable relief, any other relief provided by law, costs, and attorney fees. Creditors cannot force arbitration for civil liability.The defense must show a violation was unintentional from a bona fide error even though reasonable procedures were taken. Legal errors are not a defense. (10 U.S.C. § 987(f)(D). Statute of limitations is two years after discovery or five years after occurrence. 10 U.S.C. § 987(f)(E). A safe harbor exists for checking a specific military database or credit report. 32 C.F.R. 232.5(b)
It is helpful to download a checklist of the many FDCPA numerated sections in analyzing a case and having the client reviewing the checklist.It is also helpful to inform the client in the interview of the availability of the record all calls application for their cell phones. Most jurisdictions allow incoming phone call recordings as evidence which can be very effective on impeachment.Finally clients can and should keep track of incoming phone calls on a phone log. Often however clients fail to maintain these records.
Nick C Thompson800 Stone Creek Parkway Suite 6 Louisville KY 40223502-625-0905 Fax 502-625-0940Office@Bankruptcy-Divorce.comFor additional information on Bankruptcy and Foreclosure including articles on income tax or student loans and bankruptcy see our website atwww.Bankruptcy-Divorce.com