25

101

26

102

c. O

ther

Fal

se S

tate

men

ts27

(7

) Th

e fa

lse r

epre

sent

atio

n or

impl

icat

ion

that

the

cons

umer

com

mitt

ed a

ny c

rime

or c

ondu

ct in

ord

er

to d

isgra

ce th

e co

nsum

er.

103

28 McM

illan

v. C

olle

ctio

n Pr

ofes

siona

ls, 4

55 F

. 3d

754

(7th

Cir.

200

6)

104

29

False

Th

reat

of

Suit

105

30

Yo

u ca

n de

term

ine

whe

ther

this

thre

at is

fal

se b

y ch

ecki

ng s

tate

cou

rt r

ecor

ds fo

r th

e nu

mbe

rs a

nd

natu

re o

f ca

ses

filed

by

the

cred

itor,

debt

col

lect

or

or d

ebt b

uyer

.

--

Hav

e th

ey e

ver

sued

any

one

in y

our

juris

dict

ion?

--

Hav

e th

ey e

ver

brou

ght a

law

suit

for

a de

min

imis

amou

nt?

106

31

107

Lox

v. C

DA, 6

89 F

.3d

818

(7th

Cir.

201

2)32

7t

h C

ircui

t fou

nd th

at a

sta

tem

ent r

egar

ding

atto

rney

fee

s w

as

mat

eria

lly f

alse

on

its f

ace

and,

ther

efor

e, r

equi

red

no

extr

insic

evi

denc

e.

“[

U}n

der

the

so-c

alle

d ‘A

mer

ican

Rul

e,”

a lo

sing

part

y ca

nnot

be

cha

rged

with

the

win

ning

par

ty’s

atto

rney

fee

s un

less

a

stat

ute

or c

ontra

ct e

xplic

itly

stat

es o

ther

wise

.” (a

t 823

)

“The

nai

ve, t

rust

ing,

uns

ophi

stic

ated

con

sum

er is

ther

efor

e lik

ely

to b

elie

ve a

deb

t col

lect

or w

hen

it sa

ys th

at a

ttorn

ey f

ees

are

a po

tent

ial c

onse

quen

ce o

f no

npay

men

t, an

d th

e la

ngua

ge a

t iss

ue is

ther

efor

e m

islea

ding

.” (a

t 825

)

108

33

109

Gon

zale

s v.

Arr

ow, 6

60 F

.3d

1055

(9th

Cir.

201

1)

34

In

200

2, A

rrow

pur

chas

ed a

por

tfolio

of

debt

s ow

ed to

hea

lth

club

s. A

ll of

the

debt

s in

the

port

folio

wer

e m

ore

than

sev

en

year

s ol

d. T

here

fore

, pur

suan

t to

the

FCRA

, non

e of

them

co

uld

be r

epor

ted

to a

cre

dit r

epor

ting

agen

cy.

“A

rrow

wise

ly c

once

des

that

it h

ad n

o in

tent

ion

of r

epor

ting

the

heal

th c

lub

debt

s to

a c

redi

t bur

eau

and

was

lega

lly

proh

ibite

d fr

om d

oing

so.

”

110

Gon

zale

s v.

Arr

ow, 6

60 F

.3d

1055

(9th

Cir.

201

1)

35

“T

o th

e le

ast s

ophi

stic

ated

deb

tor,

the

phra

se ‘i

f w

e ar

e re

port

ing

the

acco

unt,

the

appr

opria

te c

redi

t bur

eaus

will

be

notif

ied

that

this

acco

unt

has

been

set

tled’

sug

gest

s tw

o po

ssib

ilitie

s. It

sug

gest

s th

e po

ssib

ility

that

A

rrow

was

not

rep

ortin

g th

e de

bt to

a c

redi

t rep

ortin

g ag

ency

, and

wou

ld

acco

rdin

gly

mak

e no

fur

ther

rep

ort i

n th

e ev

ent o

f se

ttlem

ent.

But

the

phra

se a

lso

sugg

ests

that

, und

er s

ome

set o

f ci

rcum

stan

ces

appl

icab

le

to th

e re

cipi

ent,

Arr

ow c

ould

and

wou

ld r

epor

t the

acc

ount

. A

bsen

t any

po

ssib

ility

that

Arr

ow c

ould

rep

ort t

he a

ccou

nts,

ther

e w

ould

be

no r

easo

n fo

r A

rrow

to a

sser

t its

inte

ntio

n to

mak

e a

posit

ive

repo

rt in

the

even

t of

paym

ent.

Onl

y th

e fir

st r

eadi

ng is

act

ually

cor

rect

, but

the

seco

nd r

eadi

ng

is fa

r fr

om ‘b

izar

re’ o

r ‘id

iosy

ncra

tic’—

it is

emin

ently

rea

sona

ble.

As

ther

e is

no

circ

umst

ance

und

er w

hich

Arr

ow c

ould

lega

lly r

epor

t an

obso

lete

de

bt to

a c

redi

t bur

eau,

the

impl

icat

ion

that

Arr

ow c

ould

mak

e a

posi

tive

repo

rt in

the

even

t of

a pa

ymen

t is

mis

lead

ing.

” (a

t 106

2-3)

, em

phas

is ad

ded.

111

IV.

Cla

ims

pert

aini

ng to

val

idat

ion

requ

irem

ents

and

th

e co

nsum

er’s

right

to d

isput

e a

debt

36

§

1692

g V

alid

atio

n of

deb

ts

(a) W

ithin

fiv

e da

ys a

fter

the

initi

al c

omm

unic

atio

n w

ith a

con

sum

er in

con

nect

ion

with

the

colle

ctio

n of

an

y de

bt, a

deb

t col

lect

or s

hall,

unl

ess

the

follo

win

g in

form

atio

n is

cont

aine

d in

the

initi

al c

omm

unic

atio

n or

the

cons

umer

has

pai

d th

e de

bt, s

end

the

cons

umer

a w

ritte

n no

tice

cont

aini

ng -

-

112

37

(1

) the

am

ount

of

the

debt

;

(2

) the

nam

e of

the

cred

itor

to w

hom

the

debt

is o

wed

;

(3

) a s

tate

men

t tha

t unl

ess

the

cons

umer

, with

in th

irty

days

aft

er r

ecei

pt o

f th

e no

tice,

disp

utes

the

valid

ity o

f th

e de

bt, o

r an

y po

rtio

n th

ereo

f, th

e de

bt w

ill b

e as

sum

ed v

alid

by

the

debt

col

lect

or;

113

38

114

39

Who

’s th

e C

redi

tor?

Braa

tzv.

Lea

ding

Ed

ge, 2

012

U.S.

Dist

. LE

XIS

7079

6 (N

.D. I

ll. 2

012)

115

40

Wal

ls v.

UC

B,

2012

U.S

. Dist

. LE

XIS

6807

9

(N.D

. Ill.

201

2)

116

41

117

§16

92g(

a) –

valid

atio

n no

tice

requ

irem

ents

(con

t.’d)

42

(4

) a s

tate

men

t tha

t if

the

cons

umer

not

ifies

the

debt

co

llect

or in

writ

ing

with

in th

e th

irty-

day

perio

d th

at

the

debt

, or

any

port

ion

ther

eof,

is di

sput

ed, t

he

debt

col

lect

or w

ill o

btai

n ve

rific

atio

n of

the

debt

or

a co

py o

f a

judg

men

t aga

inst

the

cons

umer

and

a

copy

of

such

judg

men

t will

be

mai

led

to th

e co

nsum

er b

y th

e de

bt c

olle

ctor

; and

118

§16

92g(

b)43

. .

. A

ny c

olle

ctio

n ac

tiviti

es a

nd c

omm

unic

atio

ns

durin

g th

e 30

-day

per

iod

may

not

ove

rsha

dow

or

be in

cons

isten

t with

the

disc

losu

re o

f th

e co

nsum

er’s

right

to d

isput

e th

e de

bt o

r re

ques

t the

nam

e an

d ad

dres

s of

the

orig

inal

cre

dito

r.

119

44

How

long

do

es th

e co

nsum

er

have

to

disp

ute

valid

ity?

120

45

121

Add

ition

al r

esou

rces

:46

Fair

Deb

t Col

lect

ion

(7th

Ed.)

–or

der

on-li

ne a

t ww

w.n

clc.

org

or c

all

(617

) 542

-959

5

The

Nat

iona

l Con

sum

er L

aw C

ente

r7

Win

thro

p Sq

uare

Bost

on, M

A 0

2110

-124

5

(617

) 542

-801

0(6

17) 5

42-8

028

(FA

X)

ww

w.n

clc.

org

The

Nat

iona

l Ass

ocia

tion

of C

onsu

mer

Adv

ocat

es

1730

Rho

de Is

land

NW

, Sui

te 7

10

Was

hing

ton,

DC

200

36(2

02) 4

52-1

989

(202

) 452

-009

9

ww

w.n

aca.

net

122

BASIC DISCOVERY

IN A DEBT COLLE,CTION ABUSE CASE

Michael T. O'Connor

March 8, 2013

Visit our website: www.de anmalone.com

TEXAS TRIAL LAWYERS

PRINCIPAL OFFICE: DALLAS TEXAS: (214) 670-9989TOLL FREE: (8óó) 670-9989

L^rw OrrlcEs oF DEAN Mel-oruErFlc.

123

SAMPI,E INTERRO GîAT ORIES

Interrogatory No. 1: State the name(s) of all collection software used by you (to create and

maintain coilection notes and records and/or for an automated or predictive telephone dialer)

when attempting to collect the Account.Answer:

Interrogatory No. 2: Identify (by name, address, and telephone number) all long distance

telephoie service providers which you used to attempt to collect the Account, as well as youl

primary billing address and your telephone number(s).Answer:

InterrogatoryNo.3: State the legal and assumed names; home addresses; date of birth; and

gender of all natural persons who assisted in collecting the Account.

Answer:

Interrogatory No. 4: Identify (by style, court, and cause number) all lawsuits which were filed

during ihe last three years and in which it was alleged that you engaged in improper attempts to

collect one or more debts.Answer:

InterrogatoryNo,5: Have you or your attorney made any audio recording of the Plaintiff or

the pláintifls attorneys within the last two years (excluding recordings made during

depositions)?Answer:

124

SAMPLE REOUESTS FOR ADMISSIqNS

Request for Admission No. 1: Admit that the Plaintiff is not personally liable for any

amount allegedly due on the Account'Response:

Request for Admission No, 2payment of the Account.Response:

Admit that you contend that the Plaintiff is liable for

Request for Admission No. 3

Response:

Admit that you do not own the Account

Request for Admission No. 4: Admit that you attempted to collect the Account from the

Plaintiff during the Relevant Time Period.

Response:

Request for Admission No. 5:

to collect the Account.Response:

Admit that you used a telephone autodialer in your attempts

Request for Admission No. 6:

policy.Response:

Admit that you have an Errors and Omissions insurance

Request for Admission No. 7collection calls.Response:

Admit that, in 2010, you recorded some or all of your

Request for Admission No. 8

collection calls.Response:

Admit that, in 2010, you did not record any of your

Request for Admission No. 9:

to the Plaintiff.Response:

Admit that you recorded some or all of your collection calls

125

SAM.,PL4 REOUESTS FOR PRqDUCTION

Request for Production No. l: Produce your records (typewritten, handwritten' and

computer-generated) of your attempts to collect the Account'

Response:

Request for Production No. 2: Produce all recordings (including audio and video), and any

typåd or written transcripts thereoi that evidence your attempts to collect the Account.

Response:

RequestforproductionNo.3: Produce copies of only the pages of your telephone long

distànce billing records which indicate upon them calls placed by you when attempting to collect

the Account.Response:

Request for Production No. 4: Produce copies of all e-mails you sent to or received from

the Plaintiff during the Relevant Time Period.

Response:

Request for production No. 5: Produce all audio recordings of the Plaintiff and the

Plaintiff s attorneys (other than recordings of depositions)'

Response:

Request for production No. 6: Produce all documents evidencing the transmission of any

information to or from any credit bureau and/or credit reporting agency regarding to the

Account.Response:

Request for production No. 7: Produce all records of disciplinary actions against all

natural persons who attempted to collect the Account.

Response:

Request for production No. 8: Produce all debt collection training records of all natural

persons who attempted to collect the Account.Response:

126

Request for Production No, 9: Produce copies of all Better Business Bureau complaints

received by you during the last three years which included allegations that one of your

employees or agents engaged in improper debt collection practices (as well as any responses you

made to such complaints).Response:

Request for Production No. 10: Produce all documents evidencing any felony conviction ofany natural person who attempted to collect the Account.Response:

Request for Production No. I 1: Produce all form letters and telephone collection scripts

you used to attempt to collect the Account'Response:

RequestforProductionNo. 12: Produce copies of all debt collector policies, procedures'

and techniques which you gave to persons who attempted to collect the Account.

Response:

Request for production No. 13: Produce the user and programming manuals for collection

software you used to collect the Account.Response:

Request for Production No. l4: Produce all documents which list and define, or act as a key

for, codes and abbreviations you used for your collection software when attempting to collect the

Account.Response:

RequestforProductionNo. 15: Produce all documents that indicate or suggest that the

Plaintiff does not owe any monies for the Account'Response:

RequestforproductionNo. 16: Produce all documents which indicate or suggest that the

Acóount was incurred for something other than personal, family, or household purposes.

Response:

Request for Production No. 17: Produce copies of all pages from the Plaintiff s pages on

any social networking website (including Facebook).

Response:

127

CAUSE NO

CONSUMER,

Plaintifl

COLLECTION AGENCY,

Defendant.

$

$

$

$

$

$

$

$

$

IN THE DISTRICT COURT OF

DALLAS COLINTY, TEXAS

JUDICIAL DISTRICT

NOTI OF

TO: Defendant Collection Agency, by and through its attorney of record,

Michael T. O'Connor, attorney for the Plaintiff in the case described in the caption

above, will take the oral deposition of Defendant Collection Agency (hereinafter "CA") at 10:00

a.m. on

-,20II

at Unless otherwise noted, the

relevant time period for the topics listed below is January 7,2009 through the day of the

deposition. The deposition will be on the following matters:

1) CA's policies and procedures regarding debt collection and responding to

complaints regarding debt collection;

2) CA's communications (including the substance and content of those

conversations) with the Plaintiff and anyone else related to collection of the

alleged debt referenced in the Plaintifls live pleading in this lawsuit;

3) Audio recordings of any telephone conversations related to collection of the

alleged debt referenced in the Plaintiff s live pleading in this lawsuit;

4) Any change in policy or procedure made by CA as a result of lawsuits in which

CA was ipurty for any period of time during the last three (3) years in which it

was allegeã thut CA violated the Federal Fair Debt Collection Practices Act or

was liabie under any other statute or cause of action due to alleged attempts to

collect a purPorted debt;

ISAMPLE] Notice to Take oral/video Deposition of Defendant - Page I of 3

128

Telephone records and collection notes evidencing or referring to calls CA placed

to anyone while attempting to collect the alleged debt referenced in the Plaintiff s

live pleading in this lawsuit;

CA's pleadings in this lawsuit (including all allegations therein and the factual

bases for such allegations);

CA's discovery responses and objections in this lawsuit (including all documents

and tangible items produced);

CA's collection efforts regarding the alleged debt referenced in the Plaintiff s livepleading in this case;

CA's training procedures for its debt collector employees;

10) The alleged debt referenced in the Plaintiffls live pleading in this lawsuit;

1l) CA's procedures regarding investigating the background of prospective and

current debt collector employees;

12) Any complaints, charges, allegations, or lawsuits against any CA employees who

attempted to collect the alleged debt from the Plaintiff (related to their alleged

activities as an alleged CA agent and/or employee);

13) CA's supervision of its employees who attempted to collect the alleged debt

referenced in the Plaintifls live pleading in this lawsuit;

l4) CA's relationship with the alleged creditor of the alleged debt referenced in the

Plaintiff s live pleading in this lawsuit;

15) CA's communications (regarding the Plaintiff, the Plaintiffs alleged debt, and

this lawsuit) with the alleged creditor of the alleged debt referenced in the

Plaintiff s live pleading in this lawsuit;

16) Any agreement between CA and the alleged creditor of the alleged debt

referenced in the Plaintiff s live pleading in this lawsuit;

l7) Any responses to and/or change in policy or procedure made by CA as a result ofcomplaints and/or allegations against CA and/or its employees filed with or

transmitted to the Better Business Bureau and/or the Texas State Attorney

General;

18) The general environment in the CA office from which calls to the Plaintiff were

made, during the time of the alleged acts giving rise to this case;

s)

6)

7)

8)

e)

ISAMPLE]Notice to Take Oral/Video Deposition of Defendant - Page 2 of 3

129

19) CA's general business practices, purpose, and model;

20) CA's net worth; and

2t) All recordings (including all transcripts) produced by CA in this lawsuit(including the content of those recordings and the identity of any current and/or

former CA employee on those recordings).

CA must - a reasonable time before the deposition - (1) designate one or more English-

speaking individuals to testify on its behalf and (2) set forth, for each individual designated, the

matters on which the individual will testify. Further, each individual designated must testify as

to matters known or reasonable available to CA.

The deposition will continue from day-to-day until completed. A court reporter shall

record the deposition stenographically. In addition, the Plaintiff may cause the deposition to be

recorded by sound or sound-and-visual.

ISAMPLE]Norice to Take oral/video Deposition of Defendant - Page 3 of 3

130

Telephone Consumer Protection Act:

Basics (and more)

Alex Burke and Keith J. Keogh, Baltimore. Md. 2013

OVERVIEW OF THE TCPA

Junk Faxes Autodialed calls Text Message Ads Pre-Records Do Not Call Violations

to Cell

131

The TCPA prohibits sending an unsolicited advertisement to a telephone facsimile machine.

47 U.S.C. §227(b)(1)(c) provides in part:

(b) Restrictions on use of automated telephone equipment

(1) Prohibitions

It shall be unlawful for any person within the United States–

...

(c) to use any telephone facsimile machine, computer, or

other device to send an unsolicited advertisement to a telephone

facsimile machine;...

The TCPA defines “unsolicited advertisement”

as “any material advertising the commercial availability or quality of any property, goods, or

services which is transmitted to any person without that person’s express invitation or

permission, in writing or otherwise.” 47 U.S.C. §227(a)(5).

The “established business relationship” exception to liability requires three factors:

(I) the unsolicited advertisement is from a sender with an established business relationship with the recipient

(ii) the sender obtained the number of the telephone facsimile machine through –

(I) the voluntary communication of such number, within the context of such established business

relationship, from the recipient of the unsolicited advertisement, or

(II) a directory, advertisement, or site on the Internet to which the recipient voluntarily agreed to

make available its facsimile number for public distribution... ; and

(iii) the unsolicited advertisement contains a notice meeting the requirements under

paragraph (2)(D) .... 47 U.S.C. § 227(b)(l)(C); see also 47 U.S.C. § 227(b)(2)(D) (“OPT OUT NOTICE”)

Opt Out Notice required even if the recipients did provide “prior express invitation or permission.” 47 CFR

64.1200(a)(3)(iv); Holtzman v. Turza, 2010 U.S. Dist. LEXIS 80756, *14 (N.D. 2010) (“47 U.S.C. §§ 227(b)(1)(C)(iii)

and (b)(2)(D) require that all fax advertisements include a clear and conspicuous opt-out notice informing a

recipient that she can request that the sender not transmit any future unsolicited fax advertisements”);

MSG Jewelers, Inc. v. C & C Quality Printing, Inc., Case No. 07AC-028676 at *3 (Mo. Cir. July 17, 2008)("[a]ll

advertising faxes including those sent with the express permission of the recipient - must include a proper

opt-out notice.").

But See Nack v Walburg, 2011 WL 310249, at * 4 (E D Mo) (Opt Out Notice only required for unsolicited faxes).

132

The TCPA makes it unlawful for any person within the United States . . . to make any call (other

than a call made for emergency purposes or made with the prior express consent of the called

party) using any automatic telephone dialing system or an artificial or prerecorded voice . . .”

47 U.S.C. § 227(b)(1)(A)(iii)

Congress found that unwanted automated calls were a “nuisance and an

invasion of privacy, regardless of the type of call” and that banning such calls

was “the only effective means of protecting telephone consumers from this

nuisance and privacy invasion.” Pub. L. No. 102-243, §§ 2(10-13)(Dec. 20, 1991)

codified at 47 U.S.C. § 227.

The TCPA defines ATDS as “equipment which has the capacity - (A) to store or produce telephone

numbers to be called, using a random or sequential number generator; and (B) to dial such

numbers.” 47 U.S.C § 227(a)(1).

Focus on ATDS is whether it has the capacity and not whether it actually used that capacity.

Satterfield, 569 F. 3d at 951; Lozano, 702 F. Supp. 2d at 1010-1011; Griffith v. Consumer Portfolio

Serv., 2011 U.S. Dist. LEXIS 91231 (N.D. Ill. Aug. 16, 2011); Vance v. Bureau of Collection

Recovery LLC, No. 10-06324, 2011 U.S. Dist. LEXIS 24908 at *6 -7 (N.D.Ill., March 11, 2011);

Lozano v. Twentieth Century Fox Film Corp., 702 F. Supp. 2d 999, 1010-1011 (N.D. Ill. 2010);

Hicks v. Client Services, Inc., 2009 WL 2365637 (S.D.Fla. June 9, 2009); See also Joffe v. Acacia Mtg

Corp., 121 P.3d 831, 839 ( Ariz. App. 2005). Kazemi v. Payless Shoesource, Inc., 2010 U.S. Dist. LEXIS

27666 (N.D. Cal. Mar. 12, 2010).

CAPACITY TO AUTODIAL & CONSENT

Capacity issue is important as virtually no one uses a pure autodialer. Instead, most

most companies use some variation of a predictive dialer, which is simply a more

productive dialer.

The TCPA directed the FCC to prescribe regulations implementing the restrictions on the use of

autodialers. 47 U.S.C. § 227(b)(2). Following Congress’s directive, the FCC has expanded the

definition of an ATDS to include predictive dialers. In the Matter of Rules and Regulations

Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, 18 FCC Rcd

14014, 14093 (June 26, 2003) (“2003 Order”).

In 2008, in response to a petition by debt collection trade association ACA International,

the FCC held the TCPA applied to debt collectors and again expressly reaffirmed that predictive

dialers used for collections calls are ATDS when it is “equipment paired with predictive dialing

software and a database of numbers.” In the Matter of Rules and Regulations Implementing the

Telephone Consumer Protection Act of 1991; Request of ACA International for Clarification and

Declaratory Ruling, CG Docket No. 02-278, 23 FCC Rcd 559, 565-566 (Dec. 28, 2007)

Unless the cell was provided by the consumer (not skipped traced) there is no consent even

under the FCC’s 2008 order and the caller has the burden to prove consent.

The FCC’s holdings with respect to predictive dialers are final and controlling under the Hobbs

Act. CE Design, Ltd. v. Prism Business Media, Inc., 606 F. 3d 443, 446 (7th Cir. 2010).

133

Text Messages are calls under the TCPA. Satterfield v. Simon & Schuster, Inc., 569 F.3d 946

(9th Cir. 2009); Lozano v. Twentieth Century Fox Film Corp., 702 F. Supp. 2d 999, 1010-1011 (N.D. Ill.

2010); Abbas v. Seeling Source, LLC, 2009 WL 4884471, 2009 U.S. Dist. LEXIS 116697 (N.D. Ill. 2009)

(“[N]either the above-quoted dictionary definition nor the TCPA requires that a ‘call’ be ‘oral.’

Indeed, if such a requirement existed, the TCPA’s prohibition on calls to ‘a paging service,’ would be of

little effect.”)

A “telephone solicitation” is defined as “the initiation of a telephone call or message for the

purpose of encouraging the purchase or rental of, or investment in, property, goods, or services,

which is transmitted to any person,

but such term does not include a call or message (A) to any person with that person’s

prior express invitation or permission, (B) to any person with whom the caller has an

established business relationship, or (C) by a tax- exempt nonprofit organization. ”

47 U.S.C. § 227(a)(3); 47 C.F.R. § 64.1200(f)(12).

A “prerecorded messages containing free offers and information about goods and services that

are commercially available are prohibited to residential telephone subscribers, if not otherwise

exempt.” TCPA Revisions Report and Order, 18 FCC Rcd 14097-98 (2003).

134

Telemarketing to phone numbers (residential or cell) on the federal or company

specific do-not-call list strictly prohibited.

Does not matter if prerecorded or automatic.

Anyone who is on the DNC list that has received two telemarketing calls within

a twelve month period can sue (for both calls).

No PROA if just one call. 47 U.S.C. 227(c)(5).

47 U.S.C. § 227(b) Restrictions on use of automated telephone equipment (1) Prohibitions It

shall be unlawful for any person within the United States, or any person outside the United

States if the recipient is within the United States—

(A) to make any call (other than a call made for emergency purposes or made with the prior

express consent of the called party) using any automatic telephone dialing system or an

artificial or prerecorded voice—

(i) to any emergency telephone line (including any “911” line and any emergency line of a

hospital, medical physician or service office, health care facility, poison control center, or

fire protection or law enforcement agency);

(ii) to the telephone line of any guest room or patient room of a hospital, health care

facility, elderly home, or similar establishment; or

(iii) to any telephone number assigned to a paging service, cellular telephone service,

specialized mobile radio service, or other radio common carrier service, or any service

for which the called party is charged for the call;

(B) to initiate any telephone call to any residential telephone line using an artificial or

prerecorded voice to deliver a message without the prior express consent of the called party,

unless the call is initiated for emergency purposes or is exempted by rule or order by the

Commission under paragraph (2)(B);

135

Telemarketing EBR: 47 CFR

64.1200(f)(5)• (5) The term established business relationship for purposes of telephone

solicitations means a prior or existing relationship formed by a voluntary two-way communication between a person or entity and a residential subscriber with or without an exchange of consideration, on the basis of the subscriber's purchase or transaction with the entity within the eighteen (18) months immediately preceding the date of the telephone call or on the basis of the subscriber's inquiry or application regarding products or services offered by the entity within the three months immediately preceding the date of the call, which relationship has not been previously terminated by either party.

• (i) The subscriber's seller-specific do-not-call request, as set forth in paragraph (d)(3) of this section, terminates an established business relationship for purposes of telemarketing and telephone solicitation even if the subscriber continues to do business with the seller.

• (ii) The subscriber's established business relationship with a particular business entity does not extend to affiliated entities unless the subscriber would reasonably expect them to be included given the nature and type of goods or services offered by the affiliate and the identity of the affiliate.

Section 227(b)(3)(B) provides a minimum of $500.00 in statutory damages per fax, call or message.

Hinman v. M and M Rental Center Inc., 596 F. Supp. 2d 1152 (N.D. Ill. 2009). Awarding $500 per

facsimile for a total of $3,862,500 based on the total of 7,725 unsolicited advertisements that

defendant sent to the class. The TCPA prohibits the sending of unsolicited fax advertisements and

make no reference at all to receipt. Id. at 1159.

If a violation was “willful or knowing”, the court can treble the amount under 227(b)(3)(c).

The FCC has held:

It is irrelevant to a finding of willfully or knowingly whether the junkfaxer intended to violate

federal law. FCC Staff Opinion (letter from Acting Chief of the Enforcement Division, Common

Carrier Bureau, Glenn T. Reynolds to Robert Biggerstaff, dated July 27, 1999).

Sengenberger v. Credit Control Services, Inc., 2010 U.S. Dist. LEXIS 43874 (N.D. Ill. May 5, 2010)

(granting summary judgment on TCPA claim and finding that an intentional act equates to willfully

or knowingly); See Nicholson v. Hooters of Augusta, Inc., 95-RCCV-616, Richmond County, Ga

(Judge Brown, April 25, 2001), Jury awarded $3,000 for each of the 1,321 class members for the

transmitting of six unsolicited facsimile advertisements. The Court tripled that amount to $9,000

per class member for a total of $11,889,000.

136

FEDERAL COURTS HAVE JURISDICTION OVER TCPA CLAIMS

Cite as: 565 U. S. ____ (2012) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash- ington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREM E COURT OF THE UNITED STATES No. 10-1195

MARCUS D. MIMS, PETITIONER v. ARROW FINANCIAL SERVICES, LLC

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE ELEVENTH CIRCUIT

[January 18, 2012]

JUSTICE GINSBURG delivered the opinion of the Court.

Mims v. Arrow Financial Services, Inc., 132 S.Ct. 740 (Jan. 18, 2011).

In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, GC

Doc. 02-278, 23 FCC Rcd. 559, 565 (January 4, 2008) predictive dialers are ATDS and creditor on

whose behalf debt collector is calling is liable for calls.

On February 15, 2012, the FCC issued a new Report and Order that redefined “prior express

consent” for all telemarketing calls.

- Debt collection calls and several other categories of calls are not affected.

- signed by the consumer and be sufficient to show that he or she:

- (1) received “clear and conspicuous disclosure” of the consequences of providing the

requested consent, i.e., that the consumer will receive future calls that deliver

prerecorded messages by or on behalf of a specific seller; and

- (2) having received this information, agrees unambiguously to receive such calls at a

telephone number the consumer designates.

The “Hobbs Act” a/k/a “Administrative Orders Review Act” 28 USC 2342(1); 47 USC 402(a)

provides specific remedies for reviewing FCC orders, which do not include District Court review.

CE Design, Ltd. v. Prism Bus. Media, Inc., 606 F.3d 443 (7th Cir. 2011), but compare Leyse v. Clear

Channel Broad., Inc., 2012 FED App. 0307P (6th Cir.) (6th Cir. Ohio 2012) holding that same FCC

Regulations regarding the TCPA is only entitled to Chevron deference and Hobbs Act does not

prevent court from reviewing.

137

The burden is on the caller to show that the wireless number was provided by the consumer to

the creditor, and that such number was provided during the transaction that resulted in the debt

owed. See In the Matter of Rules and Regulations Implementing the Telephone Consumer

Protection Act of 1991 (“2008 FCC Ruling”), 23 F.C.C.R. 559 at ¶ 10 (Dec. 28, 2007)(Emphases added).

"during the transaction that resulted in the debt owed," includes voluntary providing the cell

sometime after the account is opened. Moore v. Firstsource Advantage, LLC, 2011 U.S. Dist.

LEXIS 104517, 30-31 (W.D.N.Y. Sept. 15, 2011). Also held revocation of consent must be in writing.

During Transaction may not be limited to Initial Contract

Four federal opinions (3 from NY) found revocation must comply with § 1692c(c) of the FDCPA,

and accordingly held an oral request to cease making autodialer calls was ineffective. Moore

supra; Moltz v. Firstsource Advantage, LLC, No. 08-CV-239S, 2011 U.S. Dist. LEXIS 85196, 2011

WL 3360010, at *5 (W.D.N.Y. Aug. 3, 2011); Cunningham v. Credit Mgmt., L.P., No. 3:09-cv-1497-

G (BF), 2010 U.S. Dist. LEXIS 102802, 2010 WL 3791104, at *5 (N.D. Tex. Aug. 30, 2010)

(recommendation of magistrate judge); Starkey v. Firstsource Advantage, LLC, No. 07-CV662A,

2010 U.S. Dist. LEXIS 60955, 2010 WL 2541756, at *6 (W.D.N.Y. Mar. 11, 2010) (recommendation

of magistrate judge).

REVOCATION OF CONSENT

Oral Revocation Sufficient. Adamcik v. Credit Control Servs., 2011 U.S. Dist. LEXIS 150107

(W.D. Tex. Dec. 19, 2011); Gutierrez v. Barclays Grp., 2011 U.S. Dist. LEXIS 12546, 2011 WL 579238

at *4 (S.D. Cal. Feb. 9, 2011).

*HIPPA does not prevent “consent” for collection of medical debts. Mitchem vs. Illinois Collection

Service, Inc., 09 C 7274 (N.D. Ill. 1/20/12)

138

“We do not find the statutory construction and reasoning in Starkey, Adamcik, or Gutierrez, to

be persuasive, and expressly decline to hold that the TCPA, or any FCC regulation or advisory

opinion construing the statute, contains any provision permitting this Court to find post-

formation revocation of consent authorized under the provisions of the TCPA.” Gager v. Dell

Financial Services, LLC, 2012 WL 1942079 (M.D. Pa. May 29, 2012).

“I see nothing in the TCPA that gives a consumer two bites at the apple. That is, there is no

provision in the TCPA, unlike the FDCPA, see 15 U.S.C. § 1692c(c), that allows withdrawal of a

voluntarily-given, prior express consent to call a cell phone number. Nothing compels a

consumer to list his cell phone number with his counterparty when he opens an account, or

to open an account at all, but if that is the number he chooses to provide, then he cannot

complain about being called at that number.” Saunders v. NCO Fin. Sys., 2012 U.S. Dist. LEXIS

181174 (E.D.N.Y. Dec. 19, 2012)

The FCC unequivocally held that consumers may effectively revoke consent under the TCPA

In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991,

Declaratory Ruling as to Petition of SoundBite Communications, Inc., CG Docket No. 20-278

(Nov. 29, 2012) (“SoundBite Ruling”).

STANDING TO SUEThe TCPA grants a private right of action to any “person or entity.”

See47 U.S.C. § 227(b)(3). Specifically, § 227(b)(3) provides

A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in

an appropriate court of that State—

(A) an action based on a violation of the subsection or the regulations prescribed under this

subsection to enjoin such violation,

(B) an action to recover for actual monetary loss from such a violation, or to receive $500 in

damages for each such violation, whichever is greater, or

(C) both such actions.

Yet, defendants argue that you must be the “called party.” Response should be:

1. Need not be a called party as term is only relevant to an exception of the TCPA.

2. Even if need be a called party, term is broad enough to include most persons.

139

DON’T NEED TO BE A CALLED PARTY

The TCPA uses the term “called party,” only when setting forth an exception to liability, stating

that a person does not violate the TCPA if the call is “made for emergency purposes or made

with the prior express consent of the called party.”See47 U.S.C. § 227(b)(1)(A). The statute does

not use the term “called party” when defining who may assert a TCPA claim.

1. Page v. Regions Bank, 2012 U.S. Dist. LEXIS 185440 (N.D. Ala. Aug. 22, 2012)

2. Page collects the following cases that support this holding:

Harris v. World Fin. Network Nat'l Bank, 867 F.Supp.2d 888, 2012 WL 1110003, at *5 (E.D.Mich.

Apr. 3, 2012); Anderson v. AFNI, Inc., No. 10–4064, 2011 WL 1808779, at *7 (E.D.Pa. May 11,

2011); D.G. ex rel Tang v. William W. Siegel & Assocs., Attorneys at Law, LLC, 791 F.Supp.2d 622,

625 (N.D.Ill.2011); Tang v. Med. Recovery Specialists, LLC, No. 11–C2109, 2011 WL 6019221, at

*2 (N.D.Ill. July 7, 2011) (slip op.); Kane v. Nat'l Action Fin. Servs., No. 11–cv–11505, 2011 WL

6018403, at *7 (E.D.Mich. Nov. 7, 2011) (slip op.)

“The plain language of section 227(b)(1) makes it clear that the "recipient" of a

call violative of that provision may sue — not merely, as ERC argues, the

"intended recipient."

Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637 (7th Cir. 2012)

“Wrong Number” calls, where plaintiff inherited a debtor’s phone

number, are actionable because not made with “prior express consent”

of recipient.

Use of cell phone airtime minutes constitutes “out of pocket” loss.

Some defendants are now arguing that the end user of the cell phone must be

the “subscriber” on the bill in order to have standing.

RESPONSE: Page v. Regions Bank, 2012 U.S. Dist. LEXIS 185440 (N.D. Ala. Aug.

22, 2012) Page is the "called party" because he was the "subscriber" to the

cellular telephone in question. Page is the regular user and carrier of the cellular

telephone, as well as the person who needs the telephone line to receive other

calls. The fact that the telephone number was registered in Page's fiancee's name

does not change this result.

140

Meyer v PRA, 2012 U.S. App. LEXIS 21136, 11-56600 (9th Cir. 2012) affirmed

preliminary injunction and provisional class certification. Held:

-Issue of Consent is not an individual issue for a class consisting of cell

numbers that were skipped trace.

-Rejected argument that predictive dialers are not ATDS.

Chesbro v Best Buy Stores, 2012 U.S. App. LEXIS 21594, 11-35784 (9th 2012)

Reversed SJ for Best Buy and held:

-Reaffirmed FCC position that dual purpose calls (both customer service/informational

component and marketing component are prohibited. Focus is on purpose of

message and not defendant’s characterization and rejected argument that message

must explicitly reference any property, goods or services.

-Implicitly accepts notion that consent can be revoked.

4 Years Default SOL Applies

Hawk Valley, Inc. v. Taylor, Civ. A. No. 10-cv-00804, 2012 U.S. Dist. LEXIS 47024, at *20 (E.D. Pa.

Mar. 30, 2012) (the court concluded that based on Mims, the TCPA claim was "subject to the

federal four-year 'catch-all' statute of limitations.") See also City Select Auto Sales, Inc. v. David

Randall Assocs., Civ. A. No. 11-2658, 2012 U.S. Dist. LEXIS 16118, at *2-3 (D.N.J. Feb. 7, 2012)

("[A] four-year statute of limitations applies to actions under the Telephone Consumer

Protection Act.");

Still litigated because of prior split in authority, but should not survive Mims.

Sawyer v. Atlas Heating and Sheet Metal Works, Inc., 642 F.3d 560, 561 (7th Cir. 2011)

applied federal default SoL 28 U.S.C. 1658. 2nd Circuit found state law SOL applicable and not 4

years under 28 U.S.C. § 1658(a). Giovanniello v. ALM Media, LLC, 660 F.3d 587, 591-592 (2d Cir.

2011)

The 2nd Cir. construed the TCPA's "otherwise permitted" provision, to mean TCPA claim

"cannot be brought if not permitted by state law. Reasoning based on cases holding

that there was no federal jurisdiction under the TCPA.

141

PENDING FCC RULINGS

AUTO DIALERS

In The Matter Of Petition For Declaratory Ruling Regarding Non-Telemarketing Use Of

Predictive Dialers, CG Docket No. 02-278, DA 12-1653, 2012 WL 4959378, *1 (Oct. 16, 2012)

(“2012 Public Notice”). The 2012 Public Notice states the following:

With this Public Notice, we seek comment on a Petition for Declaratory Ruling filed by

Communication Innovators. Communication Innovators asks the Commission to clarify that

predictive dialers that are not used for telemarketing purposes and do not have the current

ability to generate and dial random or sequential numbers are not “automatic telephone

dialing systems”as defined by the Telephone Consumer Protection Act and the Commission's

related rules.

AUTO DIALERS AND CONSENT

GroupMe asked to clarify the meaning of the terms “automatic telephone dialing system”

(ATDS) and “capacity,” as used in 47 U.S.C. § 227(a)(1).4 and to clarify that “for non-

telemarketing, informational calls or text messages to wireless numbers, which can permissibly

be made using an ATDS under the TCPA with the called party's oral prior express consent, the

caller can rely on a representation from an intermediary that they have obtained the requisite

consent from the called party.”

On Behalf of Liability

The courts in Charvat v. Echostar Satellite, LLC, 630 F.3d 459 (6th Cir. Dec. 30, 2010), and

United States v. Dish Network, LLC, 2011 WL 475067 (C.D.Ill.) required the parties to submit

petitions to the FCC, which in turn, sought public comment regarding the following questions:

1. Under the TCPA, does a call placed by an entity that markets the seller’s goods or services

qualify as a call made on behalf of, and initiated by, the seller, even if the seller does not

make the telephone call (i.e., physically place the call)?

2. What should determine whether a telemarketing call is made “on behalf of” a seller, thus

triggering liability for the seller under the TCPA? Should federal common law agency principles

apply? What, if any, other principles could be used to define “on behalf of” liability of a seller

under the TCPA.

142

Discovery Tips: Interrogatories

• Broader than Document Requests (which ask for docs in possession, custody of control)

• Ints can ask about: “any nonprivileged matter that is relevant to any party's claim or defense—including:

– the existence, description, nature, custody, condition, and location of any documents or other tangible things and

– the identity and location of persons who know of any discoverable matter.” FRCP 33; 26(b).

Interrogatories• Identify all attempted and successful communications (including but not limited to

telephone calls) regarding any account associated with any of the following information: James Smith, plaintiff and/or 312-xxx-1212.

• Identify all employees, persons (including any third party, for example, Livevox or SoundBite) and departments involved with use or implementation of your Dialer or use of Prerecorded or artificial voice messages.

– A complete response would include, for example, your communications manager, dialer specialists, any supplier of Dialer software or hardware (e.g. Qwest or Aspect), any person that makes or made calls on your behalf (i.e. SoundBite or Livevox), your phone company, and any person that supplied voice message services. Include the name, work location, job title, and job description and describe by category all Electronically Stored Information concerning that person, as to dialers and recorded messages, that exists.

• Identify all of your dialers (including third party, cloud-based, hosted and other dialing companies), equipment and software, including for example any livevox, SoundBite, Nobel, Ensemble Pro and/or Aspect equipment/systems/software. Include the company, make, model, physical location, how they are used, and whether they were used to call plaintiff.

• Identify all sources where you and any predecessor/creditor on the account obtained plaintiff’s phone number, and the precise circumstances under which you obtained such.

143

Interrogatory Sidestep• Lots of times, defendants attempt to produce

documents in lieu of answering interrogatories pursuant to FRCP 33(d).This isn’t good enough.– 33(d) requires D to “specify[] the records that must be

reviewed, in sufficient detail to enable the interrogating party to locate and identify them as readily as the responding party could.”

– Account notes are indecipherable, and I can’t read them like D can. I always ask for a spreadsheet listing at least:

• Phone number called;

• Date/time of call;

• Persons involved with call;

• Substance and purpose of call (including whether a prerecorded message was played);

• Equipment used to make the call.

Document Requests

• No Brainer: All documents, records, data, recordings and other materials relating to John Doe, plaintiff or telephone number 312-xxx-1212 or any account associated with any of them.

• All documents that support or refute any affirmative defense in this case, or relating to prior express consent to receive calls made with an automatic telephone dialing system or prerecorded or artificial voice.

• All documents that describe any data sets, data fields, codes or abbreviations in any materials produced by you, including but not limited to account history materials and call records.

144

Useful Public Info

• Websites of Collectors and Dialing Companies

• Collector Submissions to the FCC (proceeding

02-278) (remove date restriction)– http://apps.fcc.gov/ecfs/comment_search/input?z=rzbxp

• Texas Public Utility Commission, projects

40065 and 40066– http://interchange.puc.state.tx.us/WebApp/Interchange/application/d

bapps/login/pgLogin.asp

• Freedom of Information Act to FCC & FTC.

Settlement of TCPA Case

• Damages are $500 to $1,500 per call, plus costs. No attorney’s fees.

• Per-call valuation. Defendants appear to prefer to think of valuation on a per-call basis.

• Ultimate valuation depends upon:– Theory of consent (e.g. skip traced number cases are

worth more than revoked consent cases).

– Type of equipment used (e.g. prerecorded messages are worth more than preview dialed calls).

– Stage of Litigation.

– Experience level of plaintiff lawyer.

145

Cle

arin

gh

ou

se R

EV

IEW

NONPROFIT ORG.

U.S. POSTAGE PAID

ChICAGO, IL

PERMIT #7706

50 East Washington Street Suite 500Chicago, Illinois 60602

Volume 46, Numbers 1–2

May–June 2012

THE SARGENT SHRIVER NATIONAL CENTER ON POVERTY LAW PROVIDES NATIONAL LEADERSHIP IN ADVANCING LAWS AND POLICIES THAT SECURE JUSTICE

TO IMPROVE THE LIVES AND OPPORTUNITIES OF PEOPLE LIVING IN POVERTY

Vo

lum

e 46, Nu

mb

ers 1–2 M

ay–Jun

e 2012 1–86

I s the specia l subject of the September–October 2012 Clear inghouse rev iew

Hunger and Food Insecurity in the

Land of Plenty

When Junk-Debt Buyers Sue

What’s Best for Individuals in Psychiatric Institutions

Medicaid Preemption Remedy Survives Supreme Court

Randomized Studies of Legal Aid Results

Social Security Administration’s Noncompliance with Regulations and Constitution

Children’s SSI Disability Benefits at Risk

Raising Illinois Taxes

And Stories from Advocates:

Victory over Unfair Evictions

Legal Services Delivery from Schools

Community-Based— Not Institutional—Care

Litigating the Right of People withDisabilities to Live in the Community

146

Clearinghouse REVIEW Journal of Poverty Law and Policy n May–June 201212

Consumer advocates are well aware of the rise in bogus lawsuits filed by junk-debt buyers.1 The sheer volume of these cases is astronomical. For example, in Maryland, Midland Funding Limited Liability Company filed more than 7,000

lawsuits in the months of November and December 2011.2 On March 9, 2011, one lawyer in Maryland filed 130 lawsuits on behalf of LVNV Funding Limited Liability Company.3 Does anybody expect that Midland Funding or the lawyer mentioned above intend to appear in court and prosecute these cases? Of course not. They are filing these lawsuits based on two historically accurate assumptions: (1) the vast majority of consumers will not show up or contest the lawsuits, and (2) a majority of judges will award a default judgment in the vast majority of cases, based on documents, often inaccurately described as affidavits, submitted by the plaintiff.4

Peter A . HollandVisiting Assistant Professor

University of Maryland Francis King Carey School of Law Consumer Protection Clinic500 W. Baltimore St.Baltimore, MD 21202410.706.4256pholland@law.umaryland.edu

1This article builds on Clinton Rooney’s Defense of Assigned Consumer Debt, 43 cLearinGhouSe review 542 (March–April 2010). Because Rooney’s article is outstanding and remains current, I will avoid significant overlap. I refer the reader to Rooney’s article for a more substantive treatment of standing, causes of action for contract and account stated, and the defense of statute of limitation and tolling. Like Rooney, I focus on defense of junk-debt-buyer lawsuits, but many of the same strategies can be employed in the defense of original creditor lawsuits. While some examples in this article are drawn from cases in Maryland, the litigation tactics of junk-debt buyers are substantially similar, if not virtually identical, across the country.

2Midland Funding Limited Liability Company, Midland Credit Management Incorporated, Encore Capital Group Incorporated, and related entities paid a fine of $998,000 to the state of Maryland to settle charges against them of alleged illegal conduct (Press Release, Maryland Department of Labor, Licensing and Regulation, Maryland Commissioner of Financial Regulation, Attorney General Announce Settlement Agreement with National Debt Collector (Dec. 17, 2009), http://bit.ly/zdWleO).

3As of the date of this article, LVNV Funding Limited Liability Company is subject to a cease-and-desist order from the state of Maryland. Alleged violations include operating without a license, knowingly filing false affidavits, intentionally misrepresenting the amount of claims and collecting impermissible compound interest, knowingly collecting unauthorized attorney fees and prejudgment interest at unauthorized rates, and “filing cases which the relevant assignment documents evidence that LVNV did not have valid title of the consumer claims at issue” (Press Release, Maryland Department of Labor, Licensing and Regulation, Maryland Commissioner of Financial Regulation Suspends Collection Agency Licenses of LVNV Funding LLC and Resurgent Capital Services (Oct. 28, 2011) http://bit.ly/z3r15F).

4Depending on your state, this may be described as an affidavit judgment, a default judgment, a summary judgment, or a similar term. Whatever the language, it suggests that a judge has (in theory) read a statement submitted by the plaintiff, made under the penalty of perjury and based on personal knowledge, claiming that the plaintiff owns an account and that the defendant owes money to the plaintiff by virtue of an assignment of the account from the original creditor to one or more intermediary assignees, resulting in the plaintiff’s current ownership of the account.

DEFEnDIng Junk-Debt-Buyer Lawsuits

By Peter A. Holland

I sued you, you didn’t file an answer, and you didn’t come to court.

What more do I need to prove?

—Remark made by an attorney for a junk-debt buyer

147

Clearinghouse REVIEW Journal of Poverty Law and Policy n May–June 2012 13

All across the United States, junk-debt-buyer lawsuits have overwhelmed the courts and wrought untold havoc on the lives of consumers. These cases have re-sulted in homelessness, needless bank-ruptcies, job loss, marital stress, divorce, depression, hopelessness, and illegal garnishments. That judgments against consumers are part of a zero-sum game is often overlooked. In these cases every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources. A Chapter 7 bankruptcy discharge does not discriminate between legitimate and illegitimate unsecured creditors; with very few exceptions, it discharges any debt which is unsecured.5 Thus the legitimate creditor to whom money is owed is materially harmed by the junk-debt buyer, who extracts money based on an illegitimate claim and forces people into bankruptcy. In short, a broad effort to defend these cases not only will help individual consumers but also could improve the entire U.S. economy by pre-serving precious resources to pay what is legitimately owed and avoiding paying for what is not. Here I survey the land-scape of the junk-debt-buyer industry and advise consumer advocates engaged in the battle against unscrupulous junk-debt buyers.

A Brief Overview of the Junk-Debt-Buyer Industry

Junk debt is assigned debt that is pur-chased for pennies on the dollar with lit-tle or no documentation of the underly-ing contract, the payment history, or the chain of assignment.6 Often the consum-er does not owe any money at all. Almost universally, even if there is an underlying obligation, as a matter of contract law,

the consumer does not owe the amount that is being claimed in the form of in-terest, late fees, and attorney fees.

At the outset we must distinguish be-tween original creditors and junk-debt buyers. The former had some business transaction with the consumer. The lat-ter are total strangers to the consum-er, and, hoping to make a killing, have merely invested in a portfolio of cheap assets. Junk-debt buyers purchase old credit card and other accounts already abandoned by the original creditor, and then the junk-debt buyers sue on them. Not uncommonly someone can get sued twice on the same debt, get sued on an ac-count one never had, get sued long past the statute of limitations, or get sued on a debt already discharged in bankruptcy. In junk-debt-buyer cases, the standards of professionalism for some lawyers are so low that it is no longer news to discover that a lawyer filing a debt-buyer lawsuit robo-signed the complaint, or that docu-ments submitted by the plaintiff contain forged or robo-signed signatures.7

Advocates must educate judges and the public about the crucial distinction be-tween traditional debt collection and the attempt to collect on junk debt. Try-ing to collect money actually owed on a credit card to an original creditor differs greatly from a junk-debt investor try-ing to collect on its own behalf. Such an investor paid only pennies on the dollar for the consumer’s debt and is seeking a windfall of one hundred cents on the dollar. Notably the returns being sought through the use of our nation’s court sys-tem are attractive on Wall Street. Some publicly traded junk-debt buyers have reported record earnings.8

5U.S. Bankruptcy Code, 11 U.S.C. § 524(a)(1).

6This section contains a brief overview of the junk-debt-buyer industry. For a more detailed overview, see the following studies: Claudia Wilner & Nasoan Sheftel-Gomes, The Legal Aid Society et al., Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Lower-Income New Yorkers 13 (May 2010), http://bit.ly/aTlND4; Rachel Terp & Lauren Bowne, East Bay Community Law Center & Consumers Union of United States, Past Due: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now (Jan. 2011), http://bit.ly/GCSUX6; Rick Jurgens & Robert J. Hobbs, National Consumer Law Center, The Debt Machine: How the Collection Industry Hounds Consumers and Overwhelms Courts, 21, 23 (July 2010), http://bit.ly/GGthnU; and my The One Hundred Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases, 6 JournaL of BuSineSS anD technoLoGy Law 259 (2011), http://bit.ly/GHBLJX.

7See Midland Funding v. Brent, 644 F. Supp. 2d 961 (N.D. Ohio 2009); Jeff Horwitz, “Robo” Credit Card Suits Menace Banks, american Banker, Jan. 30, 2012, http://bit.ly/GFb9wW.

8See infra notes 30–32.

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Defending Junk-Debt-Buyer Lawsuits

Sales of accounts to junk-debt buyers oc-cur only after the original creditor makes the business decision not to outsource the collection or pursue the collection it-self.9 In fact, plaintiff’s debt-buyer status indicates that the original creditor made a business decision to sell off the account for a few cents on the dollar rather than outsource collection of the account or collect the account in-house.10 In light of this, every time a junk-debt buyer in-tones that people should pay the debts it is trying to collect, bear in mind that the original creditor has already decided that the account is not worth pursuing. Therefore the original creditor is not as-serting a claim and will receive no ben-efit if the case is won and no detriment if the case is lost.

The old adage “you get what you pay for” is particularly true in junk-debt-buyer cases. The junk-debt buyers claim to have bought various accounts, but sales of ac-counts are haphazard at best. As a recent action by a former employee of one major bank revealed, what is being sold is often not what it appears to be.11 The junk-debt buyers routinely lack the documentation to prove the terms and conditions of un-derlying credit card contracts and usually lack the proof necessary to show the en-tire chain of assignment. That the origi-nal creditor elected to sell an account is a red flag that the account has defects and little—if any—documentation. Indeed, almost every agreement between origi-nal creditor and initial purchaser (and between the original purchaser and each subsequent assignee) is made without representations and warranties, without recourse, and often without any duty on the part of the seller to investigate the ac-curacy of what it is selling. In sum, once the banks sell off summaries of alleged accounts at fire-sale prices, they do not want to be bothered with them again and

no longer have any financial interest in the accounts included in the summary of accounts sold.

A complicating aspect is that much of this junk debt is sold through wholesalers that purchase the junk debt from large insti-tutions and then resell the junk debt to junk-debt buyers. The resold junk debt is often packaged in smaller and more focused bundles such as geographic-specific debt (e.g., debtors with Maryland addresses), type of debt (e.g., auto loans, credit card loans, etc.), and age of debt (i.e., older debt is cheaper than current debt). The criteria for these bundles may include debt discharged in bankruptcy or clearly beyond the statute of limitations for any litigation-based collection effort.

The problems resulting from this over-all lack of proof or accuracy are myriad, leading to thousands of dubious judg-ments entered by default. In recom-mending changes in Maryland’s court rules for collecting assigned debt, the Maryland Court of Appeals Standing Committee on Rules of Practice and Pro-cedure stated:

The problem, which has been well documented by judges, the few attorneys who represent debtors, and the Commissioner of Financial Regulation, is that the plaintiff often has insuf-ficient reliable documentation regarding the debt or the debtor and, had the debtor challenged the action, he or she would have prevailed. In many instances, when a challenge is presented, the case is dismissed or judg-ment is denied. In thousands of instances, however, there is no challenge, and judgment is en-tered by default.12

9For a description of the overall problem of lack of proof in debt-buyer lawsuits, see The One Hundred Billion Dollar Problem in Small Claims Court, supra note 6.

10Although beyond the scope of this article, one part of the decision by the original creditor is the potential for lender’s insurance.

11See infra note 46.

12Maryland Court of Appeals Standing Committee on Rules of Practice and Procedure, 171st Rules Committee Report to the Maryland Court of Appeals 7 (July 1, 2011), http://bit.ly/GUNppk.

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13Letter from Association of Credit and Collection Professionals to Maryland Court of Appeals Standing Committee on Rules of Practice and Procedure 2 (Jan. 19, 2011) (in my files).

14Id.

15While the scope of this article is limited to junk-debt buyers, many of the same issues are in original creditor cases, as evidenced by the story of Chase Bank and Linda Almonte (see infra note 51).

16Fair Debt Collection Practices Act § 1692e(5), 15 U.S.C. §§ 1692–1692p; “[T]his Court interprets Section 1692e(5) of the FDCPA to include the taking of ‘action that cannot legally be taken’” (Bradshaw v. Hilco Receivables Limited Liability Company, 765 F. Supp. 2d 719, 730 (D. Md. 2011)).

This observation is validated by the in-dustry itself. Specifically, in a January 19, 2011, letter to the Maryland Court of Appeals Standing Committee on Rules of Practice and Procedure, the Associa-tion of Credit and Collection Profession-als, an industry representative, stated its concern about the requirement that a junk-debt buyer must give the court “a certified or otherwise properly authen-ticated photocopy or original of certain documentation establishing proof the consumer debt at issue existed.”13 The reason why the industry opposes the re-quirement of “proof the consumer debt at issue existed” is that, in its own words,

[t]he above documentation is often unattainable for a variety of reasons, the most impor-tant of which is that the original creditor no longer has the infor-mation or did not have it when selling an account or turning the account over for collection. Par-ticularly in the context of credit cards, financial institutions are not required under federal law to maintain this type of infor-mation beyond two years.14

Can a consumer successfully sue an en-tity for breach of contract without offer-ing any proof of the terms and conditions of the contract? That is what junk-debt buyers presume to do every day, hun-dreds of thousands of times per year, in courts across our nation.

Tips for Defending Consumers in Junk-Debt-Buyer Lawsuits

I offer the following tips to help Clear-inghouse review readers protect consum-ers from illegal and unethical abuse while educating judges about the essential dif-ferences between cases brought by origi-nal creditors and those brought by junk-debt buyers.15

1 . Read the Complaint and Supporting Documentation Carefully

Read the complaint and accompanying documents multiple times, highlighter in hand, while looking for intentional deceptions, errors, and omissions that could help your client prevail. First, look for defects on the face of the complaint. For example, the named plaintiff might be a different corporation from the en-tity named in the supporting documents. This occurs with surprising frequency. Second, if your state requires debt buy-ers to be licensed as debt collectors, check whether the debt buyer is licensed. Suing without a license creates standing issues, and, according to an increasing number of courts, it constitutes a viola-tion of the Fair Debt Collection Practices Act.16 The junk-debt buyer is subject to the Fair Debt Collection Practices Act because the junk-debt buyer allegedly acquires the debt after default.

Third, look for the failure to prove the existence of (or the terms and conditions of) the alleged underlying contract. Fail-ure to prove the contract is the rule rath-er than the exception. Often a contract is not even attached to the complaint. More often, some well-worn photocopy sam-ple of a terms-and-conditions mailer is attached. This sample is often illegible, and almost never signed by the consum-er. On close inspection, the printing date on this document often reveals that it was generated years after the account was al-legedly opened. Also, the terms and con-ditions submitted may not be from the original creditor identified by the junk-debt buyer but are presented to make the claim appear supported.

Fourth, the debt buyer is usually unable to prove a complete and unbroken chain of title. Without a valid chain of title, the debt buyer does not have standing to sue.

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