Do FDCPA Lawsuits Unjustly Enrich Lawyers?

Mar 02

Do FDCPA Lawsuits Unjustly Enrich Lawyers?

Is the FDCPA glass half full?

FDCPA Suits on the Rise…

The economy is still in trouble and people are defaulting on loans in record numbers. It should come as no surprise then that Fair Debt Collection Practices Act (FDCPA) lawsuits are on the rise, with court awarded attorney’s fees often far overshadowing the typical $1,000 in statutory damages awarded to the plaintiff.

“Only the Brave Deserve the Fee”

It’s a not so well kept secret that FDCPA violations are so common that bankruptcy law firms often make more in attorney’s fees representing FDCPA and stay violation plaintiffs than they do representing chapter 7 debtors. Recent press coverage has cast aspersions on the validity of FDCPA claims, suggesting they “clog” the courts with frivolous litigation. According to a recent Denver Post article:

“In effect, some say the Fair Debt Collection Practices Act has morphed into little more than fodder for lawsuit mills cranking out hundreds of cases yearly — thousands nationally — enriching the lawyers filing them and minimally helping the consumers for whom the laws were written.”

I don’t think the author has had recent dealings with a debt collector. While the Post article takes the tone of a “we can do it better” op-ed, lamenting the rise of FDCPA lawsuits, it does not make a single suggestion as to how the law could be changed. Not one.

“Much of what is at issue stems from a federal law that, while intending to protect consumers, leans so far in their favor that virtually any infraction can lead to a successful lawsuit, no matter how innocent the mistake, experts say.”

Partisan = Expert?

Unfortunately, the “experts” interviewed for the story all appear to be attorneys who make a living representing, well….debt collectors. Ok, so the debt collector’s attorneys think the FDCPA overreaches. That’s breaking news? The article goes on to criticize FDCPA claims for not discharging the underlying debt.

“And the underlying debt — the reason the consumer is being called in the first place — nearly always remains intact.”

FDCPA is not Bankruptcy. So What?

DUH! Of course the underlying debt remains intact. FDCPA plaintiffs are not filing for bankruptcy, they’re pushing back against a bully. The validity of a debt vs. the techniques used to collect on it are separate issues entirely. The FDCPA was never intended as a panacea, it was enacted to encourage a minimum level of civility out of an increasingly tactless industry. As part of their business model, debt collectors routinely harass people who do not owe a single penny. FDCPA claims are not usually predicated on a disputed debt, they arise most frequently as a result of the ridiculous tactics debt collectors use to pursue debtors. No one likes to have their Mother harassed or to explain to a young family that Mom and Dad can’t answer the phone. These examples will only seem melodramatic to those who haven’t experienced creditor harassment. FDCPA claims might not justify millions in damages, but they have merit.

Attorney’s Fees Awards are a Deterrent

The FDCPA, like so many consumer protection statutes, allows for an award of attorney’s fees in recognition of the fact that damages for violations are often small. Fee shifting provisions are designed to encourage litigation, that’s the whole point! If anything, the continued abuses by the debt collecting industry provide evidence that there haven’t been enough FDCPA suits filed and the attorney’s fees awards haven’t been large enough. Treble the fees until the violations cease! Not enough consumers know their rights. Until this changes, it will be impossible to beat the unsavory debt collecting industry into submission. FDCPA settlements will continue to be written off as a cost of doing business.

In the mean time, the suggestion that attorneys are being unjustly enriched as a result of FDCPA is laughable.

John O’Connor

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