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Author: Sergei Lemberg
Can a Debt Collector Lie to You?
Picture this-you owe a debt, one that you can’t afford to pay, a debt that you have been trying not to think about, but have been worrying about nonstop. Then the call you’ve been fearing finally comes. It’s a collection agency, and they are suing you. “You need to get a lawyer,” they say, and your heart sinks. Yet another expense you can’t afford. You immediately get a lawyer as instructed, who informs you the debt collector had no intention of suing you. This was merely a tactic to pressure you to pay, and now you are wondering, how can they do this? Is this legal?
No. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are prohibited from lying to consumers. 15 U.S.C. 1692 e (10) forbids a debt collector from using deception to collect a debt or to obtain information from a consumer.
In Raimondi v. McAllister & Associates (50 F. Supp. 2d 825, N.D. Ill. 1999), a debt collector attempted to employ deception to coerce a consumer to pay by sending them a letter claiming they would “investigate your financial situations through credit reporting agencies, employers, banks and other lending institutions.” Since the FDCPA expressly forbids debt collectors from contacting employers except to verify employment, the court ruled that making this statement was a violation of the law.
In another relevant case, United States v. National Financial Services (820 F. Supp. 228 D. Md. 1993), the court ruled that a debt collection agency lied to consumers when it sent them letters stating, “Your account will be transferred to an attorney if it is unpaid after the deadline date.” As this was merely a threat as the collection agency did not intend on actually suing consumers, it was considered a deception. Such statements stresses consumers out as it leads them to believe they will have to expend money they already do not have to pay the debt to hire a lawyer and defend a court action.
More Forbidden Lies
Court cases across the country have held that a number of similar deceptions are also violations of the FDCPA. These include:
- Misidentification, for instance pretending you’re a collection agency, or using an attorney’s letterhead to trick the consumer into thinking they’re about to be sued.
- False threats of lawsuits or other collection activities the creditor has no intention of doing
- Threatening to publicly shame the consumer by revealing the details of the debt to family, friends, and coworkers.
- Incorrectly stating that a debt will appear on credit reports until it is paid.
- Insisting that payment be made by wire transfer or similar costly and immediate methods, when any method of payment is acceptable.
- Claiming that payment must be made in full, instead of accepting partial payment.
- Telling consumers the only way to avoid a lawsuit is by allowing their wages to be garnished.
- Pretending to provide the consumer with legal advice and to be on their side
- Pretending that the IRS is somehow involved in the debt collection.
- Misrepresenting the relationship between the creditor and the collection agency.
- Discouraging the consumer from trying to halt communications from the collection agency.
- Sending the letter verifying the debt disguised as a solicitation or junk mail, so the consumer throws it away without reading it.
The Least Sophisticated Consumer Standard
Movie buffs may remember Denzel Washington’s portrayal of an attorney in the movie Philadelphia, who famously says, “Explain this to me like I’m a six year old.” This makes perfect sense to anyone who has ever been confronted with a letter or contract rife with unfamiliar legal times and other mumbo jumbo. Sometimes collection agencies attempt to use “legalese” to intimidate consumers into paying debts. Courts have held that collection agencies must use easily understood language, and not legal mumbo jumbo intended to alarm and confuse consumers.
Brown v. Card Service Center was one such case. The consumer in that case was told that if they did not completely pay off their debt within five days, a lawsuit “could be” filed. The court held that this was a deceptive tactic because the defendant rarely filed lawsuits against debtors. The court felt that less sophisticated consumers could be misled by the intimidating language and come to the conclusion they were being sued.
In general, a debt collection letter is considered deceptive if the language contained within could have two or more meanings. The FDCPA understands that ordinary consumers may not be able to decipher legalese, therefore they compel debt collectors to use words in ordinary use that the average person understands.
Other Examples Of False And Misleading Representation
Courts have made decisions regarding other kinds of false and misleading representations made by collectors that are not specifically mentioned in the law. For instance, in Tatis v. Allied Interstate a debt collector was trying to collect a debt that was beyond the statute of limitations. Consumers are not obligated to pay debts that are time barred and past the statute of limitations. In Tatis, the collector made an offer to the consumer to settle the time barred debt. It can be considered misleading to offer to settle debt the consumer no longer has to pay. The court was on the fence about this one. It held that trying to settle a debt past the statute of limitations is not necessarily deceptive, and using the word “settlement” is not a violation of the FDCPA. However, the court warned that “…such letters, when read in their entirety, must not deceive or mislead the least sophisticated debtor into believing that she has a legal obligation to pay the time-barred debt.”
Nearly every American fears running afoul of the Internal Revenue Service (IRS). In Balon v. Enhanced Recovery Company , the collector sent the consumer a notice stating that their discharged debt might be regarded as income by the IRS. The court ruled this statement was misleading because it could lead a less legally savvy consumer to believe that they could end up in trouble with the IRS for discharging a debt or settling a debt when that may not be the case.
Another case in court dealt with a consumer receiving a letter telling them the collector will notify all the credit bureaus of the updated status of the account once the last payment was received, The court held that this statement was misleading, because it led the consumer to believe the credit bureaus would only be updated that the debt was no longer delinquent after the last payment was made, which is false.
Statements That Are Not False Or Misleading
Under the FDCPA and common law, statements are not false and misleading if they’re true, and can easily be understood by the average consumer. In addition, not all false statements are against the law. In Jensen v. Pressler & Pressler, the defendant incorrectly identified the clerk of the New Jersey court. The court ruled that false statements by debt collectors do not violate the law unless they affect the consumer’s decisions.
Do not let a debt collector lie to you and get away with it! You may be entitled to recovery of up to $1,000 under the FDCPA if a debt collector lies to force you to pay. As a bonus, the law forces lying debt collectors to pay your attorney’s fees and court costs!
About the author:
Sergei Lemberg is a consumer rights attorney, practicing since 2006, whose practice focuses on consumer law, class actions and personal injury litigation. He is known for a United States Supreme Court case (Facebook v. Duguid) defending consumers from autodialers under the Telephone Consumer Protection Act of 1991 to send unsolicited text messages. He is also the author of Defanging Debt Collectors, a book that teaches consumers how to battle debt collectors and win.
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