Saturday, February 19, 2011

FYI: 7th Cir Says FDCPA Debt Collector May Contact Debtor's Attorney After Payment Refusal, Communications-Stop Demand

The United States Court of Appeals for the Seventh Circuit recently held that the FDCPA does not prevent a debt collector from communicating with a debtor's attorney after the debtor refuses payment and requests that the debt collector cease communications with the debtor.  A copy of the opinion is attached. 

After receiving demands from a debt collector for payment of a debt, a debtor retained a lawyer, who sent the debt collector a letter stating that the debtor refused to pay and lacked assets that the creditor could seize. The letter concluded: "we request that you cease all further collection activities and direct all future communications to our office." 

The debt collector refrained from calling or writing to the debtor, but did call the lawyer with a request for payment.  The debtor then filed a lawsuit asserting violation of 15 U.S.C. §1692c(c) of the federal Fair Debt Collection Practices Act ("FDCPA").  The debtor alleged that by contacting the attorney the debt collector violated the FDCPA's prohibition on contacting a debtor after he refuses to pay a debt.  The district court found in favor of the debt collector, holding that the debtor's lawyer was not a "consumer" as defined in the FDCPA and therefore that communications with him were not prohibited.

As you may recall, in relevant portion, §1692c(c) provides that where "a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer" then "the debt collector shall not communicate further with the consumer" except under certain limited circumstances.  Section 1692c(d) defines the word "consumer" for the purpose of §1692c.  It provides that "consumer" includes "consumer's spouse, parent (if the consumer is a minor), guardian, executor, or administrator." 

The debtor argued that whether or not a debtor's lawyer was "the consumer," the lawyer was the debtor's agent, and therefore that communications to the lawyer should be treated as communications to the debtor. The debtor noted that 15 U.S.C. §1692a(2) defines "communication" as "the conveying of information regarding a debt directly or indirectly to any person through any medium."  The debtor then reasoned that anything a debt collector says to a debtor's lawyer is an indirect communication to the debtor. The debtor therefore argued that once a debtor invokes his rights under §1692c(c), any communication to either the debtor or his lawyer is forbidden, unless it comes within one of the exceptions of the FDCPA.  The Court noted that at least one district judge had accepted the argument made by debtor.  However, the Court also noted that no appellate court had addressed the issue. 

In rejecting the debtor's argument, the Seventh Circuit held that subsections (a) and (b) of §1692c provided guidance as to whether a debtor's attorney was intended to be included in the definition of "consumer."  Subsections (a) and (b) provide as follows in relevant portion:

"(a)    Communication with the consumer generally

"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—

* * *

"(2)    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; or

        * * *

"(b)    Communication with third parties

"Except as provided in section 1692b of this title, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector."

The Court stated that the debtor's "argument makes hash of [subsections (a) and (b)], because if the word 'consumer' is replaced by 'lawyer' (whether because a lawyer is a 'consumer' or because a communication to a lawyer is an indirect communication to a consumer) both subsections become gibberish."  The Court further found that "[t]he problem is not simply that the words 'consumer' and 'attorney' must mean different things in this subsection," but also that "the point of subsection (a)(2) is to tell the debt collector that it is OK to communicate with the debtor's attorney even when it is forbidden to communicate with the debtor." 

The Seventh Circuit therefore ruled that to read §1692a(2) as prohibiting communications with a debtor's attorney would be implausible.  It noted that such a reading would prevent debt collectors from engaging in settlement negotiations with an attorney to avoid litigation.  The Court questioned:  "Why would Congress have provided that hiring a lawyer makes it impossible for the debtor and debt collector to communicate through counsel?"

Ultimately, the Court held Congress did not intend such a result.  The Court reasoned that the debtor's reading of the FDCPA "causes serious problems for the structure and operation of subsections (a)(2) and (b), and is not supported by subsection (d)—which. . . does not include the debtor's lawyer in the definition of 'consumer.'" 

Therefore, the Court concluded that "§1692c as a whole permits debt collectors to communicate freely with consumers' lawyers."   


Ralph T. Wutscher
Kahrl Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois  60602
Direct:  (312) 551-9320 
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Mobile:  (312) 493-0874

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