Collections: The Fair Debt Collection Practices Act

     It is time again to review the Fair Debt Collections Practices Act (FDCPA), Title 15 U.S. §1692. This is a federal law designed to protect consumer debtors from "unscrupulous" collection activities. It defines the practices, the people who are protected, and the people who are restricted.
     The most damaging part of the act is the definition of "collector" (as only collectors are covered), and attorneys are included in the definition.
     The FDCPA requires collectors to send a demand letter thirty (30) days prior to commencing suit.  The letters must contain information including:
     1. The principal amount remaining on the debt;
     2. The name of the creditor to whom the debt is owed; and 

The specific language that follows:
     Unless you, within thirty days after you have received this notice, dispute the validity of this debt, or any portion thereof, I will assume the debt to be valid.
     If you notify me, in writing, within thirty days after you have received this notice, that the debt or any portion thereof, is disputed, I will obtain verification of the debt and mail you a copy of that verification to you.
     Upon your written request within thirty days after you have received this notice, I will provide you with the name and address of the original creditor, if different from the current creditor.
     The FDCPA further restricts the jurisdictions in which suit can be brought to the city or county in which the debtor resides. In certain circumstances, the matter can be sued upon where the debt was incurred. To eliminate the ambiguity, one idea that I always suggest is that creditors stamp ("this document executed in [name of city or county], Virginia") adjacent to the original signatures of the executed documents, prior to their execution.
     The jurisdiction restriction of the FDCPA can be the most costly provision for the creditor, as attorneys, attempting to pass on the economies of consolidating cases, may be unable to do so. Additional trips to court result in additional costs which will, in one way or another (higher percentage fees), be passed on to the creditor. Hence, a wise creditor should invest in an appropriately worded stamp for each site executing such documents.

 * * * * * * * * * *
     Check out Creditor News by viewing our website at www.lawplc.com.  In the next three editions of Creditor News we will begin a review of The Equal Opportunity Credit Act. Over the last few years debtors have been utilizing the Equal Opportunity Credit Act, 15 U.S.C. §1691 ("the ECOA" or "the Act"), to avoid adverse action against them on seemingly valid creditor suits. The litigation that has arisen gives good cause to review lending policies for ECOA compliance.

Collections: Acceleration of Demand Notes

     The Twentieth Judicial Circuit examined a debtor's assertion that the note's "detailed enumeration of events consisting default was inconsistent with a demand note", and that since the note was not a demand note, the creditor must demonstrate "good faith" in accelerating repayment of the note. The case was NationsBank of Virginia, N.A. v Barnes. The Court examined Virginia Code §8.3A - 108(a), which states that a note is payable "on demand" if it says it is payable on demand or states no time for payment. The Court found that the note in this case was a form with a box "on demand" checked, with no time set for repayment, only a provision requiring monthly payments of interest. The Court ruled that the note was unambiguous and clearly a demand note, and that no showing of "good faith" was required before requesting payment on the note.
     Despite the favorable result for the creditor, great care should always be taken to clearly identify payment demand terms.

 

Collections: Garnishments Out-of-State

     While I have had good results in issuing garnishments out of state, especially when the garnishee is a bank that operates nationwide, success is not always guaranteed. Diversity in jurisdiction does create some issues. Recently a United States District Court granted a debtor’s motion to quash a garnishment summons after finding that the debtor’s wages were not located in Virginia. The garnishment summons had been issued by a Virginia creditor Virginia hospital. The debtor was a Pennsylvania resident doctor. The garnishee was an Ohio company. The court ruled that the garnishment summons issued by the court was ineffective to garnish the wages not located in Virginia.

Collections: Former Homeowners' Association President's Emails were Defamatory

      In the Fairfax Circuit Court case of Cornwell v. Ruggieri, the trial judge and jury found that the plaintiff homeowner was defamed by four emails written and published by a former association president and awarded $9,000.00 in damages.  These emails alleged that the homeowner had stolen association funds five years earlier.  The former association president tried to defend the case on the basis that the statements were simply a matter “of opinion”, not a matter of fact (as required under Virginia case law to recover damages), but the trial judge disagreed.
      The trial judge instructed the jury that under Virginia law the defendant, in his role as association president, had a "limited privilege" to make defamatory statements without being liable for damages.  However, if it was proved by "clear and convincing evidence" that the defendant had "abused" the privilege, the defamatory statements were not protected.  The trial judge instructed the jury that there were six possible ways that the homeowner could prove that the former association president abused the limited privilege.

    The homeowner presented evidence that the defendant made statements (1) with reckless disregard; (2) that were unnecessarily insulting; (3) that the language was stronger than was necessary; (4) were made because of hatred, ill will, or a desire to hurt the homeowner rather than a fair comment on the subject; and (5) were made because of personal spite, or ill will, independent of the occasion on which the communications were made.
     The jury was given a specific interrogatory with regard to each of the four defamatory statements: 

(1)  Did the defendant make the following statements?

(2)  Were they about the plaintiff?

(3)  Were they heard by someone other than the plaintiff?

(4)  Are the statements false? 
(5)  Did the defendant make the statements knowing them to be false, or, believing them to be true, did he lack reasonable grounds for such belief or act negligently in failing to ascertain the facts on which the statements were based?

(6)  Did the defendant abuse a limited privilege to make the statement? 
     For each question as to all four emails, the jury answered “yes”.  After a three-day trial, the verdict was rendered in favor of the plaintiff -- $9,000.00 in damages. 
  This case gives a good reminder that homeowner association board members must be knowledgeable, professional and well-advised when serving their communities.