Question

A Question of Ethics--Fair Debt-Collection Practices. pg. 531

Barry Sussman graduated from law school, but also served time in prison for attempting to collect debts by posing as an FBI agent. He theorized that if a debt-collection business collected only debts that it owned as a result of buying checks written on accounts with insufficient funds (NSF checks), it would not be subject to the Fair Debt Collection Practices Act (FDCPA). Sussman formed Check Investors, Inc., to act on his theory.

Check Investors bought more than 2.2 million NSF checks, with an estimated face value of about $348 million, for pennies on the dollar. Check investors added a fee of $125 or $130 (more than the legal limit in most states) to the face amount of each check and aggressively pursued its drawer to collect. The firm's employees were told to accuse drawers of being criminals and to threaten them with arrest and prosecution. The threats were false. Check Investors never took steps to initiate a prosecution. The employees contacted the drawers' family members and used "saturation phoning"--phoning a drawer numerous times in a short period. They used abusive language, referring to drawers as "deadbeats," "retards," "thieves," and "idiots." Between January 2000 and January 2003, Check Investors netted more than $10.2 million from its efforts.

[Federal Trade Commission v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007)] (See Credit Protection.)

(a) The Federal Trade Commission filed a suit in a federal district court against Check Investors and others, alleging, in part, violations of the FDCPA. Was Check Investors a "debt collector," collecting "debts," within the meaning of the FDCPA? If so, did its methods violate the FDCPA? Were its practices unethical? What might Check Investors argue in its defense? Discuss.

(b) What is the public purpose of laws like the FDCPA?

Answer 1

1) They were not collecting debts within the meaning of FDCPA. Fair Debt Collection Practices act is a federal law that has certain boundaries and limits with respect to the behavior and actions of debt collectors. Debt collectors are the third party who are attempting to collect debts on behalf of an another person or an entity. This Act protects the rights of the consumers who take debts, so when a third party is involved the debt collection, they need to adhere to certain regulations while collecting debts. In other words, debt collectors must adhere to a certain set of rules when they are pursuing consumers who owe money.

Some of these rules relate to preventing fraud on the part of collectors. For example, it is illegal for collectors to use false information from a consumer’s credit report or threaten the debtor. Also, there are some regulations which try to ensure the respectful treatment of debtors. For example, it is illegal for collectors to use abusive or profane language when discussing debt issues with debtors and to repeatedly call or contact a debtor with the intension of harassment.

In the above case, Check Investors were clearly violating the rules by threatening the debtors and using foul and abusive language. They also gave false threats on arrest and prosecution and accused them of criminals. Apart from that, the employees of Check Investors called up the drawers' family number of times within a short span of time, thus making their lives hell. The abusive language like "deadbeats," "retards," "thieves," and "idiots" were used to refer the drawers. All this is absolutely an aggressive way of approaching the debtors, which is completely against FDCPA.

2) The purpose of such laws is to protect the interests of the consumers and thereby protecting their privacy. At the same time, these laws also give opportunity for the third party to collect the debts from the debtors in a fair manner. FDCPA is designed to protect debtors from harassment by bill collectors. As a result, it is illegal for debt collectors to harass debtors, and in particular, they cannot threaten bodily harm or arrest. Additionally, debt collectors cannot threaten to sue debtors unless they truly intend to take the debtors to court.