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In Crawford v. LVNV Funding, LLC, the United States Court of Appeals for the Eleventh Circuit had previously decided whether debt collectors may violate the FDCPA by filing a proof of claim seeking payment of a consumer debt which was time barred by the applicable statute of limitations on the date that the consumer filed bankruptcy. The Crawford decision is binding upon the federal bankruptcy and trial courts in Florida, Georgia and Alabama. (Outside the Eleventh Circuit, the courts often reach opposite results for several reasons.)


Mr. Crawford owed $ 2,037.99 to Heilig-Meyers Furniture Company. Heilig-Meyers charged off Mr. Crawford’s account in 1999, and sold the account to an affiliate of LVNV Funding in September, 2001. The final transaction on the account occurred on October 26, 2001, without any further payments towards the closed out account. The court applied Alabama’s three year statute of limitations to the facts of Mr. Crawford’s account and found that the account became time barred in October, 2004. Mr. Crawford filed Chapter 13 bankruptcy in February, 2008 and LVNV Funding filed a proof of claim seeking payment on the Heilig-Meyers account although the statute of limitations expired four years earlier.

Mr. Crawford filed an adversary proceeding against LVNV Funding alleging that LVNV Funding violated the FDCPA by filing the proof of claim attempting to collect the time barred Heilig-Meyers account. The bankruptcy court dismissed Mr. Crawford’s case and the U.S. District Court affirmed the dismissal after Mr. Crawford appealed.


The US Court of Appeals for the Eleventh Circuit began its analysis by reviewing the sections of the FDCPA that Mr. Crawford alleged LVNV violated :

“Section 1692e of the FDCPA provides that ‘[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.’ 15 U.S.C. [Section] 1692e. Section 1692f states that ‘[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” Id [Section] 1692f.”

Crawford at 1258. Then, the Circuit Court researched the definitions of “unfair” and “unconscionable” because these terms are not defined in the FDCPA itself :

“Because Congress did not provide a definition for the terms ‘unfair’ or ‘unconscionable,’, this Court has looked to the dictionary for help. ‘The plain meaning of ‘unfair’ is ‘marked by injustice, partiality, or deception.'” LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1200 (11th Cir. 2010) (quoting Merriam-Webster Online Dictionary (2010).) Further, “an act or practice is deceptive or unfair if it has the tendency or capacity to deceive.” id. (quotation marks omitted and alterations adopted). We also explained that the “[t]he term ‘unconscionable’ means ‘having no conscience’; ‘unscrupulous’; ‘showing no regard for conscience’; ‘affronting the sense of justice, decency, or reasonableness.'” Id. (quoting Black’s Law Dictionary 1526 (7th ed. 1999)). We have also noted that “[t]he phrase ‘unfair or unconscionable’ is as vague as they come.” Id. (quoting Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470, 474 (7th Cir. 2007).”

Crawford, at 1258. The Circuit Court settled on the terms “deceptive”, “misleading”, “unconscionable”, or “unfair” as providing the standards under the FDCPA for the violations alleged. The Circuit Court employed the “least sophisticated consumer” standard in applying these standards to the facts of the case. See Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1177 (11th Cir. 1985).


When debtors file bankruptcy under Chapter 7, 11, 12, or 13, the debtors are obligated to list all of their creditors in their schedules. 11 U.S.C. Section 521(a0(1)(A).

The bankruptcy courts send notices to the creditors who are listed in the debtor’s schedules and creditors are given an opportunity to file a proof of claim. See 11 U.S.C. Section 501(a).

The proof of claim form is a brief form which is often completed by computers using auto-populated information. The form for proof of claim does not request the date of last payment or other information which would allow the trustee or debtors’ counsel to efficiently screen the claims assuming that they had the resources to do so.

Unless the trustee or the debtor objects to a proof of claim, even time barred claims are automatically allowed against the debtor pursuant to 11 U.S.C. Section 502(a)-(b) and Bankruptcy Rule Procedure 3001(f). If an objection is timely filed, the bankruptcy court will conduct a hearing to determine the amount and allow the claim unless it falls under one of several exceptions to allowance. On of those exceptions is when the claim is unenforceable against the debtor and the property of the debtor under applicable law. See 11 U.S.C. Section 502(b)(1).

If a claim is allowed, a Chapter 13 debtor must pay the debt from his future income pursuant to the Chapter 13 Plan and Confirmation Order. In bankruptcies where a high percentage of the unsecured claims are paid out, the debtor bears more of the burden to the extent that time barred claims are allowed. In bankruptcies where the pay out to the nonpriority unsecured creditors is rather low, more of the burden is borne by the other unsecured creditors who filed claims for enforceable debts (i.e., debts which were not time barred).

In Mr. Crawford’s Chapter 13 bankruptcy, neither the trustee or the debtor objected to LVNV’s proof of claim on the time barred debt until four years later. The Chapter 13 trustee disbursed some of the debtor’s funds to LVNV.


LVNV acknowledged that filing a collection lawsuit in state court on the account would likely have violated the FDCPA. It is well established that debt collectors violate the FDCPA if they threaten to file a lawsuit to collect a time barred debt or actually file such a lawsuit. See 15 U.S.C. Section 1692e and 1692f.

The Crawford Court noted that “[s]tatutes of limitations ‘protect defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise.”

R.R. Telegraphers v. Ry. Express Agency, 321 U.S. 342, 349, 64 S.Ct. 582, 586, 88 L.Ed. 788 (1944). The Crawford Court continued by examining the purpose of the statute of limitations in the context of proof of claims :

“The same is true in the bankruptcy context. In bankruptcy, the limitations period provides a bright line for debt collectors and consumer debtors, signifying a time when the debtor’s right to be free of stale [1261 * 1261] claims comes to prevail over a creditor’s right to legally enforce the debt. A Chapter 13 debtor’s memory of a stale debt may have faded and personal records documenting the debt may have vanished, making it difficult for a consumer debtor to defend against a time-barred claim.”

Crawford, at 1268 1269. After comparing the similarities of the purpose the statute of limitations in collection lawsuits and bankruptcy proof of claims allowance, the Eleventh Circuit described some of the harms that debt collectors’ mass filings of proof of claims creates :

“Similar to the filing of a stale lawsuit, a debt collector’s filing of a time-barred proof of claim creates the misleading impression to the debtor that the debt collect can legally enforce the debt. The ‘least sophisticated’ Chapter 13 debtor may be unaware that a claim is time barred and unenforceable and thus fail to object to such a claim. Given the Bankruptcy Code’s automatic allowance provisions, the otherwise unenforceable time-barred debt will be paid from the debtor’s future wages as part of his Chapter 13 repayment plan. Such a distribution of funds to debt collectors with time-barred proof of claims then necessarily reduces the payments to other legitimate creditors with enforceable claims. Furthermore, filing objections to time-barred claims consumes energy and resources in a debtor’s bankruptcy case, just as filing a limitations defense does in state court.”

Crawford, at 1261. Although the Eleventh Circuit did not rule that filing a proof of claim on a time-barred debt violates the specific provisions of 1692(e) or 1692(f), the Crawford court continued :

“For all of these reasons, under the ‘least-sophisticated consumer standard’ in our binding precedent, LVNV’s filing of a time-barred proof of claim against Crawford in bankruptcy was ‘unfair,’ ‘unconscionable,’ ‘deceptive,’ and ‘misleading’ within the broad scope of [Section] 1692e and [Section]

Crawford, at 1261. The Crawford Court also rejected LVNV’s argument that filing a proof of claim is not an attempt to collect a debt so the FDCPA would not apply :

“The FDCPA does not define the terms ‘collection of a debt’ or ‘to collect a debt’ in [Section] 1692e or 1692f. However, in interpreting ‘to collect a debt’ as used in [Section] 1692(a0(6), the Supreme Court has turned to the dictionary’s definition : ‘To collect a debt or claim is to obtain payment or liquidation of it, either by personal solicitation or legal proceedings.'”

Crawford, at 1269 citing Heintz v. Jenkins, 514 U.S. 291, 294, 115 S.Ct. 1489, 1491, 131 L.Ed.2d 395 (1995) (quoting Black’s Law Dictionary 263 (6th ed. 1990). The Crawford Court held that LVNV’s filing of the proof of claim “fell well within the ambit of a ‘representation’ or ‘means’ used in ‘connection with the collection of any debt.’ It was an effort ‘to obtain payment’ of Crawford’s debt ‘by legal proceeding.'” Crawford, at 1269.

The Crawford Court expressly noted that it was not deciding whether the Bankruptcy Code preempts the FDCPA :

“The Court also declines to weigh in on a topic the district court artfully dodged: Whether the [Bankruptcy] Code ‘preempts’ the FDCPA when creditors misbehave in bankruptcy. Crawford, 2013 WL 1947616, at *2 n.1.”

Crawford, at __, n. 7.

In Crawford, the parties did not address the elephant in the room (preemption) so neither did the District Court. As a result the Circuit Court could not address the preemption issue either. The second difficult phase of the war against out of statute proof of claims was about to heat up.


The United States Court of Appeals for the Eight Circuit is the only federal appellate court to consider whether to follow Crawford. In Nelson v. Credit Management, Inc., the consumer urged the court :

“… to follow the Eleventh Circuit and extend to bankruptcy claims the rule against actual or threatened litigation on time-barred debts. *** In Crawford, the Eleventh Circuit held that knowingly filing a time-barred proof of claim violated the FDCPA’s prohibitions against unfair, unconscionable, deceptive, or misleading conduct. *** The Crawford court reasoned that the same concerns underlying the rule against litigationg or threatening to litigate time-barred debts — the debtor’s faded memory and lost records, possible ignorance of the statute of limitations, and expenses to contest the stale debt – apply equally to a debt collector filing a claim on a stale debt.”

The Sixth Circuit flatly rejected the consumer’s argument based largely upon public policy. Rather than focusing on the language of the statutes, the Sixth Circuit essentially reasoned that the bankruptcy debtors, the bankruptcy trustees, and even other unsecured creditors should bear the costs of the time-barred proof of claims and, therefore, denied consumer debtors relief under the FDCPA.

The Sixth Circuit began by applying a tortured construction of the least sophisticated consumer standard :

Crawford, however, ignores the differences between a bankruptcy claim and actual or threatened litigation. In Freyermouth, this court held that a defendant’s FDCPA liability turns on ‘whether an unsophisticated consumer would be harassed, misled or deceived by’ the debt collector’s acts. Freyermouth, 248 F.3d at 771. The bankruptcy process protects against such harassment and deception. Unlike defendants facing a collection lawsuit, a bankruptcy debtor is aided by ‘trustees who owe fiduciary duties to all parties and have a statutory obligation to object to unenforceable claims.’ In re Gatewood, 533 B.R. 905, 909 (8th Cir. B.A.P. 2015); see 11 U.S.C. [Section] 704(a)(5), 1302(b)(1) (outlining trustee’s duties, including objecting ‘to the allowance of any claim that is improper’).”

The unsophisticated consumer would be over his or her head in addressing the statute of limitations issues, choice of law, tolling issues, and other complex factual and legal issues that often arise in analyzing whether a debt is time barred. Furthermore, few consumers know how to object to a proof of claim. So, the Nelson court relies on bankruptcy trustees, who have little knowledge of such law either, to police the flood of time-barred claims? Few debtors’ bankruptcy counsel understand the applicable law either. Few claims were ever objected to. That’s why the “business model” (i.e., scam) is so profitable that large, well funded debt buyers such as LVNV, PRA, RoundUp, Asset Acceptance, buy these time barred debts and wait for the bankruptcy notice to appear on their computer screens.

The Nelson court continues with a “no harm, no foul” attitude :

“Defending a lawsuit to recover a time-barred debt is more burdensome that objecting to a time-barred proof of claim. ‘[T]he Bankruptcy Code provides for a claims resolution process involving an objection and a hearing to assess the amount and validity of the claim… [that] is generally a more streamlined and less unnerving prospect for a debtor than facing a collection lawsuit.’ In re Gatewood, 533 B.R. at 909. Because of proof of claim does not expand the pool of funds available in bankruptcy, debtors have less at stake than a collection defendant. Rather, an unsecured creditor likely shares only ‘pro rata in the distribution of the pool of available funds and see[s] the unpaid portion of its claim discharged.’ Id.”

Nelson, at ____. Sometimes, debtors file bankruptcies where the distribution to unsecured creditors is as high as 100%. Regardless of the payout percentage to the unsecured creditors, legitimate creditors with timely claims suffer dilution of their claims.

Objecting to a time barred proof of claim (including reviewing the payment dates on all of the legitimate claims in order to identify the time barred claims) is burdensome regardless of whether the burden is as great as objecting in a particular bankruptcy case.


If you are a Florida bankruptcy attorney or a pro se debtor who believes you have potential claims arising from time barred proof of claims which were filed within the past 365 days, feel free to contact my office concerning your potential case.

annoyed man reading letter

Should he pay the zombie debt collector?


The United States Court of Appeals for the Seventh Circuit (the “Seventh Circuit”) sent a message to debt collectors in McMahon v. LVNV Funding, LLC by holding that “an unsophisticated consumer could be misled by a dunning letter for a time-barred debt, especially a letter uses the term ‘settle’ or ‘settlement’.” McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. March 11, 2014).

Until the Seventh Circuit decided McMahon, consumers faced an uphill climb when they attempted to assert claims under the Fair Debt Collections Practices Act (“FDCPA”) against debt collectors who sent them deceptive dunning letters which attempted to collect time-barred debts.


The issues in McMahon demonstrate the wide gap between prior case law and how frequently consumers do not understand even the basics about statutes of limitations. According to the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) :

“most consumers do not understand their legal rights with respect to time-barred debts.”

McMahon, at pg. 1021.   The Seventh Circuit agreed with these agencies and put great weight on their findings.

Based upon counseling Florida consumers for over two decades, I know that they seldom understand how the statute of limitations operates and rarely know the correct limitations period.    Although the internet is often a good source of information, it is spreading much incorrect information concerning the statute of limitations applicable to many types of consumer debts.    Almost every chart concerning the statute of limitations contains many errors including information provided concerning Florida law.  Internet forums written by non-lawyers frequently exaggerate the risk of reviving a time-barred debt by “acknowledging” the debt.

According to the FTC’s research, many consumers believe that once a debt is time-barred, the debt is extinguished. Except in Wisconsin & Mississippi the debt is not extinguished when the statute of limitations expires. See, Miss. Code Ann. § 15 – 1 – 3; Wis. Stat. Ann. § 893.05.

Under Florida law, debt collectors who sue on time-barred debts may obtain default judgments against the consumers who fail to respond to the lawsuit. Florida judges can not refuse to enter the default judgment even if the papers indicate the debt is time barred.    Therefore, Florida consumers should never ignore a lawsuit even if they believe the statute of limitations has expired.

Debt collectors who traffic in junk debt make most of their money as a result of default judgments or taking on borrowers who try to represent themselves.

As a result, even time-barred debts have a market value. Debt prices depend upon, among other things, the age of the debt. A recent FTC study found that the average prices paid for debt portfolios was :

(1) 7.9 cents per dollar for debts that were less than 3 years old;

(2) 3.1 cents per dollar for debts that were 3 to 6 years old;

(3) 2.2 cents per dollar of debt for debts that were 6 to 15 years old; and

(4) “effectively nothing” for accounts that were older than fifteen years.

See Fed. Trade Comm’n Repairing a Broken System : Protecting Consumers In Debt Collection Litigation And Arbitration, pg. 23 – 24 (2013) cited in McMahon, at pg. 1022.

The McMahon opinion along with the FTC and  CFPB’s enforcement efforts may finally put a throttle on some of the most deceptive practices involving the collection of time-barred debts.  The Seventh Circuit placed great weight on these agencies findings and they were probably the decisive factor in departing from decisions adverse to consumers which had already been adopted by the Third and Eighth Circuits.

The McMahon court noted :

“[t]he FTC has found that nondisclosure of the fact that a debt is time-barred might deceive consumers in at least two ways :

First, because most consumers do not know or understand their legal rights with respect to the collection of time-barred debt, attempts to collect on such debt may create a misleading impression that the consumer has no defense to a lawsuit;

Second, consumers often do not know that in many states the making of a partial payment on a stale debt actually revives the entire debt even if it was otherwise time-barred.”

McMahon, pg. 1015. To avoid misleading consumers, the FTC recommended that if a collector knows or should know that an account that it is attempting to collect is time-barred, “it must inform the consumer that :

(1) the collector cannot sue to collect the debt; and

(2) providing partial payment would revive the collector’s ability to sue to collect the remaining balance.”

McMahon, pg. 1015.  But, such affirmative obligations to disclose to the consumer that the debt collector is attempting to collect a time-barred debt are quite rare.

The FTC obtained a consent agreement from Asset Acceptance that requires Asset Acceptance to provide such disclosures to consumers.    The Consent Decree requires Asset Acceptance to also disclose that :

“[t]he law limits how long you can be sued on a debt.  Because of the age of your debt, we will not sue you for it.”

McMahon, at 1016.   This is language that consumers can quickly understand.   When combined with the required disclosures warning the consumer that a partial payment may revive the entire debt, consumers are in a position to protect their interests.   The New Mexico Attorney General requires debt collectors to provide New Mexico consumers with disclosures that are at least as thorough as those the FTC is attempting to require the industry to adopt.  The City of New York enacted Local Law No. 15 containing a three prong disclosure similar to the FTC’s Consent Agreement with Asset Acceptance.

Until McMahon, the only federal appellate decisions allowed debt collectors to attempt to collect time barred debt so long as they did not threaten litigation or file a lawsuit.


Three influential cases — Kimber , Freyermuth, and Huertas — brought the law interpreting the FDCPA to that point.

In Kimber v. Federal Financial Corp., the United States District Court for the Middle District of Alabama held that it is unfair under Section 1692f to file a lawsuit to collect a time barred debt and deceptive under Section 1692d to threaten to file such a lawsuit.  Kimber v. Federal Financial Corp., 668 F. Supp. 1480 (M.D. Ala. 1987).

In Freyermuth v. Credit Bureau Services, the dunning letter did not threaten litigation. Instead, the debt collector stated that Chex Systems would not reinstate the consumer’s checking privileges until the consumer paid the amounts owed for the N.S.F. checks. The dunning letter said :

“Our records show the amount due indicated below remains in our CheckMate permanent bad check data file. To protect your check-writing privileges, remit the balance due immediately (cash or money order only) …. To be sure of proper credit and to stop further procedure [sic], make your payment in full.”

Freyermuth v. Credit Bureau Servs., 248 F.3d 767 (8th Cir. 2001). The United States Court of Appeals for the Eighth Circuit (the “Eighth Circuit”) found that “[h]ere, no legal action was taken or even threatened.” The Eighth Circuit approved Kimber, while allowing debt collectors to ask for payment on time barred debts so long as the debt collector did not threaten litigation or file litigation. The facts in Freyermuth demonstrate why this case should never have been brought nonetheless appealed to the Eighth Circuit.

In Huertas v. Galaxy Asset Management, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) followed Freyermuth. The Third Circuit held that a dunning letter requesting that the consumer call the debt collector to “resolve the issue” did not threaten litigation and was not deceptive although the debt was time barred. Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3RD Cir. 2011).

The Third Circuit described pro se appellant Huertas’ primary contention on appeal as that the District Court erred in concluding that the expiration of the statute of limitations did not extinguish his debt — an argument that the the Third Circuit summarily rejected.   Huertas probably read a debtors’ forum on the interwebz and became convinced that this bogus legal theory was worth a shot. Unfortunately, his decision to file and ultimately appeal his FDCPA case based upon a bogus theory of law created even more powerful bad case law.

The Third Circuit affirmed the dismissal of Huertas’ FDCPA complaint brought under : Sections : (1) 1692e (prohibiting debt collectors from using “any false, deceptive, or misleading representation in connection with the collection of any debt”); (2) 1692e(2)(A) (falsely representing “the character, amount, or legal status of any debt.”); and 1692f (prohibiting debt collectors from using unfair or unconscionable means).

Third Circuit cited Freyermuth and two district court opinions for the proposition that the FDCPA permits debt collectors to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its collection efforts.”

As a result of Freyermuth and Huertas, the courts routinely required consumers to prove that the debt collector threatened litigation. This high threshold prevents most consumers from receiving protection under the FDCPA.

The federal courts have held that dunning letters containing the following statements did not threaten litigation.

A dunning letter stating that it was an “opportunity to resolve this matter amiably” and “advise you to consult an attorney” did not constitute a threat to sue. See, Combs v. Direct Mktg. Credit Servs., 165 F.3d 31, (7th Cir. 1998) (unpublished) (text published at 1998 WL 911691).

A dunning letter stating that the account was ““scheduled to be returned to [consumer’s] original creditor who may … secure advice of counsel” was not a threat of imminent suit. See, Owsley v. Coldata, 104 Fed. Appx. 994, (5th Cir. 2004).

Similarly, the ubiquitous phrases “further collection procedures” and “additional collection activity” do not threaten litigation. See, Goodman v. Southern Recovery, 1998 WL 240403 (E.D. La. May 12, 1998); Kelemen v. Professional Collection Sys., 2011 WL 31396 (M.D. Fla. Jan. 4, 2011). These phrases could mean anything even simply continuing to write or call the consumer and courts have tended to focus on whether the contested words could be literally true. I would not recommend that anyone sue a debt collector for using either of these phrases.   McMahon, at 1013.


For an analysis of the Seventh Circuit’s rulings, click on “2″ where it says “Pages: 1 2″ immediately below the social share buttons.


Consumers Can Stop Robo-Calls To Their Cell Phone

On March 28, 2014, the United States Circuit Court of Appeals for the Eleventh Circuit issued an opinion which provides that, under Florida law, cell phone users can verbally withdraw permission for a creditor (or debt collector) to call their cell phone using an Automated Telephone Dialing System and overturned a federal trial court’s order which rejected the consumer’s case because the consumer did not withdraw his permission in writing. See Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (Cir. 11th, 2014). The Eleventh Circuit decided Osorio based upon Florida law, consumers in Alabama and Georgia should consult with an experienced TCPA lawyer who is licensed to practice in their state to assess whether Alabama or Georgia law is materially different than Florida law on the methods for revoking consent.

The Eleventh Circuit frequently cited a six-month old opinion by the Third Circuit — Gager v. Dell Financial Services, LLC — with approval and adopted the Third Circuit’s logic.

The United States Court of Appeals for the Third Circuit (the “Circuit Court”) recently decided Gager v. Dell Financial Services, LLC, addressing whether cell phone subscribers can withdraw their “express consent” for a business or collection agency to continue to call their cell phone using automated dialing systems (“ATDS”). The Circuit Court decided that the Telephone Consumer Protection Act (“TCPA”) allows consumers to revoke their prior express consent to be contacted on her cell phone via an ATDS and that there is no time limit on when consumers can revoke their prior consent.


The Telephone Consumer Protection Act provides that it is unlawful for any person :

“to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service or which the called party is charged for the call.”

47 U.S.C. § 227(b)(1)(A)(iii) (emphasis added). The TCPA is silent whether consumers can withdraw their “express consent” after they’ve provided it.


Ms. Gager sued Dell Financial Services, LLC (“Dell”) alleging that Dell used an ATDS to call her cell phone. According to the Circuit Court :

“*** Gager applied for a line of credit from Dell to purchase computer equipment. The credit application required that she provide her name and her home phone number. Gager listed her cellular phone number in that place on the application. In doing so, however, she neither stated that the number was for a cellular phone, nor did she indicate that Dell should not use an automated telephone dialing system to call her at the number she provided.

Dell granted Gager a line of credit, which she used to purchase several thousand dollars worth of computer equipment. Gager subsequently defaulted on her debt. Dell then began using an automated telephone dialing system to call Gager’s cellular phone, leaving pre-recorded messages on her voicemail concerning the debt. In December 2010, Gager sent a letter to Dell, listing her phone number and asking Dell to stop calling it regarding her account. The letter did not indicate that the number was for a cellular phone. Gager has alleged that, after receiving her letter, Dell called her cellular phone approximately forty times over the three week period, using an automated telephone dialing system.”

Gager, at pg. 3.

Gager’s lawyer filed her lawsuit in a Pennsylvania trial court. Defendant Dell promptly removed Gager’s lawsuit to the United States District Court for the Middle District of Pennsylvania (the “District Court”). Defendant Dell filed a motion to dismiss arguing that the facts alleged in Gager’s complaint, even if accepted as true, failed to state facts sufficient to state a violation of the TCPA.

The damages in TCPA cases may be substantial. The TCPA awards prevailing consumers $ 500 per call made in violation of the law and, if the violation is willful, the court may award up to an additional $ 1,000 per call.


The District Court granted Dell’s motion holding that Gager could not revoke her prior express consent for two reasons : (1) the absence of language in the TCPA providing for “post-reformation revocation of consent” indicated that phone subscribers did not have such a right; (2) although Gager had the right to instruct Dell not to use an ATDS to call her, Gager had to instruct Dell not to do so at the time she provided her cellular telephone number to Dell. The District Court also held that collection calls are not subject to the TCPA.

Ms. Gager’s lawyers appealed the District Court’s order.


The United States Circuit Court of Appeals for the Third Circuit (the “Circuit Court”) reversed the District Court’s order dismissing Ms. Gager’s lawsuit.

The Circuit Court considered the rules and regulations promulgated by the Federal Communication Commission (“FCC”) to enforce the TCPA. The Circuit Court noted that, as far back as 1992, the FCC stated that calls placed using an ATDS are lawful so long as the recipient has granted “permission to be called at the number which they have given, absent instructions to the contrary.” In the Matter of Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, 7 FCC Rcd. 8752, 8769 ¶ 31 (Oct. 16, 1992) (emphasis added) (hereinafter the “1992 Ruling”). The 1992 ruling did not address whether a cell phone user could withdraw express consent once given.

The Circuit Court analyzed a declaratory ruling issued by the FCC after the District Court dismissed Ms. Gager’s lawsuit. See In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, SoundBite Communications, Inc., 27 FCC Rcd. 15391 (Nov. 26, 2012) (hereinafter “SoundBite”).

In SoundBite, the company’s request for a declaratory ruling asked whether the company could send one (1) text message to the cell phone user to confirm the user’s opt-out request rather than whether the opt-out right exists. The Circuit Court carefully reviewed the FCC’s analysis :

“The decision in SoundBite starts by noting that ‘neither the text of the TCPA nor its legislative history directly addresses the circumstances under which prior express consent is deemed revoked.’” *** The FCC then noted ‘that consumer consent to receive … messages is not unlimited.’ *** Consistent with this notion, the FCC stated several times that a consumer may ‘fully revoke’ her prior express consent by transmitting an opt-out request to the sending party.” ***

Gager, at pg. 7 (internal citations omitted). The Circuit Court concluded that SoundBite demonstrates that the FCC’s position is : “(1) a consumer may revoke her informed consent once it has been given; *** and (2) there is no temporal limitation on when a consumer may revoke her prior express consent by sending an opt-out message. ***” Gager, at pg. 8.

For an analysis of Dell’s arguments against allowing consumers to revoke express consent, click on “2” where it says “Pages: 1 2″ immediately below the social share buttons.

Man typing rant on the internet

Take a deep breath. Stop and think before disclosing personal information about your case.

An Arkansas consumer (the “Plaintiff”) recently defeated the Defendant’s Motion to Dismiss his FDCPA lawsuit and to enter a “Civility Order” prohibiting the Plaintiff from making further comments on two internet “gripe sites” that the Plaintiff actively uses. Although the United States District Court denied the Defendant’s motion to dismiss the case and for the civility order, the Plaintiff’s win is likely to be a pyrrhic victory because the court’s order advises the parties that the court will allow the Defendant to present the Plaintiff’s comments on the gripe sites to the jury. Ouch! This case illustrates some of the hazards that plaintiffs including consumers create for their case when they use social media and other internet sites to tell their story.

On May 25, 2012, Plaintiff filed a complaint against the Credit Bureau of Jonesboro, Inc. (the “Defendant”) alleging that Defendant called him a month after Defendant received Plaintiff’s letter telling Defendant that Plaintiff refused to pay the alleged debt. The Fair Debt Collection Practices Act (“FDCPA”) requires debt collectors to cease communication after the debt collector receives written notice from the consumer that the consumer (1) requests that debt collector cease communication; or (2) refuses to pay the debt. 15 U.S.C. Section 1692c(c). The consumer wisely sent the letter via certified mail return receipt requested. Although the FDCPA does not require consumers to explain why they refuse to pay, Plaintiff explained that he disputed the alleged debt because during two hospital visits, he never saw a physician. Plaintiff’s complaint also alleged that a guest heard Defendant’s message and that the message disclosed that Defendant is a debt collector. Plaintiff wisely saved a copy of Defendant’s telephone message.

If debt collectors leave messages for the consumer, they must identify the name of their company and disclose that they are a debt collector.
Debt collectors can not disclose the alleged debt to third parties, including Plaintiff’s invited guest who allegedly overhead the Defendant’s message to Plaintiff.

Plaintiff alleged that he :

“experienced extreme stress, embarrassment, shock, the pre-existing condition of anxiety was re-aggravated and the Plaintiff experienced severe anxiety (panic attack), a condition which the Plaintiff has been under a medical doctor’s care for in the past, including the Plaintiff being seen in the emergency room three times for severe anxiety attacks.”

First Amended Complaint, Paragraph No. 54. Plaintiff’s allegations may be true. Unfortunately for Plaintiff, he likely substantially impaired his potential claims for actual damages by writing posts on two debtors’ websites.

At Plaintiff’s video deposition, Defendant asked Plaintiff about whether he considered himself knowledgeable about the FDCPA. Plaintiff replied :

“Oh, absolutely. Yeah. Yeah. I doubt there’s anybody who isn’t a lawyer that knows any more about the FDCPA in the country than I do.”

Deposition Transcript, Pg. 30. Defense counsel asked whether Plaintiff kept any journals or anything in writing. Plaintiff identified two sites where he discussed how to fight consumer debts and provided Defendant’s counsel with his user names. Plaintiff also volunteered that :

“My avatar is a picture of a military guy with a gasmask on holding a bazooka. shooting it up a collector’s ass that says ‘I strenuously object’.”

Deposition Transcript, Pg. 85. Defendant’s counsel inquired how often Plaintiff posted to these forums; Plaintiff replied that he probably posts approximately 20 times a day.

Defendant asked Plaintiff to describe the damages that he had suffered as a result of Defendant’s alleged violations. After summarizing his understanding of the legal and medical definitions of anxiety, Plaintiff explained, in part :

“So your client caused me two anxiety attacks, a lot of anxiety, and a whole lot of pissed off. So that’s my actual damages.”

Deposition Transcript, Pg. 87. Plaintiff explained that he was embarrassed that his friend found out about the alleged debt.

Defendant’s lawyer asked Plaintiff :

“Have you ever advised somebody on how to increase their damages for emotional distress?”

Plaintiff admitted that he had. Deposition Transcript, Pg. 88. Defendant’s counsel followed up by asking :

“Have you ever asked them — you know, stated what medications they should be –”

Deposition Transcript, pg. 88. Plaintiff replied :

“No. I’ve told them to go to the doctor and then when they go to the doctor — now, if they’re having actual stress and anxiety. I don’t say, ‘Hey, you need to go have some stress and anxiety.’ But if they’re having stress and anxiety, I tell the — I do what I did to National Loan Recoveries. I tell them to go to the doctor and then when the doctor or the nurses, you know, — have you had any type of events in your life, blah, blah, blah, I tell ’em instead of just saying, ‘Yeah, I’m stressed,’ or whatever, make sure you say — be very specific because the nurse and the doctor — they’re writing this down on your chart.

So kind of like I did with National Loan Recovery. Doctor asked me and I said ‘Yeah. I’ve got National Loan Recoveries coming after me,’ and I explained my situation. So when National Loan Recoveries subpoenaed my medical records — and so they were lokiing at ’em going up-oh. And so it’s in there.”

Deposition Transcript, Pg. 88. Next, Defendant’s counsel asked “And you made sure to have it in there?” Plaintiff answered :

“Hell, yeah. Yeah. Yeah. You’ve gotta lay the foundation. You gotta plant the seed.”

Deposition Transcript, Pg. 89. Plaintiff admitted that the purpose of this is “to get your damages up” but explained that he never recommended to anyone that they go to a physician (or anywhere else) and say things that weren’t true.

Defense counsel will have at least 6,500 posts by Plaintiff on one gripe site to challenge Plaintiff’s credibility.

After the deposition, Plaintiff continued to actively participate in the internet gripe site and even discussed his pending lawsuit against Credit Bureau of Jonesboro.

Defendant’s Motion to Dismiss the consumer’s lawsuit raised numerous alleged events which, if true, will likely adversely affect his prospects for trial.

Plaintiff said that he was the “Robinhood” of debtors and asserted that he has helped over 70 people fight debt collectors through an internet website. Motion To Dismiss, Paragraph No. 7. Plaintiff states that one of his cases went all the way to the Wyoming Supreme Court. Id.

Defendant filed seven (7) forum comments allegedly left by the Plaintiff which advised other members to run up a debt collector’s legal fees by turning the litigation into a “circus” and three additional comments advising them to make it a “complete nightmare”.

Plaintiff sent Defendant’s counsel ex parte email containing a direct link to a website where Plaintiff created a thread entitled “Let the Games Begin – They Want to Depose Me, YES!!!” Motion To Dismiss, Paragraph 10. Plaintiff wrote that he had hoped for the deposition to be a ‘train wreck” and he prepared some “one-liners” to entertain his forum fans in the videotaped deposition. Motion to Dismiss, Paragraph 12. Defendant inferred that Plaintiff’s deposition answers about his ex-wife’s unfaithfulness and a former girlfriends vindictiveness were examples of needless jokes.

Defendant’s counsel alleged that Plaintiff’s comments of a sexual nature did not stop with these two examples.

For more information about the Plaintiff’s internet activities and the Court’s rulings, click on “Page 2” immediately below.

Justice prevailed

Justice prevailed for the consumers

A New Jersey debt buyer, Vanz LLC, recently filed a lawsuit against Mattia & Associates alleging that Mattia misrepresented the quality of charged off consumer accounts which Vanz purchased from Mattia.

Vanz’s lawsuit arises from two separate portfolios that Vanz purchased from Mattia : (1) the “Chase Portfolio” consisting of 3,932 charged off Chase credit card accounts which allegedly had balances totaling $ 21,442,947.29; and (2) the “AAG Portfolio” consisting of charged off loans totaling $ 325,219.18 secured by motor vehicles. Although Vanz alleged that distinctly different systemic deficiencies involving these portfolios, both portfolios illustrate some of the havoc inflicted on consumers when courts accept debt buyer records at face value without allowing thorough discovery.

The inadequacy of JPMorgan Chase’s record keeping systems have been well publicized largely because Linda Almonte’s lawsuits against JPMorgan Chase arising from her lawsuit alleging that JPMorgan Chase terminated her employment in retaliation for opposing Chase’s sale of inaccurate, inadequately documented, or unenforceable charged off accounts and her administrative (SEC) complaint against JPMorgan Chase filed pursuant to the Dodd Frank Act’s whistleblower provisions.

Debt buyer records are often inadequate yet courts often place great reliance on original creditor records. Consumers and their counsel should not just assume that even a bank’s records are accurate. Although many original creditors maintain an adequate evidentiary chain, many do not.

Fortunately for consumers, some of the inadequate and sometimes even fraudulent practices of the credit card issuers have been exposed in the past couple of years including, for example, the JPMorgan Chase / Washington Mutual / Providian Bank affidavits allegedly signed by “Martha Kunkel”, a robo-affiant who was allegedly deceased while she continued to execute thousands of affidavits on the banks’ behalf. Nor is Vanz, a small debt buyer, unique in blaming the seller. Even after this fraud gained national attention thanks to the Wall Street Journal, Portfolio Recovery Associates replied to the WSJ insisting that it was the “victim” of JPMorgan Chase’s false affidavits. To the best of my knowledge, PRA did not voluntarily vacate the many judgments that PRA says it unwittingly obtained using the fraudulent “Martha Kunkel” affidavits.

According to Vanz, Vanz agreed to pay 2.65% of the total amount of the balances of the accounts on their respective charged off dates. Vanz paid Mattia $ 568,238.10 for the Chase Portfolio.

A list of the alleged accounts and their respective balances were apparently attached as an exhibit to the parties’ asset purchase agreement.

Vanz alleged that it :

“learned that post charge off interest added to the charge off balance of the accounts that were a component of the purchase price for the Chase Portfolio were inaccurate.

Not only were they inaccurate but also they were included as a component of the purchase price which was contrary to all industry practices and standards.”

Complaint, Paragraph 7. In other words, the Complaint alleges that Vanz paid too much for the portfolio because Mattia overstated the amount of the balances of the accounts it sold.

Vanz alleges that the correct amount of accounts in the Chase Portfolio totaled $ 15,382,271.02 or $ 6,060,676.00 less than the amount Mattia told Vanz it was selling to Vanz. That’s $ 6,060,676.00 that someone will likely be demanding that consumers pay a debt buyer.

Vanz allegedly overpaid Mattia by $ 173,238.10 because Mattia inflated the amount of the accounts by $ 6,060,676.

Relying on usual industry practices and Mattia’s representations as to the charge off dates and amounts, Vanz apparently was adding post-charge off interest to many of the accounts for a second time without knowing that Mattia had already “random[ly] and inaccurate[ly] post[ed] charge off interest”.

Vanz alleged that Mattia sold Vanz the AAG portfolio consisting of charged off loans secured by automobiles for the sum of $ 325,219.18. Although Vanz is only licensed to collect debts in New Jersey, Vanz agreed to purchase all of the accounts in the AAG Portfolio based upon Mattia’s assurances that Mattia would attempt to collect the non-New Jersey accounts and remit the proceeds to Vanz or would attempt to broker the non-New Jersey accounts by selling those accounts to another debt collector.

According to the Complaint, Mattia “did not attempt to market the non-New Jersey, Maryland and Virginia accounts and made little or no effort to collect these accounts on Plaintiff’s behalf despite their promises to do so.”

Anyone from Florida and possibly other states such as Maryland or Virginia who paid Mattia money should be concerned based upon Vanz’s allegation that :

“Although Plaintiff learned that Mattia and Associates had sold and/or collected Florida accounts and others, Mattia and Associates has not remitted the full amount of monies it collected to Plaintiff for same.”

Complaint, Paragraph No. 4. In my opinion, it is possible that many consumers are at risk of being asked to pay alleged debts that they have already paid. This article consists of my opinions. Mattia’s answer is not due as I write this article and I assume Mattia will deny many of the allegations in Vanz’s complaint.

Vanz’s buyer’s remorse illustrates some of the record keeping problems which plague the debt buying industry. The frequency and severity of such “errors” should be considered by courts and the courts should allow considerable latitude to defendant’s discovery efforts. Effective discovery requires extensive knowledge of the state rules of civil procedure and the rules of evidence. Judges can not tutor pro se litigants or make arguments on their behalf.

Fortunately, hiring an experienced lawyer to defend a collection lawsuit is often within a consumer’s means thanks to the laws of Florida and many other states which require (or allow) the court to require the plaintiff junk debt buyer to pay the defendant consumer’s legal fees if the consumer prevails.


I encourage consumers to consult with a collection defense lawyer who practices in their local area before they surrender by entering into a stipulation for judgment withheld or by doing nothing which allows the credit card issuer or debt collector to obtain a default judgment against the consumer. The collection lawyers are counting on consumers continuing to be uninformed.

If you are a resident of central Florida and surrounding counties — Orange, Osceola, Lake, Marion, Seminole, Sumter, Volusia, Putnam, Duval, Polk, Hillsborough counties, who is being threatened with a lawsuit or has recently received a summons over a consumer debt, you are welcome to contact my office by completing the Collection Agency Harassment form in the right hand column or by calling my assistant, Kris Altizer, at (407) 403 – 6760.

I will contact you to discuss your situation and whether I may be able to assist you.

(C) 2014 – 2016 Donald E Petersen

All rights reserved


Santander Ordered to Pay $ 571,000 for TCPA Violations

$ 100 bills

$ 571,000 judgment against Santander is a lot of “Benjamins”.

Santander Consumer USA, Inc. called consumer Heather Nelson’s cellular telephone one thousand twenty-six (1,026) times and left pre-recorded messages an additional one hundred sixteen (116) times during a one year period while attempting to collect a consumer debt arising from loans were secured by two motor vehicles, a van and a truck. The Court entered judgment against Santander in the amount of five hundred and seventy-one thousand dollars ($ 571,000) for the one thousand one hundred forty-two (1,142) violations of the Telephone Consumer Protection Act (“TCPA”).

The Telephone Consumer Protection Act (“TCPA”) prohibits calls to cellular telephones where the caller uses an automatic dialing system and/or leaves pre-recorded messages unless the recipient provided the caller prior express consent. The Telephone Consumer Protection Act (“TCPA”), 15 U.S.C. Section 227(b)(1)(A)(iii) makes it :

“unlawful for any person … to make any call (other than a call … made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice … to any telephone number assigned to a … cellular telephone service … or any service for which the called party is charged for the call.”

TCPA, 15 U.S.C. Section 227(b)(1)(A)(iii). If you are not already familiar with the fundamentals of the TCPA and how it relates to debt collection calls, click here for a primer.

    Factual Background

Santander purchased HSBC Auto Credit including HSBC’s loan portfolios which included Ms. Nelson’s accounts. Unfortunately for Santander, Ms. Nelson had never provided her cellular telephone number in her loan application with HSBC Auto Credit. Nor is there any indication that Ms. Nelson ever provided her cellular telephone number to HSBC Auto Credit or Santander Consumer USA, Inc.

The parties disputed whether Ms. Nelson verbally told Santander not to call her cell phone number. Fortunately for Ms. Nelson, on April 13, 2010, Ms. Nelson wrote a letter to Santander stating:

“You may not at anytime contact me at any work number listed. This includes [four telephone numbers including Ms. Nelson’s cellular telephone number]. Any conversations need to be addressed in writing.”

Santander continued to call Ms. Nelson on her cell phone after they received her letter.

On May 29, 2010, Santander repossessed Ms. Nelson’s truck. Between March, 2010, and April, 2011, Santander called Ms. Nelson’s cell phone one thousand twenty-six (1,026) times. One hundred and sixteen (116) of these calls also resulted in prerecorded messages left on Ms. Nelson’s cell phone voicemail.

Santander Consumer USA, Inc. used a telephone system manufactured by Aspect. Aspect’s telephony system uses computer software to route and place inbound and outbound calls. The Court found that “Aspect has the capacity to (1) store telephone numbers and then call them; and (2) perform ‘predictive dialing’ and ‘preview dialing’.” (emphasis added).

Aspect’s predictive dialing system schedules the dialing of phone numbers using an alogrithm to predict when a collection employee will be available to receive the next completed call. To facilitate that method of dialing, Santander created lists of customer telephone numbers to be called on a particular day. In preview dialing, an employee chooses a telephone number by clicking on a computer screen and the system calls it.”

The Court also found that Santander’s “employees never called plaintiff by pressing numbers on a keypad.” This lack of human intervention is the hallmark of automatic dialing systems.

    Ms. Nelson’s Motion for Partial Summary Judgment

Ms. Nelson filed a motion for partial summary judgment. Ms. Nelson’s motion requested that the Court enter a judgment against Santander for Santander’s violations of the TCPA based upon the evidence (documents, depositions, affidavits, etc.) already in the record. Summary judgment allows the Court to rule upon the factual disputes without the parties proceeding to trial where there are not any disputed issues of fact.

Santander argued that the Court should deny Ms. Nelson’s motion for summary judgment because there were disputed issues of fact : (1) whether Ms. Nelson qualifies as a “called party”; (2) whether Ms. Nelson gave Santander consent to call her; and (3) whether Santander uses an “automatic telephone dialing system”. Santander also disputed Ms. Nelson’s entitlement to enhanced statutory damages.

    “Called Party”

Santander argued that Ms. Nelson was not a “called party” within the meaning of the TCPA, Section 227. The cellular phone account was solely in Ms. Nelson’s husband’s name although Ms. Nelson was the person who used the cell phone which was assigned the number that Santander called. According to Santander, Ms. Nelson “has not shown that she has ‘standing’ to sue violation of Section 227(b)(1)(A)(iii). The Court commented that Santander’s argument was “imaginative but not persuassive.”

The Court distinguished between Santander’s argument that Ms. Nelson lacked standing and the question whether Ms. Nelson had a cause of action (basis for suing) under the TCPA and ruled in Ms. Nelson’s favor on both questions.

The Court observed that Ms. Nelson had standing if she was injured by Santander’s conduct and her injury can be redressed by winning her lawsuit. The Court ruled that there was “no question” whether Ms. Nelson had standing because she alleged that Santander called her cell phone over 1,000 times and seeks statutory damages for each of the calls.

The Court issued an insightful opinion into the more debatable question — whether Ms. Nelson had the right to sue Santander for violations of the TCPA.

Santander relied upon the opinion in Soppet v. Enhanced Recovery Co., LLC. to support its argument that the phrase “called party’ as used in Section 227(b)(1) means the person subscribing to the called number at the time the call is made.” Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637, 643 (7th Cir. 2012). Basically, Santander argued that Ms. Nelson was not the “called party” because the cell phone account was in her husband’s name, not hers.

The Court distinguished Soppet as a “red herring” because the issue in Soppet was who had the authority to give consent to call Ms. Soppet’s cellular telephone number. The issue in Soppet was not about whether plaintiff could sue for violations of the TCPA (Section 227).

In Soppet, a cell phone customer gave the creditor permission to call the cell phone number at issue in the Soppet case. Subsequently, the first cell phone customer’s service became disconnected. Eventually, the cell phone number at issue was “recycled” and reassigned to Soppet. In Soppet, Enhanced Recovery argued that the “called party” be read to mean the person that Enhanced Recovery intended to call so that the first cell phone customer’s consent remained valid long after the cell phone number was reassigned to Soppet. For more about Soppet v. Enhanced Recovery Co., refer to my article by clicking here.

In Nelson v. Santander, the Court implicitly rejected some of the dicta in Soppet which could be read to suggest that a person who receives calls unsolicited calls on his or her cellular telephone may somehow be barred from suing the caller because someone else’s name appears on the account associated with the cell phone number. The Nelson Court relied upon the plain language of the TCPA. The Court ruled :

“Noting in [Section] 227(b)(1) limits the protections of the statute to the owner of the phone. Rather, that section prohibits the use of automatic dialing ‘to any telephone number assigned to a … cellular telephone service’ regardless who answers or receives the call. Further, 47 U.S.C. [Section] 227(b)(3), which creates a private right of action for violations of the statute, does not limit lawsuits to those brought by “subscribers’ or ‘called parties,’ but applies to ‘a person or entity’. ***”


Santander also argued that there were questions of fact whether Ms. Nelson consented to Santander (or Santander’s predecessor HSBC) calling her cell phone. For a detailed discussion about whether debt collectors can call your cell phone, please click on the highlighted portion of this sentence.

The Court ruled that the issue whether Ms. Nelson consented to calls on her cellular phone constitutes an affirmative defense. The Federal Communications Commission has stated that :

“the creditor should be responsible for demonstrating that the consumer provided express consent’ because the creditor (e.g., Santander) is “in the best position to have records kept in the usual course of business showing such consent.”

In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd. 559, 565 Parag. 10 (Jan. 4, 2008). More importantly to the Nelson Court, the district courts in the Seventh Circuit, have uniformly adopted the position that the issue whether the person who received the calls consented to the calls is an affirmative defense.

Unfortunately for Santander, Santander did not attempt to raise this affirmative defense until it filed a motion to amend its answer to Ms. Nelson’s complaint one month after Ms. Nelson filed her motion for summary judgment. The Court held that Santander had waived the defense.

In any event, the Court found that Ms. Nelson sent a letter dated April 13, 2010, to Santander requesting that Santander stop calling her and she listed her telephone numbers including her cellular telephone number.

    Automatic Telephone Dialing System

The Federal Communications Commission (“FCC”) has interpreted the term “automatic telephone dialing system” to include “predictive dialers” which the FCC defines as :

“equipment that dials numbers and, when certain computer software is attached, also assists telemarketers in predicting when a sales agent will be available to take calls. The hardware, when paired with certain software, has the capacity to store or produce numbers and dial those numbers at random, in sequential order, or from a database of numbers.”

    In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991

, 18 F.C.C.R. 14014, 14091-93 (July 3, 2003) (Court’s emphasis). Santander argued that the Nelson Court should disregard the FCC’s interpretation of “automatic telephone dialing systems” because Congress did not grant the FCC authority to implement Section 227 of the TCPA and because the FCC’s interpretation is inconsistent with the statutory language.

The Nelson Court criticized Santander’s argument as “comes perilously close to violating Fed. R. Civ. Pro. 11.” The Court reminded Santander that the United States Circuit Court of Appeals for the Seventh Circuit has ruled that “the Hobbs Act, reserves to the courts of appeals [on direct review] the power ‘to enjoin, set aside, suspend (in whole or in part), or to determine the validity of’ all final FCC orders.” Citing CE Design, Ltd. v. Prism Business Media, Inc., 606 F.3d 443, 446, 449 n.5 (7th Cir., 2010). The CE Design court expressly ruled that “a litigant can’t avoid the Hobbs Act’s jurisdictional bar simply by accusing an agency of acting outside its authority.” Id at 449.

The Nelson Court noted that Defendant cited Griffith for its definition of automatic dialing equipment under Section 227(a)(1) and reminded defendant’s counsel that “they have a duty under Rule 11 to refrain from making a legal contention unless it is ‘warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law’ and a duty under SCR 20:3:30 to “disclose to the [court] authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client’.”

The Court addressed Defendant’s remaining arguments which Defendant raised to attempt to negate the evidence introduced by Ms. Nelson to support her argument that Santander used “automatic dialing equipment” to place the calls at issue in her case.

Ms. Nelson relied upon the testimony of Santander’s Senior Vice President of Servicing, Mr. Wayne Nightengale. Santander argued that Mr. Nightengale “is neither a representative of Aspect [the company that created the telephone system] nor is he a telephone communications expert” and Ms. Nelson’s counsel did not ask Mr. Nightengale any questions establishing the foundation for the testimony. Usually, the witness must have direct personal knowledge as to how the equipment functioned or it is inadmissible hearsay.

In this case, Ms. Nelson’s counsel served Santander with a Notice of Deposition pursuant to Fed. R. Civ. Pro. 30(b)(6) which allows an opposing party to depose a “corporate representative” who testifies on behalf of the corporation. The corporation being deposed (in this case Santander) gets to chose the person who will testify on the corporation’s behalf (in this case Ms. Nightengale.)
The corporation’s designation of that person to testify waives any objection to lack of foundation that the witness testifies to.

    Square D. co. v. Breakers Unlimited, Inc.

, 2009 WL 1661582, *1-2 (S.D. Ind. 2009);

    Bowoto v. Chevron Corp

., 2006 WL 2455740, *1 (N.D. Cla. 2006).

Finally, the Court rejected Santander’s argument that Ms. Nelson failed to show which calls it placed to her employing predictive dialing and which calls Santander made through “preview dialing”. (“Preview dialing” allows an employee rather than a computer to choose which number to dial.) The Court held that :

“Regardless whether preview dialing falls outside the scope of [Section] 227(a)(1) and the FCC’s order, I agree with the plaintiff that defendant’s argument is another red herring. Under both the statute and the order, the question is not how the defendant made a particular call, but whether the system it used had the ‘capacity’ to make automated calls.”

Nelson, pg. 18-19, citing

    Satterfield v. Simon & Schuster, Inc.

, 569 F.3d 946, 952 (9th Cir. 2009) (“[A] system need not actually store, produce or randomly call or sequentially generated numbers, it need only have the capacity to do it.”)

    Tip of the Hat to Plaintiff and Her Counsel

As Jimmy Cliff wrote, “The Bigger They Come, The Harder They Fall”. Congratulations to Ms. Nelson and her lawyers for an excellent decision and for establishing additional precedence which helps to combat cell phone harassment.


If you are receiving calls from collection agencies on your cell phone, you may contact me by completing the Collection Agency Harassment Form in the right hand column of this page.

If you are a Florida resident, you are also welcome to call my office at (407) 648 – 9050. I will contact you to discuss your situation and how I may be able to help you.

If you live outside Florida and complete the Collection Agency Harassment Form, I will try (as a courtesy to you) to provide you with the name and contact information for an experienced phone harassment lawyer who is licensed to practice law in your state.

(C) 2013 – 2016    Donald E. Petersen
All rights reserved.


National Enterprise Systems Complaints

National Enterprise Systems, Inc. (“NES”) allegedly violated the Fair Debt Collection Practices

Act (“FDCPA”) by threatening to sue without being able to or intending to sue, threatening to garnish non-borrower’s wages, repeatedly calling consumer’s

National Enterprise Systems headquarters sign

National Enterprise Systems’ headquarters in Salon, Ohio

relatives, threatening to have consumers arrested unless they paid their alleged debts, and using profanity according to consumers who filed FDCPA lawsuits.

Although the factual allegations in the Fair Debt Collection Practices Act lawsuits described in this article are just that — alleged facts which were never proven or disproven in court — many of the consumers’ complaints allege serious misconduct.


A Florida consumer alleged that National Enterprise Systems left a message on her answering machine which stated :

“I am one of the facilitators here with NES and Associates. I am calling in regards to a file complaint that’s here in my office that is scheduled to be forwarded out today at 3 PM through Fort Lauderdale, FL. It is in your best interest to retun my call today before 3 PM in regards to the file complaint number FL, as in Florida, 41485642.”

False threats to sue a consumer violate the Fair Debt Collection Practices Act. If a collection agency threatens to sue a consumer without having : (1) the ability to sue; OR (2) the then-present intention to do so, violates the FDCPA. If the collection agency does not own the debt OR does not have lawyers licensed to practice law in the state where the consumer resides, the debt collector does not have the ability to sue. Even the very few debt collectors that actually have the ability to file suit seldom have a firm intention to sue a consumer.

The Florida consumer alleged that NES called her cell phone although she never gave NES or the original creditor express permission to call her cell phone. Unless the consumer granted the original creditor (or the debt collector) “express permission” to call their cell phone, collection agencies who use “automatic dialers” or leave prerecorded messages on consumer’s cellular telephones may have violated the consumer’s rights under the Telephone Consumer Protection Act.


A Minnesota consumer alleged that National Enterprise Systems’ debt collector left a phone message at her place of employment stating that NES was calling “regarding a pending legal action” and that the debt collector needed to speak with her immediately.

Obviously, this is yet another false threat to sue by a NES debt collector. Leaving no stone unturned, the Minnesota consumer’s highly experienced FDCPA lawyer alleged that NES’s message violated 15 U.S.C. Section 1692d, 1692d(2), 1692e, 1692e(2), 1692e(4), 1692e(5), 1692e(9), 1692e(10), 1692e(11), 1692f, and 1692f(1), “amongst others”.


A New York consumer alleged that National Enterprise Systems called consumer at the hospital where she works. Debt collectors who call employees at hospitals, emergency services, or transportation facilities just might have a “clue” that such calls might be inconvenient. NES’ employee told consumer that he would be sued immediately unless she agreed to pay NES during this phone call. Consumer informed NES that he was not able to speak while at his place of employment. NES’ employee replied that, if consumer hung up, he would be sued immediately. During this conversation, NES’ debt collector indicated that she had spoken to other employees at consumer’s place of employment. [Debt collectors frequently contact co-workers, neighbors, relatives and friends in an attempt to illegally coerce consumers into paying.]

NES’ employee demanded to know consumer’s cellular telephone number and the telephone numbers of consumer’s friends and relatives. NES then informed consumer that he needed to telephone his friends and relatives on another telephone line to attempt to have them pay the alleged debt. NES again reminded consumer that if he hung up the phone he would be immediately sued.

Eventually, consumer informed NES that he would like to discuss the account directly with Sallie Mae. NES’ debt collector told the consumer he was not permitted to speak to Sallie Mae and that his only opportunity to settle the alleged debt was right then over the phone with her.

After the consumer repeated that he was not allowed to receive NES’ calls at work, NES called him on his cellular telephone was still talking with NES’ collector on his employer’s land line. When the consumer asked the NES collector why she was calling his cell phone while she was speaking to him on his employer’s land line, NES’ debt collector responded that now that he was speaking to her on his cellular phone, the consumer was able to leave work and continue speaking to her on the cellular phone. NES’ debt collector demanded that he pay $ 5,900 right then and there or he would be sued immediately.

After the consumer finally got off the phone with NES, he contacted Sallie Mae to inquire about the status of the alleged debt. The consumer and Sallie Mae agreed to direct payment arrangements.

After the consumer and Sallie Mae agreed to payment terms, a person purporting to be a manager from NES telephoned the consumer demanding money. The consumer informed the NES “manager” that he had reached payment arrangements directly with Sallie Mae and had in fact paid Sallie Mae the required money. The consumer invited the “manager” to call Sallie Mae to confirm what he said and then demanded that NES stop calling him.

NES continued to call the consumer although the consumer paid Sallie Mae as directly agreed to.

When consumer demanded that NES stop calling him, NES’ debt collector said that NES would not comply with consumer’s request.

Although cease communication requests must be in writing in order to be actionable without additional facts, this case presents additional facts. The consumer told NES that he had called Sallie Mae, that the parties directly agreed to payment terms, and that the consumer was satisfying the agreement with Sallie Mae. A court may decide that debt collectors who continue to call the consumer under these circumstances do so with an intent to harass the consumer.

The debt collector’s statements that the consumer could not discuss the alleged debt directly with Sallie Mae are probably also false and deceptive and, in this case, sympathetic because the consumer disregarded NES’ false representations and contacted Sallie Mae to arrange payment terms.


An Arizona consumer alleged that National Enterprise Systems called her about a Citibank-Sears account. According to the consumer, NES “advised her that she would have charges pressed against her and that the police would come to her door if she terminated the phone call and/or if she did not set up a payment arrangement with an account number that very same day.” NES’ debt collector “further advised that he could have the police sent to the [consumer’s] house and serve her with papers and take her to jail.” NES’ debt collector then asked “How would your parents like that?”

Consumer asked NES’ debt collector to allow her to call her mother for a loan to pay NES the amount they demanded. NES advised consumer that she could not call back, that she had to pay or NES would have the police sent to her door.

Consumer told NES that she did not have any money and requested to make payments. NES’ debt collector told the consumer that they were beyond making payments and that she needed to pay the full amount. Eventually, NES and the consumer arranged for a payment on September 19 and made a conference call with consumer’s bank to authorize the withdrawal. NES’ debt collector warned consumer that if for any reason the payment did not go through that he would go ahead with the charges against her. I am not admitted to practice in Arizona but I suspect the debt collector’s threats to prosecute were groundless. They would be under Florida law especially considering the FDCPA’s protection of consumers who provide post dated checks or electronic access to their checking accounts.

Immediately after her conversation with NES ended, the consumer was in tears and contacted her mother about what just occurred. Consumer told her mother she did not know where she could get the money to pay NES.

Consumer’s mother called the NES debt collector. The debt collector told consumer’s mother that consumer could go to jail and that if the money was not available when agreed it would be a felony offense.

On Friday September 18, consumer called NES’ debt collector to tell him that she had closed the account and that she would not be paying NES. NES’ collector informed consumer that stopping the payment was a felony and that she would have to deal with the consequences.

Later that same day, consumer’s mother called NES’ employee. NES told her that stopping payment was a felony and described consumer’s conduct as malicious and dishonest. NES’ employee claimed that he had the court charges suspended based on consumer’ promise to pay. NES’ employee also stated that he would immediately file charges for passing a bad check over state lines. The debt collector told the consumer’s mother that he had done the consumer a favor by not sending in the police.


A Michigan consumer (the borrower), her co-signor (her mother), and the consumer’s step-father (who was not obligated on the loan) alleged that National Enterprise Systems violated the Fair Debt Collection Practices Act and the Michigan Collection Practices Act while attempting to collect a private student loan. NES’ debt collector called the consumer’s father and told him that they were looking for the consumer’s cell phone and address to verify a job application. Obviously, the consumer had not applied to work at NES. NES’ debt collector called the co-signor’s house and told her son and asked for the consumer’s cell phone number and address again under the ruise of a pending job application and pending employment.

Soon thereafter, NES called the consumer and was very rude to her. NES’ debt collector referred to the consumer as an “idiot” for managing money in such a fashion for allowing her student loans to be in collection and ruing her mother’s credit score. NES’ debt collector false told consumer that her mother may never speak to her again.

Several days later, NES called consumer’s 81 year old grandfather at the nursing home where he resides.

NES employee called consumer’s step father and falsely told him that consumer “does not care about your wife’s credit score”. Although consumer’s step father was not obligated to pay the consumer’s educational loan, many of the provisions of the Fair Debt Collection Practices Act also protect people who do not allegedly owe the debt.

A week later, NES’ employee told consumer’s mother (who co-signed her loan) that she had to make a decision that day. NES’ employee recommended that the mother take money out of her retirement account to pay NES and was “very rude”. NES’ debt collector said to the consumer’s mother “You must not have a very good relationship with your daughter. She didn’t tell you what was going on? You must not get along very well.” Consumer’s mother replied “You’re talking down on me. I’m not going to put up with this. I need to speak with your manager.” NES transferred the call to a manager but the parties were unable to agree to payment terms.

NES’ harassment of the consumers was rewarded by consumer’s parent’s payments of $ 7,000 and $ 6,500 during the next two weeks. The harassment also sparked the FDCPA lawsuit 36 days after the events alleged in their complaint began.

If National Enterprise Systems is threatening you like the consumers who have sued NES alleged, I understand how frightening it must be. For more information about NES’s false threats including a North Carolina consumer who NES allegedly threatened until he paid a debt that was not even his, click on “Page 2” below.

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New York Judge Criticizes Credit Card Scavenger Lawsuits


New York court rejects zombie debt buyer’s standing to pursue default judgments

New York judges have openly expressed their frustration with credit card collection lawsuits and the fact that consumers contest only six percent of the time. Six percent!

The deficiencies criticized by the New York judges are also problematic in other states although consumers’ ability to combat the deficiencies depends upon the law of the state where the collection lawsuit is pending.

In Centurion Capital Corp. v. Guarino
, Centurion Capital Corp. sought to reduce a default a default judgment entered on December 8, 2005, into a judgment. (Default judgments arise when defendant consumers fail to respond to the complaint or appear in court as required.) Centurion Captial Corp. filed an application to accept a Notice of Assignment of the default judgment from “Centurion Capital Corp.” to “Palisades Acquisition XVI, LLC” and a consent to substituting the new counsel for Palisades as the new plaintiff.

Judge Straniere commented that :

“This is another case which is slowly convincing me that I am the judge in the ‘Sixth Sense’ part of the Civil Court where, like characters in that film who only see dead people, I am relegated to seeing cases with ‘dead corporations’ represented by ‘dead law firms’.”

Ouch! The Court proceeded to present a detailed analysis explaining the frustration which lead to the Court’s pithy comment. The Court’s analysis focused on eight general questions.

First, the Court asked whether the underlying action was properly brought.

The complaint alleged that Centurion Capital Corporation is a Maryland corporation with an office in Rockville, Maryland without alleging that it was authorized to sue in New York.

The Court checked the Maryland Department of State records and found that Centurion Capital Corporation was formed on March 24, 2005, and was dissolved on March 25, 2009. There was no indication that
Centurion Capital was ever revived. Nor was there any evidence that Centurion Capital Corporation obtained a certificate of authority to transact business in New York.

Many states require foreign corporations to register to transact business in their state as a prerequisite to filing a lawsuit. In order for a foreign corporation to maintain a lawsuit in New York, it must obtain a certificate of authority to do so and pay all state fees and taxes. [Business Corporations Law Section 1301 and 1312(a).] Judge Straniere noted that :

“[t]here is case law that holds that there is a difference between ‘commencing’ an action and ‘maintaining’ an action, which permits the unregistered foreign corporation to file the action initially (commence the action), but to be in compliance in order for the action to continue (maintain the action). Paper Mfrs. Co. v. Ris Paper Co., Inc. 86 Misc.2d 95 (1976).”

Judge Straneiere also noted that there is New York case law holding that a single, isolated transaction will not subject a foreign corporation to the registration requirements of New York’s Business Corporation Law. Highfill, Inc. v. Bruce and Iris, Inc., 50 AD.3d 742 (2008). So, the Court proceeded to analyze whether the pending case was an isolated occurrence.

The Court noted that Centurion Capital Corporation’s stated purpose was to purchase accounts receivable and then attempt to collect these accounts receivable by using the court system.
The Court found :

“Analysis of the filings in Civil Court Richmond County, discloses that a total of 930 cases were commenced by Centurion Capital Corporation between 2005 and 2007 with 300 cases brought in 2005; 629 in 2006; while in 2007 only one case was filed. If this is not enough to establish that the plaintiff was engaged in a systemic regular course of business in New York, a check of the filings by Centurion Capital Corporation in the other four counties of the New York City Civil Court shows a total of 12,794 cases being filed city-wide during that three-year period. Of that total 17 were in 2007 and one lonely additional case was filed in 2008. A review of Civil Court Richmond County’s records discloses that none of the 930 cases went to trial.

Another way to look at the number of filings is that between March 24, 2005 and December 31, 2006, a period of twenty-one months, Centurion Capital Corporation filed over 650 cases a month in the Civil Court.”

The Court found that Centurion Capital Corporation adopted a business plan to use the New York State court system as an “arm of its collection activities without making any effort to comply with the filing
requirements for a foreign corporation.”

The Court also noted that Centurion Capital Corporation failed to obtain a license to collect consumer debts in New York City as required by New York City Administrative Code Section 20-488, et seq.

Few Courts would ever raise a waivable defense on behalf of a defendant who was in default. The Court commented that “the fact the CPLR [Section] 3211 makes lack of capacity a waivable defense, contemplates its use on an individual case basis and not in a situation like this where a plaintiff is engaged in a business which requires the use of the court system to enforce its claim as part of that business model and finds no need to comply with the minimum requirements to conduct business in New York.” Consumers should never place themselves in a situation where they depend upon a court to intervene and save them.

Second, the Court inquired whether the Consent to Substitution of Attorneys is Proper?

CPLR Section 321(b)(1) sets forth the requirements to change attorneys :

“[A]n attorney of record may be changed by filing with the clerk a consent to change signed by the retiring attorney and signed and acknowledged by the party. Notice of such change of attorney shall be given to the attorneys for all parties in the action, or if a party appears without an attorney, to the party.”

CPLR Section 321(b)(1). The Court was confronted with a chain of counsel which allegedly flowed from “Wolpoff & Abramson, LLP” to “Mann Bracken, LLC” to “Fulton, Friedman & Gullace, LLP”.

The counsel of record for Centurion Capital Corporation was Wolpoff & Abramson, LLP. Wolpoff & Abramson was suspended from doing business in New York or its authority to conduct business was “revoked” because of its failure to designate a registered agent [LLPL Section 121-1500(g) & Section 121-1502(f)], therefore the court concluded that Wolpoff & Abramson could no longer appear as attorney of record on any litigation while suspended or revoked. [LLCL Section 1306(d)(4) & LLPL Section 121-1500(m), Section 121-1502(m).]

Wolpoff & Abramson, LLP merged into Mann Bracken but apparently never bothered to notify the Court of the “substitution” of law firms.

The Court rejected the unexplained substitution of counsel from Wolpoff & Abramson to Mann Bracken. The first indication that Mann Bracken was involved was pursuant to a purported assignment of the account from Centurion Capital Corporation to Palisades Acquisition XVI, LLC which did not occur until three years after Centurion was dissolved!

Third, the Court inquired “Is there a proper assignment?”

The Court found several deficiencies in the “Notice of Assignment” which purported to assign the account/judgment from “Centurion Capital Corp” to Palisades Acquisition XVI, LLC.

The plaintiff Maryland corporation was “Centurion Capital Corporation” and NOT “Centurion Capital Corp.” Although there was a New York corporation named “Centurion Capital Corporation”, the New York corporation was not involved in the lawsuit. The Court ruled that he purported Notice of Assignment is defective because the purported assignment is not from the same entity that brought the litigation.

The Court also noted that the Notice of Assignment was undated and the acknowledgment was dated February 2, 2012. The Court questioned how it is possible for Centurion Captial Corporation which ceased to exist on March 25, 2009 to execute an assignment of judgment three years later? The Court speculated :

“One explanation might be an undelivered sack of mail was found in an abandoned Baltimore & Ohio Railroad box car, being used as a hot dog stand at Camden Yards. Another would be that Centurion Capital Corporation is a charter member of the ‘Procastinators Society.’ Perhaps they had to wait until ‘the moon was in the seventh house and Jupiter aligned with Mars.’ Some how none of these are satisfactory, especially because Centurion Capital Corporation alleged in an Alabama case in May 2008 that under Maryland law it no longer exists as a corporation [Meredith v. Unifund CCR Partners, 2009 WL 141 3361 (M.D. Ala 2009)].”

Fourth, the Court questioned whether the notarizations were proper.

The Court found that the out-of-state notarizations lacked the certificate of conformity as required by CPLR Section 2309(c) & Real Property Law Section 299(a) and also lacked the acknowledgment reqquired by CPLR Section 5019(c).

Next, the Court questioned whether there is a proper affidavit of the facts.

The Court held that the Affidavit of Facts in support of the default judgment was defective because the affiant (an employee of Centurion Capital Corporation) could not have personal knowledge of the books and records of Marin Bank.

The Court’s opinion concludes with a scathing analysis of the case.

“I often wonder what the conversation is between the third party debt collector client and the law firm considering representing the creditor, such as the world famous Dewey, Cheatum & Howe, when they initially meet. It would probably go something like this.

Client : I need a lawyer to represent me on debt collection litigation.

Lawyer : Before I agree let me ask some questions.

Lawyer : Do you know the person you want to sue and have you ever met them?

Client : Well no.

Lawyer : Do you have a written agreement with the person whom you claim owes you the money?

Client : No again.

Lawyer : Do you have anything signed by the debtor showing they owe the money?

Client : No.

Lawyer : Do you ahve a bill showing the debtor owes the money?

Client : No.

Lawyer : Do you ahve somethign that shows the debtor made any payments on the obligation?

Client : No.

Lawyer : Do you have any relationship with the debtor?

Client : No.

Lawyer : Well how do you know the debtor owes you the money?

Client : I bought the debt by assignment from the original creditor and he gave me a computer print-out saying the debtor owes him money.

Lawyer : Do you have a copy of the assignment of the claim?

Client No.

Lawyer : Do you know if the statute of limitations has run on the debt and what state’s law applies to the agreement?

Client : No.

Lawyer: So let me get this straight. You’ve never had any contact with the debtor, have no copy of an agreement or any documents to verify charges were made, have no personal knowledge of any thing regarding the account, no proof that you own the account and don’t know whether the statute of limitations has run.

Sounds good to me. I’ll take the case.”

(C) 2012 – 2016 Donald E. Petersen
All rights reserved.

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Collection Calls to New Cell Phone Owners Prohibitted

woman in red dress looking at her smart phone

If you are receiving calls on your cell phone about someone else’s debts, read the educational articles about the TCPA

Soppet v. Enhanced Recovery Company, LLC, the United States Court of Appeals for the Seventh Circuit held that the Telephone Consumer Protection Act (“TCPA”) protects cell phone owners who inherit “recycled” cell phone numbers from most companies that use automatic dialers to call their cell phone attempting to contact someone who formerly used their cell phone number. The appellate court’s ruling affirmed the trial court’s order denying Enhanced Recovery Company’s motion for summary judgment. The opinion written by Chief Judge Easterbrook represents the first time a federal circuit court ruled on who is a “called party” and is therefore entitled to sue the caller for violating the TCPA.

The Federal Communications Commission issued an opinion stating that when customers provide their cell phone numbers to a creditor, the customer has consented to the creditor calling the customer about the account including calls to the customer’s cell phone even when placed by autodialing equipment often referred to as robo-dialers. This consent flows through to the collection agencies who may subsequently attempt to collect the account. (If you are receiving auto-dialed calls to your cell phone from a collection agency or creditor about an account that is yours, please click on the highlighter portion of this sentence for information about your rights under the TCPA.)

Debt collectors aggressively pursue cell phone subscribers even when the subscriber truthfully tells them that they’re calling the wrong person. Debt collectors have been fighting hard to protect their “right” to unleash their robo dialers on persons who never consented to the debt collector (or the original creditor) calling them on their cell phone. Collection agencies and their trade association took the low road and argued that the customer’s consent remained with the telephone number until the new cell phone subscriber revoked the prior user’s permission to call the customer at that number. The debt collectors and their trade association (ACA International) were unwilling to invest in complying with the TCPA’s protection afforded to innocent bystanders without putting up a desperate fight.

The Telephone Consumer Protection Act (“TCPA”) provides :

“It shall be unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States — (A) to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice …. (iii) to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio, or other radio common carrier service, or any service for which the called party is charged for the call[.]”

47 U.S.C. Section 227(b)(1). The term “called party” is not defined anywhere in the TCPA. The collection industry’s argument is that the phrase “called party” means the customer that consented to creditors calling him or her at that number.

The appellate court started its analysis by identifying several times where the term “called party” appears in the statute. In Section 227(b)(1) (quoted above), “called party” refers to the person who provided the caller consent to being called on his cell phone. There is some ambiguity in the meaning of the pharse “called party” if the reader refers only to this sentence and does not read the statutory language which surrounds it.

The second use of the term “called party” in Section 227(b)(1) refers to the person being charged for the call which the court unsurprisingly noted had to refer to the current subscriber. The court did not find any ambiguity in the second use of “called party” in (iii).

The appellate court employed the presumption that where a statute uses a single phrase consistently, the phrase must be interpreted to have the same meaning each time it appears.

The Soppet court identified seven (7) times the phrase “called party” appears in the TCPA and concluded that :

“Four unmistakably denote the current subscriber (the person who pays the bills or needs the line in order to receive other calls); one denotes whoever answers the call (usually the subscriber); and the others (the two that deal with consent) have a referent that cannot be pinned down by context.”

The Soppet court summarized the debt collector’s argument as asking the Court to conclude that,

“despite the presumption of uniform usage within a single statutory section, those two uses, and those two alone, denote the person [that the] Bill Collector is trying to reach…”

and noted that the debt collector (but not the TCPA) dub such persons “intended recipient of the call.”

The Soppet court characterized the debt collector’s argument that “consent is effective until revoked and infers that Customer’s consent must last until Bystander, the new subscriber, revokes it” as “odd”. Odd indeed. The Soppet court held that any consent lapses when the customer’s cell phone number is reassigned to the new subscriber. Once the cell phone number is reassigned or “recycled”, any consent must come from the new subscriber.   Judge Easterbrook presented three hypothetical situations to undermine the debt collector’s interpretation of the TCPA.

woman holding cell phone at her desk

If she follows the right steps, she can stop debt collectors from calling her cell phone.

The first hypothetical situation supposed that :

“Customer had given ‘consent’ to call someone else’s number — perhaps Customer put down his own number with a typo, or the number of a person against whom Customer had a grudge.”

At oral argument, Defendant debt collector conceded that it could not invoke the customer’s “consent” for the creditor to call the person who subscribed to whatever number the customer wrote down.
The court criticized the debt collector’s position as inconsistent because the debt collector could still say that they intended to call the customer and did not realize that the customer provided
them with someone else’s telephone number.

The second hypothetical consisted of a person “X” who intends to call person “A” but who calls person “B” because of a typo. Person “B” tells the caller “you have the wrong number”.
The court briefly commented that “[n]o colloquial user of English” would call person “A” (the customer who formerly subscribed to the number called) rather than person “B” (the new subcriber) the “called party”.

The third hypothetical demonstrated the court’s disdain for the debt collector’s interpretation of the TCPA. The court supposed that :

“Borrower agrees with bank, as a condition of a loan, that Bank can enter borrower’s garage and reposses hiw car if he does not keep current on pyaments. After signing this contract, Borrower sells his house, moves, does nto tell bank his new address, and defaults on the loan. can bank now enter the garage of the house where borrower sued to live and sezie the car the repo men find there? Surely not. Borrower can consent to an entry ofn his own land and the use of his own car as collateral, but he can’t consent to an entry on anyone else’s land and the use of his own car as collateral, but he can’t consent to an entry on anyone else’s land or the seizure of someone else’s property. Borrower’s consent follows Borrower’s change of address : Bank has permission to enter the garage where borrower keeps his car at the time of entry; Bank does not have consent to enter the garage of the new owner of Borrower’s old house. Similarly Customer could consent expressly to recevie calls at his current Cell Number, even if that number changes, but simply providing Creditor with a number — which is how Customer consented here — does not authorize perpetual calls to that number after it has been reassigned to someone else.”

After describing this outrageous hypothetical, Judge Easterbrook observed that defendant’s argument is not based on either a “linguistic analysis of [Section] 527 or the way the law understands consent”. Instead, defendant asked the court to recognize that :

“people are moving in droves from landline to cell service; that numbers are portabel (so numbers that used to reach landline phones may start to ring cell phones); and that making it risky to use predictive dialers will drive up the expense of debt collection — which in the long run will lead to higher prices across the board….”

Judge Easterbrook refused to engage in the judicial activism that Enhanced Recovery and the American Collection Association (“ACA”) begged the court to employ so that debt collectors could call wrong persons’ cell phones with impunity. The court noted that the debt collector’s suggested changes to the TCPA would expose new subscribers to unwanted calls and unjustified expense.

As in many other opinions issued by the United States Court of Appeals for the Seventh Circuit, the court suggested ways that the debt collector could comply with the Telephone Consumer Protection Act :

“Have a person make the first call ***, then switch to a predictive dialer after verifying that Cell Number still is assigned to Customer”

The court’s first suggestion distinguishes between calls place by automatic dialers and calls placed by a human who dials the number because Section 227(b)(1) is limited to automated calls.

“Use a reverse lookup to identify the current subscriber to Cell Number.”

The court’s second suggestion illustrates the debt collector’s growing need to invest in the information technology required in order to help assure compliance.

“Ask Creditor, who obtained Customer’s consent, whether Customer is still associated with Cell Number — and get an indemnity from Creditor in case a mistake has been made.”

The court pointed out that indemnity may be “automatic” under Paragraph 10 of In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd, 559 Paragraphs 9, 10 (Jan. 4, 2008).

The take away is that people who receive calls on their cell phones which were machine or computer dialed by collection agencies, creditors, and many (but not all) other types of callers are now more firmly protected from harassment on their cell phones. To learn more about the Telephone Consumer Protection Act and how it can protect you, click on the highlighted portion of this sentence.

Is a collection agency or financial institution calling your cell phone about someone else’s debt? As much as people hope the debt collector will do the right thing and stop calling, they often don’t until they receive a summons and complaint. The summons is often the only piece of paper that will contains the “magic words” that persuade the caller to remove people from their list of robo-dialing victims.

The facts in Soppet demonstrate the debt collection industry’s disregard for people’s right to privacy including protection of their cell phone. In Soppet, the debt collector was calling two unrelated plaintiffs about charge off cell phone accounts that they were attempting to collect. Even if the debt collector was brain dead (which they are not), certainly the cell phone company knew that they’d terminated service to the prior subscriber who allegedly owed the account. These facts remind me of the Lilly Tomlin sketches where her character did awful things to her imaginary customers and got away with it because “we’re the phone company”. Many debt collectors share Ms. Tomlin’s antisocial tendencies.

If you are receiving calls from collection agencies on your cell phone, you may contact me by completing the Collection Agency Harassment Form in the right hand column of this page.
If you are a Florida resident, you are also welcome to call my assistant. I will contact you to discuss your situation and how I can help you stop the unwelcome calls and obtain
compensation from the company that’s harassing you.

(C) 2012 – 2016   Donald E. Petersen
All rights reserved


Legal Helpers Debt Resolution Sued by Debt Settlers

Vultures eating prey

Debt settlers go to court to fight over consumer’s debt settlement payments.

Legal Helpers Debt Resolution, LLC, and Macey, Aleman, Hyslip & Searns, recently agreed to pay the Attorney General for the State of Illinois $ 314,000 as a fine for operating an unlicensed debt settlement business. Attorney General Lisa Madigan’s lawsuit alleged that Legal Helpers unlawfully charged consumers upfront fees for debt settlement services with promises to make consumers debt free but, in fact, they never lower the consumers’ debts and actually left them worse off financially.

The Federal Trade Commission (“FTC”) investigated debt settlement programs and found that the debt settlers settled few if any debts. Attorney General Lisa Madigan’s investigaton of other debt settlers concluded that fewer than 10% of the consumers who enter into debt settlement programs have any debts settled. Attorney General Madigan also noted that 65 percent of consumers who enter into debt settlement programs drop out before the debt settlement firm contacts even one creditor.

The debt settlers were nevertheless charging their fees up front before even making offers to any creditors. In order to fight these predators, the FTC promulgated regulations which prohibited debt settlement companies who use the telephones to communicate with customers from charging their fees until the debt was settled. This rule, effective October 27, 2010, threatened to drive over 80% of the debt settlement companies out of business or force them to dramatically decrease their customer base.

Legal Helpers attempted to avail themselves of an exemption which allows attorneys to charge up front fees which non-attorney debt settlers are prohibitted from charging. Attorney General Madigan alleged that Legal Helpers Debt Resolution merely served as a front for non-lawyer debt settlement business and that Legal Helpers contracted out the actual debt settlement activities to non-lawyer, third party companies.

In response to the Illinois Attorney General’s lawsuit, Legal Helpers adamantly denied the allegations. According to Jason Searns, general counsel and managing partner with Legal Helpers, “We’re a bona fide law firm providing legal services. Our attorneys review every client’s file to determine what’s appropriate for them.”

The costs paid by Legal Helpers “clients” are substantial. Legal Helpers charged nonrefundable fees including a $ 500 retainer, a $ 49 monthly charge, and 15% of the total debt according to Attorney General Madigan’s lawsuit. Unlike non-attorney debt settlement firms, Legal Helpers charged these fees before any debts were settled based upon Legal Helpers’ representation that it was an “attorney” debt settlement firm.

According to Velocity Processing, Legal Helpers required Velocity Processing and its marketing affiliates to receive their fees spread over half the life of the debt settlement plan. Although Velocity Processing alleged that Legal Helpers required this pay out schedule for compliance purposes, the Complaint does not indicate how the delay in sharing the “attorney” fees would possibly bring their scheme into compliance. Velocity Processing’s Complaint alleges that these fees were earned up front and are now due and owing to Velocity Processing and its marketing affiliates.

Velocity Processing’s Complaint indicates that Legal Helpers demanded that Velocity Processing pay $ 934,495 to settle litigation in Illinois and $ 140,667 to settle litigation in Washington. According to Velocity Processing, “[t]his was wholly unreasonable and was not required under any contractual relationship” between Velocity Processing and Legal Helpers. But, Velocity Processing received the lion’s share of the fees paid by the debt settlement clients.

Forced with complying with the laws governing debt settlement companies, Legal Helpers terminated its relationships with Velocity Processing, LLC (“Velocity Processing”) and Velocity Processing’s marketing affiliates. Now that Legal Helpers is no longer sharing the fees with the back office “processors” and marketing affiliates, Legal Helper’s former non-lawyer partners are dislosing much more information about the internal workings of the debt settlement partnership than the Attorney General’s lawsuit.

On April 12, 2012, Velocity Processing filed a complaint in Dallas County, Texas seeking a temporary injunction against Legal Helpers Debt Resolution and Macey, Aleman, Hyslip & Searns. Velocity Processing’s complaint alleged that Legal Helpers “misappropriated” between $ 800,000 to $ 1,000,000 owed to Velocity Processing and its “marketing affiliates”. According to Velocity Processing, “[o]f this amount, Legal Helpers was only entitled to $ 4,900 for outstanding retainer fees.” Complaint, pg. 3.

One of the shocking details of Velocity Processing’s Complaint is the number of consumers who have fallen prey to Legal Helpers’ debt settlement program. Velocity Processing alleged that Legal Helpers has somewhere between 15,000 to 20,000 debt settlement clients. In my opinion, it is implausible to believe that Legal Helpers’ lawyers were personally and adequately involved in counselling 15,000 “clients” concerning their options in dealing with their debts.

The parties entered into a “Strategic Alliance Agreement” which permitted Velocity Processing to :

“offer potential debt settlement clients the opportunity to enroll in Legal Helpers’ debt settlement program so that Velocity Processing could provide the debt settlement services for such clients.”

Complaint, Paragraph 29. In return for “directly supervising all aspects” of the strategic alliance, Velocity Processing agreed to pay Legal Helpers :

“(1) up to $ 3,000 per compliance audit conducted by Legal Helpers’ compliance department plus $ 600 for travel expenses; (2) *** any refunds of client fees or costs in situations where Legal Helpers was allowed to keep its full retainer fees; (3) *** 5% of the Support Fee ‘in consideration for [FSCC’s] supervision of Velocity Processing and its assistance in the implementation and monitoring of the [debt settlement services]’; and (4) *** a portion of the monthly maintenance fee charged to the clients even though Velocity Processing was wholly responsible for maintaining the client files.”

Complaint, Paragraph 29. Although its difficult to reconcile Velocity Processing’s allegations that only $ 4,900 of the $ 800,000 to $ 1,000,000 belongs to Legal Helpers with the revenue sharing provisions in the contract, Velocity Processing’s Complaint makes it clear that Velocity Processing was owed the lion’s share of the disputed debt settlement fees because Velocity Processing performed almost all of the work and incurred almost all of the marketing expenses.

According to the Complaint :

“[t]he break down of the remaining portion of the money is estimated as follows : $ 422,473 is owed to Velocity Processing and Velocity Processing Debt Resolutions; $ 337,105 is owed to various marketing affiliates of Velocity Processing and Velocity Processing Debt Resolution; and $ 246,473 was allotted to the fee payments for the Legal Helpers’ Litigation Defense Fund, which was designed to cover the costs associated with legal representation of Legal Helpers clients in litigation.”

Affidavit, Maria Barnes, Paragraph 2. $ 246,473 may sound like a substantial legal defense fund but it’s a drop in the bucket of what would be required to zealously defend 15,000 to 20,000 litigation prone consumers who had entered debt settlement programs. (Some credit card issuers automatically refer the consumer’s account to outside counsel for collection litigation upon the initial contact from a debt settlement company.)

The “most significant expense” was the costs associated with the marketing of debt settlement programs. The internet, television, and radio ads are expensive. So intermediaries began to sell clients (or leads) to the back office processors such as Velocity Processing.

Velocity Processing’s Complaint alleges three causes of action : (1) Wrongful Termination of a Franchise Relationship in Violation of the Illinois Franchise Disclosure Act; (2) Money Had & Received; and (3) Conversion.

Velocity Processing, a non-lawyer debt settlement firm, invoking Illinois Franchise Disclosure Act to sue its “attorney” debt settlement partner requires chutzpah. But, franchise laws and other unfair and deceptive practices laws protect businesses as well as consumers. It reminds me of the old adage, if you let the devil ride, he’s going to want to drive.

According to Velocity Processing’s Complaint, Illinois Franchise Act defines a franchise :

“means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which : (a) a franchise is granted the right to engage in the business of offering, selling, or distributing goods or services, under a marketing plan or system prescribed or suggested in substantial part by a franchisor; and (b) the operation of the franchisee’s business pursuant to such plan or system is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and (c) the person granted the right to engage in such business is required to pay to the franchisor or an affiliate of the frnachisor, directly or indirectly, a franchise fee of $ 500 or more.”

Complaint, Paragraph 27. Without reviewing the Illinois Franchise Disclosure Act, it appears that Velocity Processing may have a colorable claim which might survive a summary judgment motion. But, it also appears that Velocity Processing likely shaped the business arrangement so that it would supposedly fit within the “attorney debt settlement” model in order to benefit by using Legal Helpers as a front in order to claim the exemption from FTC regulations.

Velocity Processing alleged that it can probably establish a cause of action for Money Had & Received. Under Texas law, a party can establish a cause of action for Money Had & Received by showing : (1) the defendant (i.e. Legal Helpers) holds the money; and (2) the money belongs to the plaintiff (i.e., Velocity Processing) in equity and good conscience. “Equity and good conscience”.

Velocity Processing also plead a cause of action for conversion. To establish a cuase of action for conversion under Texas law, Velocity Processing alleged that : (1) plaintiff (Velocity Processing) owned, possessed, or had the right to immediate possession of property; (2) the property was personal property; (3) the defendant (Legal Helpers) wrongfully exercised dominion or control over the property; and (4) the plaintiff suffered injury.

Velocity Processing’s Complaint and the accompanying affidavits express concern for the potential harms that the debt settler claims that unspecified numbers of consumers will suffer as a result of the immediate interruption in services. Velocity Processing claims that Legal Helper’s acts will cause consumer’s debt settlement deals to be terminated because Velocity Processing will be unable to monitor whether the consumer paid Global Client Solutions. (Global Client Solutions is the granddaddy of all back end processors). Velocity Processing also claims that an unknown number of customers’ settlement negotiations which were close to being finalized will be lost because Legal Helpers has instructed them to no longer communicate with their customers.

The duties performed by Velocity Processing may exceed “merely” monitoring disbursements. Velocity Processing, not Legal Helpers, negotiates with any creditors. Velocity Processing’s officer’s affidavit also states that

“clients enrolled in the program develop strong bonds with their customer service reprentative because this representative has been making monthly calls during the life of the contract to monitor the clients’ progress through the program.”

Affidavit of Maria Barnes, Paragraph 7. Velocity Processing apparently serves as some type of intermediary in the processing of collection lawsuits against Legal Helpers’ consumer clients. Velocity Processing’s officer’s affidavit also states that the company :

“is also receiving notices of lawsuits filed against Legal Helpers’ clients. Because there are deadlines for responding to these lawsuits, the lack of a transition period will put many of these clients in jeopardy of default.”

Macey Bankruptcy Law, P.C. appears to have responded to these problems by “rebranding”. Legal Helpers Debt Resolution, LLC is an affiliate of Legal Helpers, P.C. Legal Helpers, P.C. recently changed its name to Macey Bankruptcy Law, P.C.

One of the statistics that I have not read is what percentage of the debt settlement clients “Legal Helpers” was able to convince to remain with the firm when the debt settlement programs inevitably failed. Given the huge “client” base, the potential revenue is tremendous. As an industry, debt settlement providers prey upon unknowledgable consumers’ fear of filing bankruptcy and mislead consumers about the success rates they achieve. Perhaps with the anticipated exit of Legal Helpers from the debt settlement business, consumers will be better able to identify bankruptcy attorneys who are committed to providing bankruptcy representation without encouraging their clients to spend substantial sums on futile debt settlement programs.

The Legal Helpers Debt Resolution train wreck should serve as a warning to attorneys who are tempted to enter into “strategic alliances” with non-lawyers or consumers who are considering employing such lawyers.

For more information on the hazards of debt settlement, click on the highlighted portion of this sentence. For more information about the government’s efforts to combat debt settlement scams, click on the highlighted portion of this sentence.

(C) 2012 Donald E. Petersen
All rights reserved.