INSIGHT: Why the ABA Is Wrong on Amending Debt Collection Bill

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By Jeff Sovern and Gina Calabrese

The American Bar Association has a proud history of maintaining the integrity of the legal profession, by, for example, evaluating judicial candidates and adopting ethical rules. But the ABA is turning its back on this history and putting collection attorneys ahead of consumers by pushing a bill that Congress might vote on during its present lame duck session.

A federal law, the Fair Debt Collection Practices Act, bars debt collectors—including lawyers—from abusive and fraudulent acts, such as demanding payment for debts consumers do not even owe. The ABA wants Congress to amend this statute so that it no longer applies to attorneys’ litigation activities, and a House Committee has already approved the bill.

Ethical Rules Don’t Stop Wrongdoing

The ABA argues that consumers don’t need protection from unscrupulous lawyers because lawyers are already subject to state ethics rules largely written by the ABA itself. Experience tells us otherwise. When a law firm sued consumers for debts they did not owe, the Consumer Financial Protection Bureau needed the FDCPA to stop it. One of us teaches in a law school consumer clinic and has observed that ethical rules do not stop attorneys from deceiving consumers.

The ABA’s ethical rules are not enough to protect victimized consumers because, as the Federal Trade Commission has observed, the debt collection litigation system is broken. Some courts are swamped with debt collection suits. Lawyers, whose actions carry the patina of legitimacy, routinely take advantage of consumers, few of whom can afford lawyers or know their rights, including when they have grounds to complain to attorney disciplinary boards—meaning that ethics investigations are never even triggered.

Often consumers simply fail to show up to defend the lawsuits—perhaps because they never received notice of the suit or cannot miss work (many are low-income)—giving collection attorneys more freedom to use questionable proof, which courts essentially “rubber-stamp.” If regulators, who have sued to end patterns of fraud in lawsuits against consumers, could not use the FDCPA, the situation would undoubtedly worsen.

No Punishment

One of us has seen an attorney tell a court—under penalty of perjury—that a large balance remained on a debt that had been fully paid. The firm later admitted it was wrong, but only after it was held accountable under the FDCPA. Lawyers have frozen our law clinic’s clients’ bank accounts, blocking their access to their own funds, for debts that had already been paid. In none of these cases did the attorneys face ethics sanctions. Indeed, courts routinely excuse such missteps.

Though state courts often fail to discipline attorney abuses, federal regulators have stepped in. The Consumer Financial Protection Bureau used the FDCPA to obtain a $3.1 million penalty from a law firm for operating a debt collection assembly line in which lawyers spent less than a minute reviewing cases that resulted in consumers paying money they did not owe. Lawyers who only pretend to review cases for merit do not deserve the solicitude of their fellow solicitors.

Consumers have also used the FDCPA to address collection abuses. In New York, a collection firm that had obtained more than 100,000 default judgments after filing false documents in court finally closed shop, after it was sued under the FDCPA.

Do Unto Others

The ABA also argues that attorneys are sued for violating the FDCPA’s technical requirements, like suing consumers in the wrong county. But being sued in a distant court can make it impossible or prohibitively expensive for consumers to show up and defend. And there is something incongruous about an organization of lawyers arguing that attorneys should be excused from obeying technical rules when its members often counsel clients on complying with just such technicalities.

Most of the FDCPA is anything but technical. It protects consumers from abuse, harassment, and outright lies, like misrepresenting a consumer’s legal rights. Ethical rules prohibit similar wrongs, but the FDCPA provides protections ethics rules don’t.

Congress has already tried and rejected essentially the ABA’s approach. When Congress first enacted the FDCPA, it excluded lawyers. Attorney debt collectors soon outnumbered non-lawyer collectors; some even advertised that creditors should hire them because lawyers could ignore the FDCPA. Congress responded by extending the statute to cover lawyers in 1986. We fear something like this history will repeat if Congress enacts the ABA’s bill.

Lawyers have long had a questionable public image. The ABA’s attempt to protect misbehaving collection attorneys does more to aid lawyers’ critics than help lawyers. Congress should reject the ABA’s plea.

Author Information

Jeff Sovern and Gina Calabrese are professors at St. John’s University School of Law and members of the American Bar Association. Sovern has been teaching and writing about consumer law for more than 30 years. Calabrese co-teaches the Consumer Justice for the Elderly: Litigation Clinic, where students represent consumers sued for debt. She has drafted and advocated for consumer debt policy reforms on local, state, and federal levels.

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