May 16 — Outside attorneys appointed by the Ohio attorney general to collect state debts didn't violate the Fair Debt Collection Practices Act by using state letterhead in their collection efforts, the U.S. Supreme Court held May 16.
A contrary ruling could have hindered the many states that use outside counsel for debt collection.
The FDCPA bars “false” or “misleading representations” in connection with debt collection.
But here, “the Attorney General authorized—indeed required—special counsel to use his letterhead in sending debt collection communications,” Justice Ruth Bader Ginsberg wrote for a unanimous court.
“Special counsel create no false impression in doing just what they have been instructed to do,” the court said.
“There is no cause, in this case, to construe federal law in a manner that interferes with ‘States' arrangements for conducting their own governments,' ” the court said.
Under Ohio law, the state attorney general's office may appoint outside “special counsel” to help collect debts. In a footnote, the court acknowledged that its opinion only addresses “special counsel” and that these considerations “may not carry over to other debt-collector relationships.”
“This could be very significant,” said Manuel H. Newburger, an attorney with Barron & Newburger P.C., Austin, Texas, whose practice focuses on the FDCPA.
“The Consumer Financial Protection Bureau has taken the position that it is empowered to regulate state debt collection proceedings that are conducted subject to state court rules,” he told Bloomberg BNA in a May 16 e-mail.
“The Sheriff decision raises questions as to whether the Court would permit such federal interference with state debt collection proceedings,” Newburger said.
“It is notable that the Court tried to make this opinion as narrow as possible—focusing only on the relationship of these particular special counsel with this particular state,” said the debtors' attorney E. Joshua Rosenkranz of Orrick, Herrington & Sutcliffe LLP, New York.
“At least for now, that means that professional debt collectors are not free to abuse and harass consumers just because their client happens to be some state entity,” Rosenkranz told Bloomberg BNA in a May 16 e-mail.
“Only time will tell how lower courts apply this ruling in the context of other debt collectors who serve commercial entities,” Rosenkranz said.
Here, debtors sued special counsel appointed by the Ohio attorney general after receiving debt-collection letters on the attorney general's letterhead but signed by the counsel.
They alleged that by using the attorney general's letterhead, the special counsel “employed deceptive and misleading means to attempt to collect consumer debts,” in violation of the FDCPA.
Even assuming that the attorneys aren't exempt state “officers” under the FDCPA, 15 U.S.C. §1692 et seq., their use of state letterhead wasn't misleading, the Supreme Court found.
The high court analyzed the nature of the relationship between the Ohio attorney general's office and the outside counsel.
The letterhead identifies the principal and the signature block names the agent, conveying “that special counsel act on behalf of the Attorney General,” the court said.
This setup illustrates the relationship between the two parties and isn't false or misleading, it said.
The plaintiffs acknowledged that if, in lieu of using the letterhead, “special counsel's communications opened with a bold-face statement” explaining the relationship between the parties, “it would not transgress” the FDCPA, the court said.
It would “make scant sense to rank as unlawful use of a letterhead conveying the very same message,” it said.
“The Ohio Attorney General’s Office is pleased,” said Dan Tierney, a spokesperson for the Office of Ohio Attorney General Mike DeWine. A “unanimous Supreme Court agreed that our efforts to collect debts owed to taxpayer supported institutions were not deceptive but instead provided relevant information to debtors,” Tierney told Bloomberg BNA in a May 16 e-mail.
Text of the opinion at http://src.bna.com/e00.
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