Suit that looked like a "setup" could be expensive for consumer, attorney

By Richard A. Roth, J.D.

A U.S. district court judge’s conclusion that a consumer tried to trap a debt collector into a Fair Debt Collection Practices Act violation could subject the consumer, his attorney, or both to liability for the debt collector’s defense costs and to sanctions under the Federal Rules of Civil Procedure. Saying “This case has all the earmarks of a setup,” the judge has ordered both the consumer and the attorney to explain why he should not dismiss the suit and enter a costs and sanctions order (Huebner v. Midland Credit Management, Inc., Feb. 11, 2015, Cogan, B.).

The judge’s opinion makes clear his disdain for FDCPA suits that he believes do not respond to meaningful debt collector misconduct. The majority of FDCPA cases he hears are brought by the same handful of lawyers, on behalf of the same consumers, for the purpose of “squeezing a nuisance settlement and a pittance of attorneys’ fees out of a collection company,” the judge said. While this “cottage industry” of FDCPA suits is neither illegal nor unethical, the judge added, this case presented “a deliberate and transparent attempt by a sophisticated debtor to entrap a collection company into a technical violation.”

According to the judge, the consumer claimed that debt collector Midland Credit Management violated the FDCPA by denying the consumer the ability to dispute the debt verbally, requiring him to provide a “valid reason” for his dispute, failing to communicate that the debt was disputed, and making false statements. The consumer even furnished the judge a transcript of a recorded telephone conversation as evidence of the violations. However, “The recording does not support plaintiff’s version of the events and there does not appear to be any good faith basis for this suit,” the judge said.

In fact, recording the conversation might have backfired on the consumer. The very existence of the recording appeared to raise the judge's suspicions, and the transcript convinced the judge that Midland's employee had done nothing wrong.

First, despite the consumer's allegations, the employee had never told him that the debt had to be disputed in writing. In fact, "writing" never was mentioned at all, the judge pointed out.

Second, while the employee did make several efforts to find out why the consumer disputed the debt, the consumer would say no more than “this is a non-existent debt”—a statement the judge characterized as “obviously and intentionally vague.” The employee’s attempt to glean “a smidgen of detail about the dispute” was not a violation of the debt collection law.

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