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Does the Wave of Fair Debt Collection Practice Act (FDCPA) Suits Benefit Consumers or Lawyers?

A tipster (send in your tips here) forwarded to me an article about Thomas Lyons, Esq. in Minnesota who was disbarred in 2010 for filing suits under the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).

While there is a need for consumers to have recourse in bringing legal suits against creditors for bad acts, I’m beginning to question if the sudden wave of legal providers who is selling FDCPA and FCRA debt relief services is going to follow the same fate as Lyons.

An article from InsideARM.com said:

According to the Minnesota Litigator, this is the eighth time that the Minnesota Office of Lawyers Professional Responsibility has disciplined Lyons. In December of 1998, Lyons was both admonished and placed on private probation for separate incidents of misconduct; in 2001, he was publicly reprimanded and placed on probation for two years; in 2002, Lyons was admonished; and he was again admonished in 2005. In addition, Lyons received two separate amended admonitions in 2007. Lyons’ previous discipline resulted from material misrepresentations, prosecuting frivolous claims, and failure to follow appropriate procedure.

The Consumer Justice Center website says: The Consumer Justice Center P.A. (“CJC”) is a consumer rights law firm dedicated to providing its clients with quality legal services in a timely manner consistent with high ethical standards. – Source

Lyons is one of two attorneys with The Consumer Justice Center P.A. (“CJC”) of Vadnais Heights, Minn., which according to its Web site “is a consumer rights law firm dedicated to providing its clients with quality legal services in a timely manner consistent with high ethical standards. The CJC is dedicated to protecting the rights of all consumers and founded on the premise that each client deserves personalized attention.”

“I believe that most ‘consumer’ attorneys file cases to make money for themselves,” said Robert Markoff, past president of the National Association of Retail Collection Attorneys (NARCA). “They do not take a case unless they are able to earn a large fee for minimal or inflated work.

“That said, they do like to see their names in print as wonderful ‘consumer crusaders’ to attract more clients. Abuses by ‘extortion litigators’ masquerading as ‘consumer attorneys’ are not often reported by the media or referred to bar disciplinary committees. Collection attorneys are hung out to dry for the slightest infractions but these attorneys escape notice.”

“Many Illinois attorneys have ‘aggressive’ methods for recruiting FDCPA, FCRA and other related claims,” noted Fred Blitt, current NARCA president. “Frankly, people like Lyons, who hold themselves out as ‘dedicated to the rights of consumers’ always seem to have the ‘sexy’ or winning story for the press and general public. The real question is whether you are truly helping the consumer or simply creating another FDCPA lawsuit that mainly benefits the lawyer in the form of attorneys fees?”

Blitt added: “Let me be clear, I am not referring to matters of a clear disregard for a consumer’s rights under the FDCPA. NARCA attorney members are licensed by their respective states and need to adhere to their respective codes of ethics and the FDCPA. That being said, although I don’t have specific figures, many FDCPA claims are filed based on hypertechnical violations of the FDCPA. I have over 20 years of collections experience, not to mention spending the majority of my young adult life working at my family’s furniture store. In my experience, the vast majority of consumers simply want to pay their bills and resolve their credit problems. Does filing an FDCPA suit for a hypertechnical violation truly benefit the consumer? In the old days, I used to receive many calls from consumer lawyers who worked with me to resolve collection cases for consumers. Today, while I recieve a few of those calls from consumer attorneys I have known for years, there are many more players in the potentially lucerative game of consumer law. In most cases I receive an FDCPA lawsuit. You tell me, is that consumer advocacy?”

Wendy Badger, attorney with Morrison Fenske & Sund, P.A., said that she’s had some cases in which she has faced Lyons. “Some of the cases had some merit, some were hypertechnical violations, and others didn’t have much merit at all.”

Don’t Get Me Wrong

There is a need for lawyers to represent consumers but where the concern lies is efforts where an attorney will charge $9,000 in advance to then go and sue creditors such as happened here.

The challenges sound wonderful to a consumer but they don’t come without risk to both the consumer and the lawyer bringing them.

Blanket challenges can land an attorney in very hot water. Just look at what happened with Laura Hess, Esq. While Hess was targeting Fair Credit Billing Act (FCBA) violations, the end result was the same. She was disbarred and lost everything.

And services like WebRecon.com offer intelligence into who is churning the FDCPA, FCRA, Truth in Lending Act (TILA), and Telephone Consumer Protection Act (TCPA) claims.

According to WebRecon:

FDCPA and Other Consumer Lawsuit Statistics, October, 1-15, 2010

There were about 497 lawsuits filed under consumer statutes in the first half of October, 2010. Here is an approximate breakdown:
• 455 Fair Debt Collection Practices Act
• 58 Fair Credit Reporting Act
• 24 Telephone Consumer Protection Act
• 11 Truth in Lending Act

Summary:
• Of those cases, there were about 524 unique plaintiffs (including multiple plaintiffs in one suit).
• Of those plaintiffs, about 100 had sued under consumer statutes before.
• Combined, those plaintiffs have filed about 514 lawsuits since 2001
• Actions were filed in 112 different US District Court branches.
• About 481.5 different collection firms and creditors were sued.

The top courts where lawsuits were filed:
• 32 Lawsuits: California Central District Court – Western Division – Los Angeles
• 25 Lawsuits: Florida Southern District Court – Fort Lauderdale
• 24 Lawsuits: Colorado District Court – Denver
• 23 Lawsuits: Illinois Northern District Court – Chicago
• 21 Lawsuits: Pennsylvania Eastern District Court – Philadelphia
• 19 Lawsuits: California Southern District Court – San Diego
• 19 Lawsuits: Minnesota District Court – DMN
• 14 Lawsuits: California Northern District Court – San Francisco
• 12 Lawsuits: Florida Southern District Court – Miami
• 11 Lawsuits: California Central District Court – Southern Division – Santa Ana

The most active consumer attorneys were:
• Representing 50 Consumers: Jack Dennis Card, Jr.
• Representing 49 Consumers: Lara Ruth Shapiro
• Representing 15 Consumers: David Michael Larson
• Representing 9 Consumers: Brent F. Vullings
• Representing 8 Consumers: Sergei Lemberg
• Representing 8 Consumers: John Cole Gayle, Jr.
• Representing 8 Consumers: Donald A. Yarbrough
• Representing 7 Consumers: Joshua R. Trigsted
• Representing 7 Consumers: Michael S Agruss
• Representing 7 Consumers: Craig J. Ehrlich

Statistics Year to Date:

9060 total lawsuits for 2010, including:
• 8481 FDCPA
• 1002 FCRA
• 420 TILA
• 136 TCPA

Number of Unique Plaintiffs: 8663 (including multiple plaintiffs in one suit)

The most active consumer attorneys of the year:
• Representing 294 Consumers: Jack Dennis Card, Jr.
• Representing 278 Consumers: Sergei Lemberg
• Representing 269 Consumers: Brent F. Vullings
• Representing 214 Consumers: David Michael Larson
• Representing 213 Consumers: Todd Michael Friedman

When Does It Become a Target?

At some point an attorney will become a target for bringing blanket FDCPA suits. Just look at the Laura Hess vs. Chase Bank case. Blanket claims of assistance by lawyers will help to identify them as targets by either regulators and creditors.

And mass scale selling of FDCPA suits does fall under the FTC telemarketing sales rules and is being examined further by the FTC for potential action against some lawyers.

It is possible that persuaded by imaginings of consumers willing to pay thousands for services that are promoted as being able to make their debt go away, other lawyers will fall into this trap.

I’ll cast a bet right now, as the FDCPA suit mill picks up steam, consumers will lose money and some lawyers will lose their licenses.

Does the Wave of Fair Debt Collection Practice Act (FDCPA) Suits Benefit Consumers or Lawyers?
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Bobbyrboyer1972

    I just came across the blog and will share my tidbit of info- I know there are a great many consumer law firms that specialize in helping fight FDCPA, FCRA & state debt collection law. Many of the nationally recognized law firms listed above, i think of them as mass production lines. The quicker they can turn a case over for settlement, the faster they can move on to the next case. In the past couple of years, Ive been repairing my credit, learning the FDCPA ,FTCPA and FCRA laws, so much, I should become an attorney lol.

    In the past year, there have been a few stubborn collection agencies not abiding by the laws. I, as a consumer, did everything I was suppose to do in regards to disputing inaccurate collections and found these collection agencies were violating my rights and laws, left and right. I finally contacted a nationally recognized law firm that helps fight collection agencies in reference to my issue. This was in reference to “one debt” collector with one account. They violated the TCPA laws calling, leaving pre-recorded voice messages on my cell phone, not naming who they are etc etc. Sent threats of suing me. The firm I retained took the case and filed a suite. In the end, the CA wanted to settle which my attorney thought was a good offer “$3,600 for the violations. I got a little over $700. for the damages the attorney got the rest.

    The law firms handling the consumer complaints usually “hope” the collection agency/debt collector will settle out of court and will usually take the 1st offer as it is a quick turn over, fast money etc. When i would bring my concerns to the firm, and they realized i knew what i was talking about, they became defensive . I asked why they didnt include several violations as the TCPA violations which I saved all recordings, caller ID. I was told, “when attorney take on “contengency” cases, they do not like to spend a great deal of time researching in depth, the accusations, they rather get the collection agencies for the “easy” violations.

    This led me to believe some law firms that help consumers with debt collectors, are not out to help the consumer, rather, fatten there wallet. These are production lines, fast,easy  turnovers for fast money. They get paid the few thousands, and consumer comes out with a couple hundred even though they were the one damaged.

    I had another collection agency list 3 collections on my credit report after I sent a dispute in response to there first letter within 30 days. sent certified mail with signature received. 2 months, never a reply. Even sent fax’s of dispute, no reply. this company also called me several times with pre-recorded automated voice msgs, not announcing themselves after I sent the inital dispute and cease and desist calling me.

    Ive studied case laws, Ive read the ftc laws about FDCPA and FCRA hundreds of times, so much, i could recite them in my sleep lol.

    I wrote my attorney from previous case they handled a two page outline of my complaint, sent supporting documents etc. He replied, it seemed like a complicated case, and didnt seem , to him, they are any violations or would be hard to prove..

    My take on that? He was being lazy, and only wanted simple, fast turn around cases. This is when I learned a great deal of firms are not in fact protecting consumers rights, they are out to make money off the consumer.

    Subsequently, I further studied case laws and statutes and decided to take this one on my self by sending the CA an “Intent to Sue” notice outlining the various violations and what my demands were for the damages. The first offer they sent was $1500, I declined second was $2500, once again i declined, 3r offer was $3500, I declined and told them my final counter offer request is $4,500 which was very reasonable considering, I could have sought $160,000.00 which is what all of the violations and with 20 tcpa calls that were in violation, my offer is firm and final. They settled for $4,500 and never had to file court papers.

    There was a lot more to this story, in regards to the violations they commited, but that would be a 5 page essay! My personal view is that a great many consumers should read up on there rights ie laws in regards to debt collections. Many consumers can do exactly what ive done and what attorney do, and the consumer will come out better. JUST KNOW YOUR LAWS before threatening to sue an attorney or debt collector, and be sure you are 100% correct that a violation was committed.

    • http://GetOutOfDebt.org Steve Rhode

      Thanks for sharing this comment. Maybe you’d consider sharing a guest post on your experience to further educate readers?

    • bweb

      well done. the risk you always run when you file suit, if you loose the winning party typically gets awarded attorney fee’s.

  • Steve Rhode

    What a great comment. Thank you.

  • Nasdmichael

    I practice consumer protection law in conjunction with a bankruptcy practice. Basically what we do is preserve the cause of action for the estate and sue in the bankruptcy court in a Chapter 13 or in the state court if the case is abandoned in a Chapter 7. Admittedly, FDCPA/UDAP violations are really low hanging fruit and there has been an increase in the number of attorneys getting into it simply because it isn’t that complex. My opinion is that consumer suits in the absence of a bankruptcy to discharge the underlying debt are usually a waste of time, effort and don’t help your client at all. A lot of it is simply bottom feeding. However, when I can take a family of 7 with a $3,300 per month bankruptcy plan payment and, through the use of consumer protection statutes, reduce the interest rate on their house to 3.5% permanently, put about $15,000 directly into their bankruptcy plan making it affordable, I’ve done a good thing. My partner and I have nothing to be ashamed of with the way we practice law. If we see a hypertechnical violation, like a transposed license number 3428 instead of 3248, I write a letter to the agency and let them know because I know some asshole will sue them, but it won’t be me.

  • Nasdmichael

    I practice consumer protection law in conjunction with a bankruptcy practice. Basically what we do is preserve the cause of action for the estate and sue in the bankruptcy court in a Chapter 13 or in the state court if the case is abandoned in a Chapter 7. Admittedly, FDCPA/UDAP violations are really low hanging fruit and there has been an increase in the number of attorneys getting into it simply because it isn’t that complex. My opinion is that consumer suits in the absence of a bankruptcy to discharge the underlying debt are usually a waste of time, effort and don’t help your client at all. A lot of it is simply bottom feeding. However, when I can take a family of 7 with a $3,300 per month bankruptcy plan payment and, through the use of consumer protection statutes, reduce the interest rate on their house to 3.5% permanently, put about $15,000 directly into their bankruptcy plan making it affordable, I’ve done a good thing. My partner and I have nothing to be ashamed of with the way we practice law. If we see a hypertechnical violation, like a transposed license number 3428 instead of 3248, I write a letter to the agency and let them know because I know some asshole will sue them, but it won’t be me.

    • http://GetOutOfDebt.org Steve Rhode

      What a great comment. Thank you.

  • Steve Rhode

    You are right, in hindsight this wasn’t my finest post. However in my defense I do see a trend growing of lawyers that are promising a magic solution of setting collectors up to violate FDCPA and then sue them. I’m concerned it will become a new and growing debt relief approach which will erode the good work done by many lawyers and members of NACA that work hard to defend consumers.

    Interestingly enough some of the very same lawyers that have embarked on this approach of mass FDCPA suits to reduce or settle debt are also joining NACA to give them some cred.

    Never a dull moment.

    Thanks for the link.

    Steve

  • caryniam

    Hi Steve, I read this website regularly w/r/t debt settlement issues and always appreciate what you have to say. I feel this post is a little one-sided and unfair. I don’t doubt that there are lawyers who abuse the FDCPA, but you make no mention (other than the give away line, “There is a need for lawyers to represent consumers”) of the absolutely horrible and abusive debt collection practices that some entities engage in and the real harm done to consumers, and the real work done by consumer lawyers to combat these abuses.

    The National Consumer Law Center recently released a report on the issue:
    http://www.nclc.org/images/pdf/pr-reports/debt-machine.pdf

    • http://GetOutOfDebt.org Steve Rhode

      You are right, in hindsight this wasn’t my finest post. However in my defense I do see a trend growing of lawyers that are promising a magic solution of setting collectors up to violate FDCPA and then sue them. I’m concerned it will become a new and growing debt relief approach which will erode the good work done by many lawyers and members of NACA that work hard to defend consumers.

      Interestingly enough some of the very same lawyers that have embarked on this approach of mass FDCPA suits to reduce or settle debt are also joining NACA to give them some cred.

      Never a dull moment.

      Thanks for the link.

      Steve

  • caryniam

    Hi Steve, I read this website regularly w/r/t debt settlement issues and always appreciate what you have to say. I feel this post is a little one-sided and unfair. I don’t doubt that there are lawyers who abuse the FDCPA, but you make no mention (other than the give away line, “There is a need for lawyers to represent consumers”) of the absolutely horrible and abusive debt collection practices that some entities engage in and the real harm done to consumers, and the real work done by consumer lawyers to combat these abuses.

    The National Consumer Law Center recently released a report on the issue:
    http://www.nclc.org/images/pdf

  • Angelo

    There are something like 180,000 collection agencies and maybe 1500 attorneys well versed in FDCPA/TILA/FCRA. Our clients tell us daily the horror stories of what these collectors are saying to them, the tactics are way beyond illegal, they are heartless. One could argue that this is the tiniest payback for the 80,000 lawsuits a year that Cohen & Slamowitz filed by a staff of 14 attorneys or the Mann Brackens or the Zwicker and Associates of the worlds who collectively churn out HUNDREDS OF THOUSANDS of lawsuits a year. Steve, Im sure if you compared the number of frivolous lawsuits filed by these law firm/collection attorneys to the numbers above, people might see things differently. I also think theres a huge difference between these attorneys (each representing under 300 clients) and the Laura Hess, Hess Kennedy upfront fee model types. Hell, even Hess Kennedy was able to eliminate over $500,000,000.00 using a similar method. I now two wrongs don’t make a right but when we have a level playing field then we can talk about wrong or right.

  • Angelo

    There are something like 180,000 collection agencies and maybe 1500 attorneys well versed in FDCPA/TILA/FCRA. Our clients tell us daily the horror stories of what these collectors are saying to them, the tactics are way beyond illegal, they are heartless. One could argue that this is the tiniest payback for the 80,000 lawsuits a year that Cohen & Slamowitz filed by a staff of 14 attorneys or the Mann Brackens or the Zwicker and Associates of the worlds who collectively churn out HUNDREDS OF THOUSANDS of lawsuits a year. Steve, Im sure if you compared the number of frivolous lawsuits filed by these law firm/collection attorneys to the numbers above, people might see things differently. I also think theres a huge difference between these attorneys (each representing under 300 clients) and the Laura Hess, Hess Kennedy upfront fee model types. Hell, even Hess Kennedy was able to eliminate over $500,000,000.00 using a similar method. I now two wrongs don’t make a right but when we have a level playing field then we can talk about wrong or right.

    • James

      You sir have hit the nail on the head. We need a cadre of attorney’s/law firms suing debt collectors before we will ever reach the point where regulators need to step in. The fact that these attorneys are doing it for the money is good… I’d question any other motive. As long as they are at least as ethical and professional as the robo signing debt collectors law firms then fair game.

  • Michael

    I think we have a loooooong way to go before there is anything close to parity between what I dub the “white hats” vs, the “black hats” involved in consumer debt.

    Here is an article with some context to the amount of suits brought by the white hats on behalf of consumers vs. suits brought mill style by the black hats:
    http://debtbytes.org/2010/08/1

    I share your concern about how FDCPA claims are marketed and over hyped to financially strapped consumers as a way out of debt, but I do not think the number of consumers falling for that type of debt relief sales pitch rise to a figure that can distract or distort anything away from the legitimate attorneys with practices that focus solely on consumer issues.

    I could be wrong in this. One should never underestimate the lure of money. There is also an army of debt relief marketers out there looking for a program they can push that will replace the income they had going prior to FTC rule changes for debt settlement service providers. Some of those marketers are as gullible as the demographic they look to pitch to.

  • Michael

    I think we have a loooooong way to go before there is anything close to parity between what I dub the “white hats” vs, the “black hats” involved in consumer debt.

    Here is an article with some context to the amount of suits brought by the white hats on behalf of consumers vs. suits brought mill style by the black hats:
    http://debtbytes.org/2010/08/12/lawsuits-to-collect-debt-vs-suing-a-debt-collector/

    I share your concern about how FDCPA claims are marketed and over hyped to financially strapped consumers as a way out of debt, but I do not think the number of consumers falling for that type of debt relief sales pitch rise to a figure that can distract or distort anything away from the legitimate attorneys with practices that focus solely on consumer issues.

    I could be wrong in this. One should never underestimate the lure of money. There is also an army of debt relief marketers out there looking for a program they can push that will replace the income they had going prior to FTC rule changes for debt settlement service providers. Some of those marketers are as gullible as the demographic they look to pitch to.

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