Loyola Consumer Law Review

Volume 10 | Issue 2 Article 12

1998

The Credit Cost Reduction Act of 1997 and theFederal Fair Debt Collection Practices Act:Problems of InterpretationLaurie A. LucasAssist. Prof., Arkansas Tech Univ. School of Business

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Recommended CitationLaurie A. Lucas The Credit Cost Reduction Act of 1997 and the Federal Fair Debt Collection Practices Act: Problems of Interpretation, 10Loy. Consumer L. Rev. 172 (1998).Available at: http://lawecommons.luc.edu/lclr/vol10/iss2/12

The Credit Cost Reduction Act of 1997 andThe Federal Fair Debt Collection Practices

Act: Problems of Interpretation

By Laurie A. Lucas

L Introduction

In 1977, Congress enacted the Fair DebtCollection Practices Act' ("FDCPA" or "Act")to curb "serious and widespread" abuses bydebt collectors.2 A court recently recitedCongress' rationale for the Act:

Congress explained that althoughunscrupulous collectors comprise only asmall portion of the industry, the lessethical debt collectors threaten consumerswith violence, use profane or obscenelanguage, make telephone calls atunreasonable hours, impersonate publicofficials and lawyers, disclose debtors'personal affairs to employers and engagein other sorts of unscrupulous practices... The Act's purpose is to eliminate suchpractices.

As the Supreme Court of the United Stateshas recognized, the Act prohibits debtcollectors "from making false or misleadingrepresentations and from engaging in [thesetypes of]... abusive and unfair practices.

The Act represents a great leap forward incurbing abusive debt collection tactics.Congress amended the Act twice, in 19861 and1996,6 to refine various provisions. However,this tinkering did not stem the flow of FDCPA-related litigation. Although the Supreme Courthas ruled on only one case involving theFDCPA,7 litigation concerning the Act

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Laurie A. Lucas is anAssistant Professor of LegalStudies at the Arkansas TechUniversity School of Business.Ms. Lucas teaches undergradu-ate level classes in The Legaland Regulatory Environment ofBusiness, Contemporary Com-mercial Law, Consumer Law,Real Property Law, Introductionto Law and Legal Reasoning,and Business Writing. She hasauthored articles on the federalFair Debt Collection PracticesAct, intellectual property rights,consumer credit, and child laborin publications such as TheBusiness Lawyer, ConsumerFinance Law Quarterly, Busi-ness & The ContemporaryWorld, and Multinational Busi-ness Review In 1985, Ms.Lucas graduated with a B.B.A.in Economics from the Univer-sity of Oklahoma, and alsoearned J.D. (1988) and M.L.I.S.(Library & Information Studies)(1993) degrees from that uni-versity. Ms. Lucas serves as aReviewer for the AmericanBusiness Law Journal and anAd Hoc Reviewer for the Jour-nal of Marketing (Legal andPublic Policy Issues). Her e-mailaddress is<bell@atuvm.atu.edu>.

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continues to increase. In 1987, only fifteenfederal judicial opinions even mentioned theAct. By contrast, more than 140 federal judicialopinions addressed some aspect of the Act in1997. This alarming rise in litigation illustratesthat consumers, debt collectors, litigators, andjudges have experienced difficulty interpretingand applying various provisions of the Act.

Congress introduced the Credit CostReduction Act of 19978 ("CCRA") as anamendment to the FDCPA. Currently, theCCRA has been referred to the HouseCommittee on Banking and Financial Services'subcommittee on Financial Institutions andConsumer Credit. The proposed CCRAamendment represents an attempt to resolvesome of the problems in interpreting theFDCPA. Specifically, the CCRA would amendthe Act for the following reasons: (1) toprovide clarification of the types of litigationactivities that are exempt from the Act'sdefimition of "communication" and whichwould not require inclusion of the Act's variousaffirmative disclosures; (2) to settle the disputeover whether the validation of debt's 30-dayperiod operates as an absolute grace periodduring which time all collection attempts mustcease, or whether it operates merely as adispute period during which time the consumermay dispute or request verification of the debt;(3) to require that the damage cap on liabilityfor a class action include not only the currentaction but any series of class actions arisingfrom the same violations by the same debtcollector; (4) to modify and limit the award ofattorney fees under the Act; and (5) to invokeFederal Rule 68 to disallow the accrual ofattorney's fees after the date a settlement offeris extended and rejected if the final award isless than the offer.

This article examines the proposedamendment and analyzes its potential effect on

several problems encountered in interpretingthe FDCPA. First, the article analyzes how theCCRA handles the problem of collectiondemands which: (1) are made within the 30-day "debt validation" period; and (2) contradictdebt verification disclosures. Second, the articleexplores the CCRA's attempt to clarify whichcommunications involving litigation are exemptfrom the Act. Next, the article discusses howthe CCRA would modify the Act's damage cap,and assesses the resulting impact on classaction litigation. Finally, the article examineshow the CCRA would revise the Act'sprovisions controlling attorney's fee awards.

II. Collection Activity FollowingInitial Notice

A. Validation of Debts-Disclosure Requirements

The FDCPA's "validation of debts"provisions require a debt collector to send aconsumer a set of disclosures in the initialcommunication or within five days of the initialcommunication. These disclosures represent afrequent basis for violations simply because theFDCPA mandates specific content, but provideslittle meaningful guidance, as to the appropriateform the required disclosures should take. TheAct only requires the following information:

(1) the amount of the debt;

(2) the name of the creditor to whom thedebt is owed;

(3) a statement that unless the consumer,within thirty days after receipt of thenotice, disputes the validity of the debt, orany portion thereof, the debt will be

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assumed to be valid by the debt collector;

(4) a statement that if the consumernotifies the debt collector in writing withinthe thirty-day period that the debt, or anyportion thereof, is disputed, the debtcollector will obtain verification of thedebt or a copy of a judgment against theconsumer and a copy of such verificationor judgment will be mailed to theconsumer by the debt collector; and

(5) a statement that, upon the consumer'swritten request within the thirty-dayperiod, the debt collector will provide theconsumer with the name and address ofthe original creditor, if different from thecurrent creditor.9

Debt collectors commonly refer to thesedisclosures as "civil Miranda warnings." 10Courts evaluate the efficacy of particularnotices only after the fact and on a case-by-casebasis using the "least-sophisticated consumer"'

standard. Under this standard, a collectionnotice which can plausibly be read to have twoor more different meanings, at least one ofwhich is misleading, violates the Act. 2 The"least sophisticated consumer" standardfocuses on whether the validation notice wasovershadowed or contradicted by otherlanguage in the communication, and thestandard has figured prominently in many courtdecisions. 3 A frequent interpretation problemcrops up in litigation concerning the Act: doesthe Act give the consumer a 30-day "graceperiod" during which collection attempts mustcease, or does it simply give the consumer 30days to dispute or request verification of adebt? Debt collectors risk violating the Actwhen they demand or take any action withinthe 30-day validation period ifthe demand or

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action contradicts the validation notice. Thisinterpretation implies that, within the 30-dayperiod, debt collectors who make anycommunications demanding payment willviolate the Act. The case of Russell v. EquifaxA.R.S.14 illustrates how one court resolved thisissue.

B. Demands Which Contradict theValidation Disclosures Within the 30-day Period - Russell v. EquifaxA.R.S.

In Russell, the debt collector sent twonotices to the debtor. The first notice was atwo-sided letter. The front side was captioned"IMMEDIATE COLLECTION NOTICE," andclosed with the warning "IT IS OURPRACTICE TO POST UNPAIDCOLLECTIONS... TO INDIVIDUALCREDIT RECORDS. 15 The reverse sidecontained the validation notice. The secondnotice was captioned "CONTACT THISOFFICE AT ONCE" and closed with,"PAYMENT IN FULL WITHIN 5 DAYS ISNOW DEMANDED." 6 Given thesecontradictory statements and implicit threats,the court found that the 1692g notice wasineffective because the language urgingimmediate action contradicted andovershadowed the 30-day debt verificationprovisions. 7 Furthermore, the court noted that"[b]y demanding payment within five days [inthe second notice], the debt collector gave thedebtor only 25 days from the date of the firstnotice to decide whether to challenge theclaim. This period of time is less than the 30days required to be given a consumer under theAct." 11 The court's holding implies that the30-day period is an absolute grace period forthe consumer and that any notice sent after the

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validation notice contradicting the 30-dayperiod violates the Act.

C. Proposed CCRA AmendmentsAddressing the 30-Day Period Issue

Courts encountering this issue haveexhibited little consistency in resolving it. 19

The CCRA amendment would address thisproblem by adding the following subsection tothe Act's validation of debts section:

(d) CONTINUATION DURINGPERIOD-Collection activities andcommunications may continueduring the 30-day period describedin subsection (a) unless theconsumer requests the cessation ofsuch activities.20

This section would resolve the 30-day issueby allowing collection attempts to proceedduring the 30-day validation period unless theconsumer requests that the activities cease. TheCCRA amendment does not specify whetherthe consumer's request must be in writing andtherefore will undoubtedly invite morelitigation on this point. In addition, while theCCRA amendment would resolve the disputeover the 30-day issue, it does little to addressthe substance of many consumers' complaints(e.g., that dunning letters and othercommunications usually attempt to pressurethe consumer into paying the debt within the30-day period).

The CCRA amendment, theoretically, wouldhave relieved the debt collector in Russell fromliability resulting from the conflicting demandsabout time (though not the threat to "postunpaid collections"). The CCRA amendment,however, does nothing to address the type of

coercive language used in most dunningletters. Since the CCRA amendment wouldrequire nothing in regard to the appropriateform for a validation notice, but would onlyrelieve the debt collector from liability fromconflicting statements about time, abuses ofthis type would likely continue and wouldprobably increase.

D. Recommendation: Combine theCCRA Proposed Amendment With a"Clear and Conspicuous" StandardGoverning the Validation Notice

Many debt collection communications"bury" the validation notice in obscure orunreadable portions of the communication.The Federal Trade Commission ("FTC"), theregulatory agency primarily responsible forenforcing the Act,2 has taken an active role infighting this practice by repeatedly urgingCongress to enact an appropriate standardgoverning the appearance of the validationnotice.22 The agency recently described how"[s]ome debt collectors print the notice...in a type size considerably smaller than thelanguage in the dunning letter, or obscure thenotice by printing it on a non-contrastingbackground in a non-contrasting color. 2Inorder to eliminate this abusive tactic, the FTCadvised Congress to explicitly require a "clearand conspicuous" format for the notice.24

If enacted, the CCRA amendment should becoupled with a provision that addresses thisunfair and misleading practice. Since anoverwhelming number of cases allegingviolations under the Act will include a 1692gallegation, perhaps the best course would be tosimply mandate a uniform "federal box" 21 forthe validation of debts information in line withthe "clear and conspicuous" standard. Such a

Loyola University Chicago School ofLaw • 1751998

mandate would arguably do more to decreasethe cost of credit than an amendment allowingdebt collectors free reign to continue collectingdebts during the 30-day period while providinglittle guidance regarding the required efficacyof the notice.

Il. Exemption for Communications

Involving Legal Proceedings

Under the FDCPA, another point ofcontention involves communications the debtcollector must include in the various affirmativedisclosures. Until the 1996 amendment to theFDCPA, it was unclear when, in what type, andhow often the warning was required incommunications with the consumer.26 Underthe Act, the FTC is required to make yearlyreports and recommendations to Congress.FDCPA, § 16921.37 For example, it is unclearwhether the Act requires debt collectors toinclude the Miranda warning in variouscommunications with consumers. Similarconfusion surrounds the extent to whichattorneys must include Miranda warnings informal pleadings filed to collect debts.Resolution of this issue has become crucial toattorneys in the debt collection field since filinglawsuits to collect debts is, at leasttheoretically, a "communication" with theconsumer requiring inclusion of the Mirandawarning in any pleadings or motions.27

A. Heintz v. Jenkins Resolved (Fora Short Time) the Circuit Court Split

The question of whether and what type oflegal activities were covered under the Actcreated a split in the circuit courts. The UnitedStates Supreme Court recently addressed theissue in Heintz v. Jenkins28 by holding that the

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Act does apply to legal activity. In Heintz, theSupreme Court interpreted section 1692e( 11)of the Act, which at that time stated that "thefailure to disclose clearly in all communicationsmade to collect a debt or to obtain informationabout a consumer, that the debt collector isattempting to collect a debt and that anyinformation obtained will be used for thatpurpose[,]"2 9 constitutes a violation of thatsection. Heintz affirmed the circuit courts,which had held that this language applies tolitigation activity as long as the other elementsof the "debt collector" definition were met.30 Inreaching this conclusion, the Court rejected theholdings of other cases, which had held that aliteral or technical reading of the Act to includelegal activities did not comport withCongressional intent." Heintz also rejected theFTC's position on the issue.32 The FTC"Commentary" concluded that the Act coveredattorneys engaged in debt collection activities.Arguably, Heintz would expand the Act's reachto attorneys who simply filed a complaint,noticed parties for a deposition, or followedfederal or state procedural requirements. Thismomentous holding in Heintz set the stage forthe 1996 amendment to § 1692e(11); theamendment specifically exempted the Mirandawarning requirement from litigation activities.

B. The 1996 Amendment OverrodeHeintz

Congress amended the FDCPA in 1996.Partially in response to the Heintz decision, theamended section 1692e( 11) now reads asfollows:

The failure to disclose in the initial writtencommunication with the consumer and, inaddition, if the initial communication with

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the consumer is oral, in that initial oralcommunication, that the debt collector isattempting to collect a debt and that anyinformation obtained will be used for thatpurpose, and the failure to disclose insubsequent communications that thecommunication is from a debt collector,[constitutes an FDCPA violation] exceptthat this paragraph shall not apply to aformal pleading made in connection with alegal action.33

The amended section now requires fulldisclosure only in the initial (oral or written)communication, and a modified disclosurestating that the communication is from a debtcollector in subsequent communications.Furthermore, the amendment clearly exempted"formal pleadings" from the Mirandarequirement. The new section 1692e( 11)induced a sigh of relief from attorneys involvedin debt collection litigation because suchattorneys who satisfy the Act's definition of"debt collector"34 are no longer subject toliability for failure to include the Mirandanotice in formal pleadings.

C. Interpretive Problems Remain

Even after the 1996 amendment, however,interpretive problems remained with theFDCPA, which the proposed CCRAamendment would remedy. First, the 1996amendment exempted only the Mirandarequirement from "formal pleadings." TheFederal Rules of Civil Procedure define"pleadings" as the complaint, answer, replies tocounterclaims, answers to cross-claims, thirdparty complaints, and third party answers.35

How the courts will interpret the words "formalpleadings" and whether they will do souniformly remains to be seen.36 In addition,

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attorneys who fall within the Act's definition of"debt collectors" must still grapple with the factthat the 1996 amendment did not address otherobligations imposed by the Act. For instance, itis still unclear whether the 1996 amendmentwould relieve attorneys from having to includethe affirmative disclosures mandated undersection 1692g - the Act's validation of debtssection - in formal pleadings or in anycommunication related to litigation activities.

D. Proposed CCRA Amendments

The proposed CCRA would amend section1692a(2) to read as follows:

(2) The Term "communication" meansthe conveying of information regarding adebt directly or indirectly to any personthrough any medium. Such term does notinclude actions taken pursuant to theFederal Rules of Civil Procedure; in thecase of a proceeding in a State court, therules of civil procedure available underthe laws of such State; or a nonjudicialforeclosure.37

The CCRA amendment, therefore, wouldclarify and expand upon the 1996 amendment'sdefinition of the term "formal pleadings." Thisclarification would serve to reduce futurelitigation by eliminating the need to establishthe meaning of the term "formal pleadings."The broader CCRA amendment also wouldclarify whether other affirmative obligations, inaddition to the validation of debt disclosures,are exempt from the Act's definition oflitigation activities. This latter clarificationwould prove especially helpful because thevalidation of debt section generates substantialnumbers of FDCPA violations.

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IV Class Action Lawsuits UnderThe FD CPA

A. The FDCPA's Damage Cap andClass Action Lawsuits - Mace v. VanRu Credit Corporation

Class action lawsuits in consumer litigationare on the rise. This increase is reflected in theFDCPA case law and has created moreinterpretation problems for the courts. Forinstance, questions have arisen about whetherthe FDCPA's class action damage cap implicitlyrequires a nationwide class action suit, asopposed to allowing a series of class actionsuits. In Mace v. Van Ru Credit Corporation,38

the Seventh Circuit reviewed the lower court'sdenial of Rule 23(b)(3) plaintiffs' proposedclass certification; the denial was based on theargument that allowing a series of class actionsagainst the same debt collector for the sameviolations would negate the purpose of the capby repeatedly exposing the same debt collectorto liability in different jurisdictions. InMace,Plaintiff alleged various violations under theAct based on letters that Defendant sent to herand other Wisconsin residents. Plaintiffrequested class certification limited toWisconsin. 39 The lower court reasoned thatthe damage cap implicitly precluded limitationof the action to one state.4° In light of thispreclusion, the court denied certificationbecause the court calculated that a large,nationwide class would receive only a deminimis recovery resulting in an inferior formof adjudication if the class were certified.

On appeal, Defendant compared the Truth inLending Act's ("TILA") damage provisions tothose of the FDCPA.4' Since the language inthe TILA requires a nationwide class,Defendant argued that the FDCPA dictated the

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same result. The Seventh Circuit noted onecritical difference between the FDCPA and theTILA damage provisions: the TILA languageencompassing "any class action or series ofclass actions.42 This language would require anationwide class, but since the FDCPA doesnot include it, the court relied instead on theFDCPA's plain language to support its positionthat the FDCPA did not require a nationwideclass. Given the FDCPA's lack of the "any classaction or series of class actions" limitation, thecourt's conclusion in Mace is unobjectionable.However, the proposed CCRA amendment, ifenacted, would dictate an entirely differentresult.

B. Proposed CCRA AmendmentWould Implicitly Require NationwideClasses

The CCRA amendment would modifysection 1692k(2)(B) as follows to include the"series of class actions" language requiring anationwide class:

(B) In the case of a class action, or anyseries of class actions arising out of thesame violations by the same debtcollector, (I) such amount for each namedplaintiff as could be recovered undersubparagraph (A), and (ii) such amount asthe court may allow for all other classmembers of such class action or series ofclass actions, without regard to aminimum individual recovery, not toexceed the lesser of $500,000 or 1 percentum of the net worth of the debtcollector;

43

Whether the CCRA amendment wouldachieve its goal of decreasing the cost of credit

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by requiring nationwide class actions under theFDCPA is far from clear. The issue clearlydeserves further study. The Mace decisionhighlights some of the problems with such anamendment, including a lack of authorityrequiring that a class action embrace thebroadest possible class, the different purposesunderlying the TILA and the FDCPA, and thefact that the Federal Rules of Civil Procedureencourage specific and limited classes. Moreimportantly, the Mace court argued that thepossibility of a de minimis recovery should notautomatically bar a class action since:

[t]he policy at the very core of the classaction mechanism is to overcome theproblem that small recoveries do notprovide the incentive for any individual tobring a solo action prosecuting his or herrights. A class action solves this problemby aggregating the relatively paltrypotential recoveries into something worthsomeone ' (usually an attorney ') labor.44

Thus, the proposed CCRA amendmentrepresents a misguided attempt to impose anationwide class requirement. This resultwould undermine Congress' purpose inenacting the FDCPA, and would contradict theFederal Rules of Civil Procedure, whichencourage specific and limited classes.Accordingly, the proposed CCRA amendmentprobably constitutes a step in the wrongdirection on the class action issue.

V. Attorney's Fees Allowable UnderThe FD CPA

The cost of litigating very small claims raisesa serious problem under the FDCPA. Given theminimal amounts usually involved in consumer

debts, providing incentives for attorneys to takean FDCPA case is important and represents adriving force behind the Act's allowance forstatutory damages up to $1,000,4" costs, andattorney's fees related to successful suits. 46

A. Lee v. Gibson Highlights the"Attorney's Fee" Problem

A recent Sixth Circuit case, Lee v. Thompson& Thompson,47 provides an example of theFDCPA's attorney's fee problem. In Lee,Plaintiff alleged a technical violation of the Actand sought only statutory damages. Plaintiff'sattorney submitted a request for a $12,759attorney's fee award. When the court renderedjudgment for Plaintiff in the amount of$1,106.85, including attorney's fees, Plaintiffappealed. The court noted that Plaintiff wasonly "the nominal appellant, [and the attorneywas] obviously the real party in interest.4" Infact, the attorney admitted that it was theattorney's fee award that provided themotivation for the appeal.4 9 The court affirmedthe lower award. The Lee case illustrates aserious problem under the Act: that it costs agreat deal to litigate what are, in some cases,very small claims. Limiting the attorney's feeaward to the equivalent of statutory and actualdamages, however, is not the best way to dealwith this problem and arguably contradicts thepurpose of the Act.

B. Proposed CCRA Amendment

The CCRA amendment also would changethe damages structure of the FDCPA bymodifying the provisions controlling the awardof attorney's fees. Currently, section1692k(a)(3) reads as follows:

Loyola University Chicago School ofLaw • 179I"9

(3) in the case of any successful action toenforce the foregoing liability, the costs ofthe action, together with a reasonableattorney's fee as determined by the court.On a finding by the court that an actionunder this section was brought in bad faithand for the purpose of harassment, thecourt may award to the defendantattorney's fees reasonable in relation tothe work expended and costs. 0

The CCRA amendment would modify thesection as follows:

(3) subject to subsection 09,51 in the caseof a successful action to enforce aliability under paragraph (1) or (2), thecosts of the action, including reasonableattorney fees, as determined by thecourt, in an amount not to exceed theamount awarded in such action under theapplicable paragraph.52

The CCRA amendment, therefore, wouldlimit the award of attorney's fees to theequivalent of the amount of statutory andactual damages awarded. Since statutorydamages are limited to $1,000 per action5 3 andthe amount of actual damages is likely to besmall, this portion of the CCRA amendmentwould eviscerate the Act's provisions designedto make FDCPA actions "worth someone'slabor."

The final change to the damage provisionsunder the CCRA amendment would be to add anew subsection (f) to section 1692k. Thissubsection would impose Rule 68 on the Act'sprovisions, and would read as follows:

(f) RULES APPLICABLE TOACTIONS UNDER THIS TITLE-Notwithstanding any other provision

of law, in any action arising underthis title, for purposes of Rule 68 ofthe Federal Rules of Civil Procedure,the following provisions shall apply:

(1) PLAINTIFF'S ATTORNEY'SFEES - Costs shall includereasonable fees for the plaintiff'sattorney.

(2) DISALLOWANCE OFCERTAIN FEES ACCRUINGAFTER REFUSAL OFSETTLEMENT OFFER- Inaccordance with Rule 68 of theFederal Rules of Civil procedure,if-

(A) an offer is made by the debtcollector to a consumer bringing anaction (including any class action orseries of class actions referred to insubsection (a)(2)(3)) under this title,and the offer is not accepted; and

(B) the amount of the final judgmentawarded to the consumer (or, in thecase of a class action or series ofclass actions, the total amountawarded to all class members in suchclass action or series of class actions)is less than or equal to the amount ofthe offer referred to in subparagraph(A),

[then] the consumer (or the classwith regard to a class action or seriesof class actions) may not be awardedor otherwise recover costs forattorney's fees incurred after the datesuch offer is rejected.-

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This proposal may operate to limit thenumber of frivolous "annoyance" suits broughtby consumer debtors. However, the amendmentwould most likely induce debtors' attorneysinto prematurely accepting "low-ball"settlement offers. Overall, the amendment doeslittle to achieve an equal playing field betweenattorneys on opposing sides of the FDCPAlitigation field. The CCRA's proposedamendments to section 1692k(b), discussedbelow, may provide a better solution.

VI. Factors Considered inDetermining Liability Under theFDCPA

In determining damages awarded under theFDCPA, the Act requires judges to considerspecific factors. Section 1692k(b) currentlyidentifies the following factors: "[A]mongother relevant factors - (1) in any individualaction under subsection (a)(2)(A) of thissection, the frequency and persistence ofnoncompliance by the debt collector, the natureof such noncompliance, and the extent to whichsuch noncompliance was intentional;"55

Unfortunately, some courts have stretched themeaning of this section to reduce damagesawarded to plaintiffs in successful FDCPAactions. The recent decision in Vandzura v. C &S Adjusters, Inc.56 provides an excellentillustration of this problem.

A. Reducing Damage Awards forActions that Include UnsuccessfulClaims - Vandzura v. C & SAdjusters, Inc.

In Vandzura, the attorney's fee and costaward exceeded $18,000, while the court

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awarded the plaintiff only $500 in actual andstatutory damages. On appeal, the courtreduced this award by 45% "to account for thetime spent litigating unsuccessful claims and[the] plaintiff's limited success." 17 The courtreached this decision based on a strainedreading of section 1692k(b)'s language. Thecourt reasoned that this provision justified areduction in the attorney's fee award when theplaintiff litigated unsuccessful FDCPA claimsalong with claims ultimately provingsuccessful.5

B. Proposed CCRA Amendment

The CCRA amendment would modify part ofsection 1692k(b) by substituting a newsubsection to read as follows:

(b) Factors Considered by the CourtIn determining the amount of any awardunder subsection (a) of this section, thecourt shall consider, among other relevantfactors

(1) In any action under subsection(a)(2)(A), the frequency and persistenceof noncompliance by the debt collector,the nature of such noncompliance, theextent to which the such noncompliancewas intentional, and the amount of actualdamages awarded;59

The initial change of "liability in any action"to "any award" appears to be cosmetic.Adding "the amount of actual damagesawarded" to the factors would appear to allowa court to remit an excessive award to bring theaward in line with the amount of damages theconsumer actually suffered. The CCRAamendment would provide a more reliablevehicle for the court to use in order remit

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inappropriately large attorney's fees awards.This result certainly would be more appropriatethan reducing the total attorney's fees award tothe sum of statutory and actual damages, as theCCRA amendment to section 1692k(a) wouldrequire, and this result would not punish theconsumer for any high expectations forattorney's fees that might be harbored by his orher attorney.60

V. Conclusion

The Cost Credit Reduction Act of 1997provides several answers to many of theproblems of interpretation under the FDCPA.The CCRA amendment's clarification of whattype of communications require inclusion of theAct's affirmative disclosures, especially thosecommunications related to litigation activities,would help reduce the need for litigation onthose issues. To have a real effect on the costof credit (by reducing the amount of litigation),the CCRA amendment also should includesome guidance, such as a "federal box"requirement in relation to the Act's validationnotice as this section of the Act is a constantsource of litigation.

However, not all of the CCRA amendment'smodifications seem compatible with thepurposes of the FDCPA. The CCRArequirement that class action lawsuits require anationwide class deserves further study.Moreover, by severely limiting the award ofattorney's fees recoverable under the Act, theCCRA arguably would eliminate an importantincentive for consumers to pursue privateenforcement of their FDCPA rights. Litigationin cases where the alleged violations are merely"technical" and the consumer has suffered noactual damage, however, are increasing, fueled,in part, by the Act's requirement of attorney's

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fees awards when the action is successful. Thisfact raises a serious issue for consumers and forthose involved in the collection industry,especially ethical debt collectors trying tocomply with this complex piece of legislation.The CCRA amendment's modification of thefactors considered by courts when awardingattorneys fees is a better way to deal with theattorney's fee problem. By considering theamount of actual damages suffered, theamendment provides courts with some leewayto remit attorney's fee awards withoutautomatically limiting those awards. Finally, theaddition of a Rule 68 requirement is probably agood idea, since it would encourage settlementof FDCPA claims. The CCRA amendmentwould clarify much of the FDCPA, thusincreasing its efficacy in protecting consumersagainst debt collection abuses. Overall,however, the proposed CCRA amendmentwould probably do more to undermine thepurposes of the FDCPA than it would toeffectuate those goals.

Endnotes

. FAm DEBT COLLECTION PRACTICES ACT, 15U.S.C. §§ 1692-1692o (1996) [hereinafter "FDCPA"].

2. See Russell v. Equifax A.R.S., 74 F.3d 30, 33

(2d Cir. 1996).

3. See id.

4. Heintz v. Jenkins, 514 U.S. 291, 292 (1995).

5. See July 9, Act of 1986, Pub. L. No. 99-361,100 Stat. 768 (1986).

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6. See Economic Growth and Regulatory Paper-work Reduction Act of 1996, Pub. L. No. 104-208, 110Stat. 3009 (1996).

7. See Heintz, 514 U.S. at 291.

8. Credit Cost Reduction Act of 1997, H.R. 1059,

105th Cong., 1st Sess. (1997) [hereinafter "CCRA"].

9 15 U.S.C.A. §§ 1692g(a)(1)-(5) (West 1995).

10. See Daniel A. Edelman, The Fair Debt

Collection Practices Act Recent Developments, 8 Loy.CONSUMER L. REP. 303, 312 (1996).

IL See Jeter v. Credit Bureau, Inc., 754 F.2d 907(11th Cir. 1985).

12. See Edelman, supra note 10 at 312 (citing

Russell v. Equifax A.R.S., 74 F.3d 30 (2d Cir. 1996).

13. See also FDCPA § 1692g(b), which requires

cessation of debt collection activities upon writtenrequest by the consumer until the debt can be verified,but does not specify whether or not collection activitiesmust automatically cease during the 30-day periodwithout such a request.

14. 74 F.3d 30 (2d Cir. 1996).

'5. Id. at 32.

16. Id. at 33.

17. See id. at 35-36. The court also found the first

notice which contained the validation notice to beineffective because it was overshadowed by otherlanguage in the letter. See id. at 34. This finding is notrelevant, though, for purposes of this discussionregarding the 30-day period.

18. Russell, 74 F.3d at 36.

19. For example, different courts reviewing

basically the same form of a dunning letter may reachdifferent results for no apparent reason. See Bums v.Accelerated Bureau of Collections of VA, Inc., 828 F.Supp. 475, 477 (E.D. Mich. 1993) (holding that adunning letter which contained the appropriate § 1692gnotice, in addition to a demand for payment "today,"

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did not violate the Act because it gave no specific timelimit); U.S. v. National Fin. Servs., Inc., 820 F. Supp.228, 237 (D. Md. 1993) (holding that a dunning lettercontaining the required § 1692g notice in addition tothe repeated use of the word "deadline" did overshadowthe § 1692g notice).

20. H.R. 1059. [Throughout this article, statutorylanguage that would be added or modified by the CCRAappears in italics.]

21. See FDCPA § 16921.

22. Federal Trade Commission Annual Report toCongress Pursuant to the Fair Debt Collection Prac-tices Act (1997), reprinted in 5 Consumer Cred. Guide(CCH) 62,274 at 62,280 (Mar. 17, 1997).

23. Id.

24. See id.

25. Many, if not most, lenders print information

containing the standard required disclosures (such asinterest rate, unit price, total payments, late fee provi-sions, etc.) in a box at the top of the loan instrument.By placing this information at the top of the instrument,and enclosing it with a box, the lenders ensure compli-ance with the "clear and conspicuous" standard.

26. The circuit courts were split on the question of

whether the warning was required to appear in allcommunications with the debtor, or simply the initialcommunication. The United States Courts of Appealsfor the Second, Third, Fourth, Sixth, and SeventhCircuits had held that the warning must be included inall communications with the debtor. See Pipiles v.Credit Bureau, 886 F.2d 22 (2d Cir. 1989); Dutton v.Wolpoff and Abramson, 5 F.3d 649 (3rd Cir. 1993);Carroll v. Wolpoff & Abramson, 961 F.2d 459 (4th Cir.1992), cert. denied, 506 U.S. 905 (1992); Frey v.Garguish, 970 F.2d 1516, 1520 (6th Cir. 1992);Tolentino v. Friedman, 46 F.3d 645 (7th Cir. 1995),cert. denied, 515 U.S. 1160 (1995).

Conversely, the Ninth Circuit and the FTC hadargued that the more reasonable interpretation would beto require the warning only in the initial communica-tion since to do otherwise would result in harassment ofthe debtor, and also would impose an unnecessaryburden on the ethical debt collector. See Pressley v.

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Capital Credit & Collection Serv., Inc., 760 F.2d 922(9th Cir. 1985). The issue of whether the warning hadto be included in oral communications with the debtoralso was unclear. See, e.g., Austin v. Great LakesCollection Bureau, Inc., 834 F. Supp. 557 (D. Conn.1993) (raising the issue of applicability of § 1692e(1)notice in oral communications, but declining to rule onthis issue because the court found violations under othersections of the Act sufficient to establish liability);Dutton, 5 F.3d at 656 n.7 ("Of course, we do not decidewhether literal application of the phrase 'all communi-cations' to every possible communication, including alloral communications, would be at cross-purposes withCongress's intent.").

27. In 1986, the FDCPA was amended, bringing

the actions of attorneys who otherwise met the Act'sdefinition of "debt collector" under the rubric of theAct; prior to 1986, attorneys had been specificallyexcluded from the Act's coverage. See Pub. L. No. 99-361.

28. 514 U.S. 291 (1995).

29. FDCPA § 1692e(11).

30. See Paulemon v. Tobin, 30 F. 3d 307 (2d Cir.

1994) (holding that a letter sent to debtor did notconstitute litigation activity even if an exemption forlitigation existed, and in dicta, expressing skepticismthat such an exemption did exist); Fox v. CiticorpCredit Serv., Inc., 15 F.3d 1507 (9th Cir. 1994) (hold-ing that the plain language of the Act did not supportany exemption for litigious activity); Tolentino v.Friedman, 833 F. Supp. 697 (N.D. Ill. 1993), aff'd, 46F.3d 645 (7th Cir. 1995) (rejecting attorney's argumentthat once suit is filed, actions became legal in natureand compliance under Act was not required); Scott v.Jones, 964 F.2d 314 (4th Cir. 1992) (holding that filingwarrants in cases constituted debt collection); Strange v.Wexler, 796 F. Supp. 1117 (N.D. 11. 1992) (rejectingassertion that lawsuit improperly requesting attorney'sfees was a legitimate use ofjudicial process to collect adebt).

31 See, e.g., Green v. Hocking, 792 F. Supp. 1064(E.D. Mich. 1992), aff'd, 9 F.3d 18 (6th Cir. 1993)(rejecting a literal reading of § 1692a(6)definition of "debt collector" to include legal activitiesas contrary to Congressional intent); Firemen's Ins. Co.

184 e Loyola ConsumerLawReview

v. Keating, 753 F. Supp. 1137 (S.D.N.Y 1990) (holdingthat an attorney pursuing legal action only was not adebt collector); National Union Fire Ins. Co. v. Hartel,741 F. Supp. 1139 (S.D.N.Y 1990) (finding law firmpursuing legal action only did not meet the definition of"debt collector").

32 See Federal Trade Commission: Statements of

General Policy or Interpretation, Staff Commentary onthe Fair Debt Collection Practices Act, 53 Fed. Reg.50,097, 50,102 (1988) ("The term [debt collector] doesnot include... [a]n attorney whose practice is limited tolegal activities (e.g., the filing and prosecution oflawsuits to reduce debts to judgment.)" ). The FTC isthe regulatory agency charged with enforcing the Act'sprovisions. See 15 U.S.C.A. §16921(a). See also, 132Cong. Rec. H 10031 (Oct. 14, 1986) (statement of Rep.Annunzio) ("Only collection activities, not legalactivities, are covered by the Act .... The act applies toattorneys when they are collecting debts, not when theyare performing tasks of a legal nature."). Cf Staub v.Harris, 626 F.2d 275 (3d Cir. 1980) (FTC's advisoryopinions not entitled to deference in FDCPA cases).

33 Pub. L. No. 104-208, 110 Stat. 3009 (1996).

34 Debt collector is defined as "[a]ny person whouses any instrumentality of interstate commerce or themails in any business the principal purpose of which isthe collection of any debts, or who regularly collects orattempts to collect, directly or indirectly, debts owed ordue or asserted to be owed or due another." FDCPA 15U.S.C. § 1692a(6) (1997). See also Laurie A. Lucas &Alvin C. Harrell, Understanding the FDCPA: AComprehensive Analysis of Recent Case Law, 49CoNsumER Fni. L. Q. REP. 301, 302 n.12 (1995) (notingdiffering interpretations and cites cases dealing with thedefinition of "debt collector").

35 See Fed. R. Civ. P. 7(a).

36 See, e.g., Cavallaro v. Law Office of Shapiro &

Kreisman, 933 F. Supp. 1148, 1156-57 (E.D.N.Y 1996)(questioning whether the section 1692e(1 1) warningwas required in a personal notice of sale in a Article 9foreclosure). The CCRA amendment would haveresolved this issue since it specifically exempts "nonju-dicial foreclosures" from the Act's requirements.

37. H.R. 1059.

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The Credit Cost Reduction Act of 1997 and The Federal Fair Debt Collection Practices Act:Problems of Interpretation

38. 109 F.3d 338 (7th Cir. 1997).

39. This same defendant had already faced a class

action lawsuit for similar violations in Connecticut.See Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996).

40. The Act allows for civil liability in a class

action, but limits damages to "the lessor of $500,000 or1 per centum of the net worth of the debt collector."FDCPA § 1692k(a)(B)(ii).

41. In fact, it was noted that when enacted the

"TILA" and the FDCPA's damage cap provisions wereidentical and neither limited class actions to a nation-wide class. The "TILA" later was amended to includelanguage which did place a such a limit under the"TILA," but not the FDCPA. See Mace, 109 F.3d at342-43.

42. Truth in Lending Act 15 U.S.C.

§ 1640(a)(2)(B) (1997).

43. CCRA 1997.

44 Mace, 109 F.3d at 344 (Emphasis added.)

45. See FDCPA, § 1692k(2)(A).

46. See id. at § 1692k(3).

47. 109 F.3d 302 (6th Cir. 1997).

48. Id. at 304.

49. See id. at 305.

50. 15 U.S.C.A. § 1692(a)(2)(A).

51. Subsection (f) is a new subsection under

§ 1692k and is discussed infra.

52. 15 U.S.C.A. § 1692k(a)(3).

53. See, e.g., Donahue v. NFS, Inc., 781 F. Supp.188 (W.D.N.Y. 1991) (holding that the maximumrecovery under § 1692k is $1000 per lawsuit, not $1000per violation); Harper v. Better Business Servs., 768 F.Supp. 817 (N.D. Ga. 1991), aff'd, 961 F.2d 1561 (lthCir. 1992) (holding that the statutory language supports

the conclusion that the statue authorizes a maximum$1000 additional damage award per lawsuit); Beattie v.D.M. Collections, Inc., 764 F. Supp. 925 (D. Del. 1991)(holding that statutory language read together withother provisions of § 1692k supports conclusion thatstatute authorizes a maximum of $1000 additionaldamage award per lawsuit). Cf Wright v. Fin. Serv., 22F. 3d 647 (6th Cir. 1994) (holding that Act allowed the$1000 statutory damages award to be given per viola-tion and not per lawsuit).

54 CCRA 1997.

55 FDCPA § 1692k(3).

56. No. P-55, Sub. 1024, 1997 WL 56917

(E.D.Penn. Jan. 29, 1997).

57 Id. at *1.

58. Id. at *2 (citing FDCPA, § 1692k(3)).

59 CCRA 1997.

60. The Vandzura court also noted that theattorney had filed 54 cases with the court since January1, 1993, and almost all had alleged a violation underthe FDCPA. See Vandzura, 1997 WL 56917 at 1, n.2.Perhaps the court was intimating that this attorneymight be exploiting the FDCPA attorney's fees provi-sion by filing meritless cases.

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