Although some law firms are slow to embrace new technologies, debt collection firms appear to be the exception to this general rule. Most of these firms use sophisticated computer software to retrieve information from their creditor-clients, and use the program to automatically populates legal forms. This process saves a significant amount of time for attorneys in a high-volume field, allowing them to file hundreds of basic pleadings in a single day. However, this process has come under increasing scrutiny from both debtors’ rights firms and the government.
In a recently filed New Jersey case, a debtor is bringing a proposed class action against a firm that attempted to collect a debt after the statute of limitations had passed. The complaint alleges that the firm violated the Federal Debt Collection Practices Act by failing to “conduct an inquiry, reasonable under the circumstances, sufficient to form a good faith belief” that the claims were supported by fact and law. In essence, the complaint accuses the debt collection firm of failing to adequately review pleadings that were likely prepared by a computer program or non-attorney.
This case virtually mirrors Bock v. Pressler & Pressler, which ended in a verdict against the debt collection firm and a settlement with the Consumer Financial Protection Bureau. Discovery in that case revealed that after the complaints were generated, the signing attorney would review each one for mere seconds before approving. Although the court acknowledged that this practice area requires a different level of speed than most, it also found that a “reasonable attorney review” as contemplated by the FDCPA is certainly more than the four seconds taken in the plaintiff’s case.
The opinion in Pressler is likely to inform the current case while also serving as a key basis for it having been filed in the first place. Notably, the court held that signing a pleading without reasonable attorney review is itself a misrepresentation under the FDCPA, meaning that even a valid underlying debt can serve as a basis for such a claim. Furthermore, while the court held that merely comparing a data sheet to the complaint for four seconds is certainly insufficient, it also stated that a case-by-case elaboration of the general rule is necessary. In other words, the court ruled that the length of time an attorney must review a complaint to satisfy the requirements of the FDCPA is open to interpretation, and few cases have been reported which provide any interpretation.
This has left debt collection firms in a precarious situation, as evidenced by the recently filed class action. In Pressler, the court accepted that blazing efficiency is what makes these firms successful. The court nevertheless held that while it could not specify what minimal standard of review is required to comply with the FDCPA, the firm in Pressler clearly did not meet it. In conjunction with holding that even valid underlying debt collections can be challenged under the FDCPA, the court has opened up the possibility of subsequent “test cases” from firms looking to test its boundaries. Unfortunately for debt collection firms, this means expending legal fees defending cases until sufficient case law exists to guide its FDCPA compliance efforts.
This situation provides another example of attorneys facing uncertainty. The law in this regard is unclear and, as a result, attorneys must balance a potential violation with managing their business and meeting client needs. A potential takeaway is to remain aware of legal developments and new law to ensure that you are on the right side of the line.