By The Book - August 2013: Collection of Student Loans: Update on Interpretations of Fair Debt Collection Practices Act Violation

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The Fair Debt Collection Practices Act (“FDCPA”) 15 U.S.C. §§ 1692-1692p (2012), passed in 1977 and effective in 1978, has undergone a series of amendments over the years, but maintains one of its primary purposes, which is to prevent “debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e) (2012).

The FDCPA, when applicable, prohibits harassing and abusive collection tactics, including, but not limited to:

 

  • Telephone contact before 8:00 a.m. and after 9:00 p.m. local time.
  • Failure to stop communications with consumers after receiving written notice from the consumer that he/she desires no further communications, or refuses to pay the alleged debt, with exceptions, including advising that collection efforts are being terminated or that the collector intends to file a lawsuit.
  • Causing a telephone to ring or engaging any person in conversation on the telephone repeatedly or continuously with the intent to annoy, abuse or harass.
  • Communicating with consumers at their place of employment after being informed that this is unacceptable or prohibited by the employer.
  • Contacting a consumer known to be represented by an attorney.
  • Communicating with the consumer after request for validation has been made and before the requested validation has been mailed.
  • Misrepresentation or deceit, including misrepresenting that the collector is an attorney or law enforcement officer.
  • Publishing the consumer’s name or address on a bad debt list.
  • Seeking amounts not available under the contract or provided for by law.
  • Threatening arrest or legal action that is neither permitted nor actually contemplated.
  • Using abusive or profane language.
  • Revealing or discussing the debt with third parties, other than the consumer’s spouse or attorney.
  • Contact via embarassing media.
  • Making false reports on the consumer’s credit report or threatening to do so.

New York State also has its own debt collection regulations, which may be enforced by the Attorney General or District Attorney.

Student loans are considered “consumer debt” under the FDCPA. Therefore, if the student loan or the collecting entity qualify under the FDCPA, special precautions must be taken to ensure compliance with FDCPA guidelines. Violations of the FDCPA allow the student loan debtor to bring a private cause of action in federal court with potential claims for damages including, actual damages, statutory damages, and attorneys’ fees and costs. It is also important to note that upon a student or former student filing bankruptcy, collection efforts with regard to the student loan must cease or else face penalties from the bankruptcy court.

The United States Court of Appeals for the Second Circuit recently addressed the interplay of the FDCPA and a student loan debtor who had previously filed for bankruptcy. Easterling v. Collecto, Inc., 692 F.3d 229, 232 (2012). The case centered on the following notice, which was sent to the plaintiff:

It was this notice, received by Berlincia Easterling who was in default on her student loans, that sparked a lawsuit alleging violation of the FDCPA. Since whether collection efforts conform with the requirements of the FDCPA are determined from the perspective of the “least sophisticated consumer,” so to protect the most amount of consumers from abusive debt collection practices, Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993), Ms. Easterling argued that this notice was false, deceptive and/or misleading.

Student loans are presumptively non-dischargeable in bankruptcy, 11 U.S.C. § 523(a)(8) (2012); however, that presumption may be overcome if the debtor established, by a preponderance of the evidence, that requiring repayment of the student loan would “impose an undue hardship on the debtor.” Id.; In re Traversa, 444 F. App’x. 472, 474 (2d Cir. 2011); United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367, 1381 n.13 (2010). In this case, Ms. Easterling had previously filed for bankruptcy, but her student loan debt was not discharged. Nonetheless, the Court found that although Ms. Easterling may face “procedural and substantive hurdles” to discharge her student loan debt, she at all times retained the right to seek bankruptcy discharge of her debt, and, therefore, the collection letter stating the debt was “ineligible for bankruptcy discharge” was false on its face and fundamentally misleading. Easterling, 692 F.3d at 235.