CFPB and FTC Team Up on Amicus Brief in FDCPA Case

The Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) filed a joint amicus brief last month in a closely watched case involving alleged debt collection violations in the use of affidavits and process serving in collection lawsuits.

The case, Monique Sykes et al., vs. Mel Harris & Associates, LLC et al., alleges that collection law firm Mel Harris, acting on behalf of debt buyer Leucadia National Corp., employed a process server that allegedly deliberately did not properly serve collection lawsuit defendants with notices they were being sued. As a result, the suit alleges that when the debtors didn’t appear in court, Leucadia and Mel Harris obtained default judgments against them, which allowed them to freeze debtors’ bank accounts and threaten to garnish wages or property to obtain settlements.

According to the case, the defendants then swore in affidavits that process had been properly served and that the affiant had personal knowledge of the relevant facts.

The case is being very closely watched by the ARM legal community as well as consumer advocates. In January 2011, insideARM.com explained the ramifications in an in-depth article and then followed up when the case was granted class action status last year.

Not only does the suit claim violations of the Fair Debt Collection Practices Act (FDCPA), but because of the collusion between the companies alleged in the case, there are potential Racketeer Influenced and Corrupt Organizations Act (RICO) penalties.

The CFPB and FTC in their amicus brief, filed November 13 in the Second Circuit Court of Appeals, directly address a defense offered by the defendants, that the FDCPA does not apply to “communications made either to third parties not affiliated with the debtors that the statute seeks to protect, or in circumstances otherwise having no chance of debtor deception.”

Mel Harris argued that the communications in question, the affidavits, were directed to the court, not to a consumer.

But the federal agencies reject that defense, bluntly titling their argument “There is No Blanket Immunity from FDCPA Liability for Conduct Directed to Third Parties.” The CFPB and FTC sum up their argument:

In short, this Court must apply the text of the FDCPA as Congress has written it, without limiting its plain scope based on defendants’ incorrect assessment of the Act’s purposes. This Court should accordingly reject defendants’ attempt to read into the Act a blanket immunity for conduct that is “directed at” third parties.

The brief concludes that the alleged conduct in the case is actionable under the FDCPA.