State Imposed Election Procedures

Tricky Telephone Calls and The Fair Debt Collection Act
by Martin Lee, Esq.

The United States Ninth Circuit Court of Appeals (the federal appellate court for California and other western states) recently issued a ruling (Clark v. Capital Credit and Collection Services, Inc., filed August 24, 2006) which exemplifies how tricky complying with all of the fair debt collection laws are. As most property managers are aware, there is a California Fair Debt Collection Practices Act (Civil Code §§1788-1788.32) and a Federal Fair Debt Collection Practices Act (15 USC §§1692-1692o). The California Fair Debt Collection Practices Act pretty much follows the requirements of the Federal Fair Debt Collection Practices Act and, despite the questions attorneys have about whether either or both statutory schemes apply to property managers attempting to collect homeowner assessments, most attorneys have always recommended full compliance therewith since, in general, the consequences of failing to comply are quite severe.

As most managers have probably been advised, communication between a property manager seeking to recover assessments and a delinquent homeowner is very difficult to control and much more fraught with risks than almost any other area of debt collection. This is especially true during telephone conversations because emotions can sometimes overwhelm one’s better judgment and cause unintentional violations of the Fair Debt Collection Practices Act. Also, once a violation is alleged to have occurred during a telephone conversation, it is difficult for a property manager to prove that he or she did or did not say something.

The recent case of Clark v. Capital Credit and Collection Services, Inc. highlights these risks. In Clark, the debtor wrote to the collection agency, disputed the alleged debt and requested “proper verification”, and directed the collection agency not to call. The events are later described by the Court, as follows:

“A few months after both Capital and Hasson had received Mr. Clark’s letters, Mrs. Clark called Hasson’s office to request information about the alleged debt. Although the parties disagree as to the exact nature of Mrs. Clark’s request, that she spoke to Hasson’s secretary is undisputed. When Hasson’s secretary called Capital to relay the message, Capital instructed her not to talk with debtors. Later the same day, Brumley returned Mrs. Clark’s telephone call. The parties do not agree on the substance of that call, but the Clarks presented evidence that the interaction so upset Mrs. Clark that she was required to obtain therapy.

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“The Clarks argue that, because of Mr. Clark’s letters ‘preclud[ing] any phone calls to [Mrs. Clark] . . . or to [their] home,’ Brumley’s telephone call of July 30, 2002, constituted a violation of §1692c(c), which provides the following:

“If a consumer notifies a debt collector in writing . . . that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt. . . .”

The Ninth Circuit then went on to construe all of the applicable statutes in the Fair Debt Collection Practices Act (which the Court discussed as being unclear) and then found that, using the “least sophisticated debtor standard”, Clark’s telephone request for information about the debt did constitute a waiver, but only to the person to whom Clark directly spoke. The Court held that this “least sophisticated debtor standard” applied to the Fair Debt Collection Practices Act and would result in the enforcement of “a waiver of the cease communication directive only where the least sophisticated debtor would understand that he or she was waiving his or her rights” under the Fair Debt Collection Practices Act. The Ninth Circuit in Clark then concluded (on this issue) by stating:

“Applying our newly articulated waiver standard to the facts before us, it is obvious that even the least sophisticated debtor would recognize that Mrs. Clark’s request for information constituted consent for Hasson, Capital’s attorney, to return Mrs. Clark’s telephone call in order to provide the specific information she requested. In other words, no reasonable trier of fact could conclude that Mrs. Clark did not waive the cease communications directive with respect to Hasson.

“Whether Mrs. Clark’s actions also constituted a waiver of the cease communications directive as to Capital and Brumley is a more difficult question. In this regard, we decline to create a rule that by waiving the protection . . . as to one debt collector, a debtor waives that protection with regard to any other debt collector with which that debt collector may be collaborating to collect the same debt. The instant case justifies perfectly our decision. It is obvious that Mrs. Clark did not realize that by calling Hasson, she was consenting to a return telephone call from Brumley. Crediting Mrs. Clark’s characterization of her interactions with Brumley, it is perfectly clear that Mrs. Clark’s choice of Hasson over Brumley (or any other employee at Capital) was not fortuitous. That Capital was a better source of information about the Clark account is undisputed; still, Mrs. Clark chose to call Hasson because her mental health suffered following her talks with Brumley.”

Obviously, one comes away from a reading of the Clark decision with the feeling that the ruling could have gone either way. Though this decision let the attorney off the hook, it limited the “waiver” solely to the person to whom the debtor spoke and left everyone else liable. This ruling should serve as a warning to all seeking to collect assessments from delinquent homeowners to be particularly vigilant on the telephone with those homeowners. And remember, a “waiver” by the debtor given to one person at a management company is not a waiver as to anyone else at that company.