Mortgage Modification – Bankruptcy – Creative Financing

LANDMARK COURT DECISION STOPS COLLECTOR CALLS,
AWARDS MONEY TO VIOLATED CONSUMERS

The issue of what message to leave when reaching a consumer’s voice mail continues to hurt the collection industry. Legal decisions out of California and New York related to voice mail messages are examples of such vexation. The Federal Trade Commission, the regulating agency over collectors defines communication as “the conveying of information regarding a debt directly or indirectly to any person through any medium.

The law requires a debt collector to make a specific disclosure in all communications. This is commonly known as the Mini-Miranda and requires agencies to disclose a communication is from a debt collector. In the past, it was generally a standard practice of the collection industry to omit the Mini-Miranda notice from voice mail messages left on a consumer’s answering machine. Collectors feared such a disclosure left on a consumer’s voice mail could constitute a violation of the law that forbids disclosing the existence of a debt to a third party. Instead, a debt collector’s message would generally consist of a simple request for a call back, such as, “Good day, we are calling from ABC Financial Systems regarding a personal business matter that requires your immediate attention. Please call back at [phone number]. This is not a solicitation.” Debt collectors never considered this type of message problematic because it was assumed such a message did not really convey any information about the debt, thus the Mini-Miranda would not be required.  

In the recent case the court held a pre-recorded message left on a consumer’s answering system similar to the one mentioned above was a “communication,” as defined by the law, and thus required the Mini-Miranda disclosure.

If the collector left the Mini-Miranda in a voice mail message would it result in a violation of the law if the message was heard by a third party? Yes, this question was answered when a voice mail message left by a debt collector that included the Mini-Miranda became the subject of a court case wherein the court denied the debt collector’s motion to dismiss, holding that providing the Mini-Miranda disclosure in a voice message may violate the third-party disclosure prohibitions of the law when the message is heard by a third party. 

The court determined a collector may violate the consumer’s rights if he leaves a message for a consumer when he is aware the message may be heard by others. The message used in the recent case began with a disclaimer intended to mitigate the possibility a third party might hear the message. The disclaimer used language similar to the following: “This is a message for Mary Smith. If you are not Mary Smith, please hang up or disconnect. If you are Mary Smith, please continue to listen to this message.” The message then disclosed the call was from a debt collector and included a call-back number to reach the debt collector. SOUND FAMILIAR!

The court noted the warning to disconnect used by the collector could perhaps dissuade other people from listening to the message, but nothing in the message would alert the consumer to disconnect if he were listening to it in the presence of others. The court also found “prior consent of the consumer given directly to the debt collector” is not provided if a third party, or the consumer in the presence of a third party, continued to listen to the message in spite of the warning. Therefore, the court found the consumer had a claim under the law and denied the collector’s motion to dismiss.

The law provides for an award of $ 1,000 in each case where a collection agency has violated the terms of the law. Although mitigating circumstances such as pain and suffering has caused awards to exceed $ 1,000,000.