CFPB and FTC Join Together in Big FDCPA Case

The Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) filed a joint amicus brief in November in a big case involving alleged debt collection violations in the use of affidavits and process serving in collection lawsuits against consumers. According to a federal judge in Manhattan, a debt buyer and collection law firm used “sewer service” to deny consumers their right to defend collection lawsuits in court.The case, Monique Sykes et all., vs Mel Harris & Associates, LLC et al., alleges that Mel Harris, a collection law firm, used a process server that purposefully did not serve collection lawsuit defendants with notices they were being sued. This was done while Mel Harris acted on behalf of Leucadia National Corp., a debt buyer.The lawsuit alleges that when the debtors did not appear in court, a default judgment was obtained against them. This allowed Mel Harris and Leucadia to freeze debtors’ bank accounts and threaten to garnish property and wages.The defendants also swore in affidavits that process had been properly served and the affidavit had personal knowledge of all relevant facts, according to the lawsuit.This case was granted class action status last year and is closely watched by consumer advocates. It may be a bellwether for the legal debt collection industry, with thousands of consumers potentially affected.The lawsuit does not just claim violations of the Fair Debt Collection Practices Act (FDCPA), there are potential Racketeer Influenced and Corrupt Organizations Act (RICO) penalties as the two companies conspired together.The defendants claimed that they did not violate the FDCPA, as it 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 affidavits were directed to the court, and therefore do not violate the FDCPA. The FTC and CFPB disagree, and titled their argument “There is No Blanket Immunity from FDCPA Liability for Conduct Directed to Third Parties.”