01.07.10
What’s a Foti claim?
We’ve handled quite a number of lawsuits, including class action lawsuits, based on a line of decisions dealing with what a debt collector must say when leaving a message on an answering machine or voice mail. Although not the first case in this line of decisions, a case brought in the United States District Court for the Southern District of New York was called Foti v. NCO Financial; hence, they are referred to as Foti claims. About a dozen federal District Courts have addressed the issue. With the exception of one unpublished decision out of the Western District of Oklahoma, the cases hold that, when the message is left in connection with an attempt to collect a debt, the debt collector must make the “mini-Miranda” disclosures required under 15 USC 1692e(11). After the Western District of Oklahoma’s decision, there have been numerous courts to address the issue and, we suspect, were that court to revisit the issue, it would follow the Foti line.
First, a clarification. I use the term “consumer” to refer to the people who are the targets of debt collection activities when the debt is the type covered by the FDCPA. There is a great to be said about this topic but suffice it for now to say the essential distinction is between consumer debt and business debt. I use “consumer” because it is the term used by the FDCPA. When I say “debtor,” I am referring to anyone who may owe a debt — both consumers and non-consumers.
Let’s look at it from the debt collector’s perspective. Collection agencies, like any for-profit business, will seek to maximize revenues and minimize costs. This is obvious — as everyone else in a capitalistic world, they should want to try to make as much money as they can. Like it or not, this is the way our economy has worked. In a perfect debt collector world, debtors would pay the full amount of all debts as soon as the collection agency communicates the fact of the delinquent debt to the debtor using the least expensive means of communication. The world, however, is not perfect. To make money, debt collectors must expend time and money attempting to engage debtors in a dialog. The FDCPA regulates how debt collectors communicate with consumers. A rational debt collectors will choose to violate the FDCPA’s communication requirements when, after considering all relevant factors, it concludes that compliance will yield less revenues or raise costs. There may be other reasons for a violation — like a mistake — but we should assume that debt collectors act rationally until they demonstrate otherwise.
Back to the phone messages. The mini-Miranda requires that the collector state that it is a debt collector. Thus, when a debt collector fails to do so, we are justified in assuming that the debt collector concluded compliance would result in fewer returned calls which results in less revenue, more costs, or both.
When sued for this violation, many debt collectors have argued that they chose not to make the disclosure out of fear that a third party might overhear the message and, if that happened, the debt collector would violate the FDCPA’s prohibition against disclosing information to third parties. No court has bought into this argument. Indeed, the only Foti case yet to have a decision from a federal Court of Appeals likened the debt collector’s argument to a Vietnam military officer who sought to excuse his destruction of a village as necessary to save the village. The court held that debt collectors have no inherent right to leave messages. So, when they do leave voice messages for consumers when collecting a debt, they must make the disclosures. If you received any messages which there was inadequate disclosure to be able to know who left the message and it did not say it was from a debt collector, you may have a Foti claim.
