Penalties for online collection violations?

Comment by JJ Hornblass on October 28, 2009 at 10:04am

Michelle, I was thinking about this and I wonder whether the cost-benefit really is against an agency. Specifically, what is the maximum penalty the FDCPA could levy for communicating via email, particularly when, as you say, rules on email collections are "not specifically covered in the current FDCPA"? We know the conversion rate on emails is high, so there is certainly a benefit to using email for collections. We should calculate the maximum penalty vs. the higher conversion rate.

Comment by Vince Delperdang on October 28, 2009 at 10:10am

There is still the issue with reliability of communication as well. Let's say you are communicating with a debtor, they send you a cease and desist however through the magic of the internet (on either end of the communication) you do not receive it (or it comes from a separate email account of the debtors and is thus unrecognized and gets caught in a spam filter), this communication is still considered to have been received (similar to when a letter is mailed by a debtor). Now because of a communication glitch, spam filter or whatever reason, you have violated a cease and desist letter. While I understand mail gets lost too, I have lost few letters in the mail versus emails getting lost in the ether. Just something to think of.

Comment by Jack Gordon on October 28, 2009 at 3:53pm

JJ,

The maximum penalty calculation is blurred by two big (and related) obstacles: legal costs and the potential for precedent.

Legal Costs: While FDCPA has a maximum statutory penalty of $1k, and many states have similar or lower penalties, the legal costs associated with defending a suit can easily be as much as a 10x multiplier on those numbers. The cost of actually losing a case can double that number (by paying the plaintiff's legal fees). So what may have been a maximum fine of $1k-$3k, can relatively easily escalate to as much as $20-$25k or more. This is why collectors frequently settle early for a fraction of that.

Precedent: There are legions of consumer activists who look for opportunities to create precedent over unsettled areas of FDCPA law. This both escalates the likelihood of litigation and the potential cost, as unsettled law will likely cause longer, more complicated trials. They usually pay nothing, as there are no shortage of attorneys who will take these cases on a contingency basis. All of the cost is thrust on the defendant.

Comment by JJ Hornblass on October 28, 2009 at 4:33pm

Jack, very helpful. And what's the return from using email? Does it outweigh the potential costs?

Comment by Michelle Dunn on October 29, 2009 at 7:31am

All very good points! Thanks for the discussion! Vince, I agree - that is something I had not thought of.

Comment by Matthew Carpenter on October 30, 2009 at 8:31am

Vince makes a great point. Although the mail is not foolproof, there are a lot of potential problems with relying on email delivery for communications. Although the explicitly discourage it through our debtor web site, we still get more tech savvy consumers who try to send their cease and desist through the web sites contact form. We still advise them to mail that in in writing.

A lot of collectors do not seem to understand this and other internal policies about communication and lack of support for texting, email and other tools, but education on their part is crucial. I am finding it important to continually communicate to them the backbone of internal policy on this, even though they are technically limited in using those methods as well.

Comment by JJ Hornblass on October 30, 2009 at 9:43am

Matthew, just to flesh out your valuable comments, and not at all to disagree with your points, are there more potential problems with email than standard mail? It seems to me that the challenges might be equal -- save the compliance factor for emails.

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