The FDCPA, Slander, Libel and Litigation Privilege

There is a bit of a misunderstanding about an issue of the law that we have to fight over frequently, something which is at times misunderstood by the lawyers for debt collectors and creditors but also misunderstood by Courts. Of course, more often than misunderstanding it, lawyers for debt collectors and creditors simply make false statements to the Court about this niche topic and so it is a battle we have to fight over in local courthouses. This is a battle over a somewhat obscure legal topic that few judges ever have to deal with and fewer lawyers.

Litigate privilege and to a lesser extent, libel and slander.

Debt Collectors Have to Tell The Truth

The argument by debt collectors virtually never works, but that does not stop debt collectors from trying to use it in many of our cases anyway. Under the Fair Debt Collection Practices Act(“FDCPA”), more specifically 15 USC 1692(e)(2)a and 15 USC 1692(e)10 it is a violation of the law for a debt collector to make a false statement while trying to collect a debt. There is no complicated analysis and no small print, there is no ancillary rule, it is pretty straightforward. Debt collectors are not allowed to make false statements while trying to collect a debt, everything they say has to be true. Debt collectors cannot lie about the amount or legal status of a debt and they cannot say anything false. It does not matter if the statement made by the debt collector was false on purpose or not, they cannot make false statements while trying to collect a debt.

We have filed numerous counter-lawsuits against debt collectors for suing our clients for amounts that our clients do not owe, in these counter-lawsuits or “counterclaims”, we claim that the debt collector made false statements while trying to collect a debt. In response, on numerous occasions, debt collectors have filed motions to dismiss by arguing that our counter-lawsuits should be thrown out because the things they said or written statements they made were either said in a courtroom or written in official court documents and therefore should not count as a violation of the Fair Debt Collection Practices Act.

To try to get around this debt collectors usually try three arguments:

1. Litigation privilege

Litigation privilege is a state law that says that statements contained in Court filings or things said in courtrooms cannot be subject to litigation, nor can they count as libel or slander (with some very, very rare exceptions). Thus the lawyers for the debt collectors argue that counterclaims against the debt collector for lying to courts should be thrown out as invalid. Few judges ever have to deal with the issue of litigation privilege in their entire careers because it is simply a niche topic that rarely comes up. And when this claim has been raised by lawyers for debt collectors in our cases, it has failed virtually every time for one simple reason: The Supremacy Clause of the United States Constitution. State laws and rules cannot be given preference over a Federal law and the FDCPA is a federal law so litigation privilege simply does not matter. The FDCPA says that debt collectors cannot make false statements while trying to collect a debt, so it does not matter if the false statements are made in a courtroom or even in court papers, they are still unlawful.

2. Unintentional conduct

Debt collectors often argue that their conduct was not intentional. The FDCPA is a “strict liability” statute. Their violations of the law in almost all of our cases are intentional anyway, but under the FDCPA it does not matter to determine liability if the debt collector intended to break the law or not. If they made a false statement, knowingly or not, it is a violation.

3. Minor and inconsequential

Debt collectors argue that their false statements were minor and inconsequential and thus should not “count”. We strongly disagree with the claim that their supposed violations of the law are “minor” or “unimportant”. Suing someone for an amount they do not owe is not a “minor mistake”, it is substantial and important and if the people who owned the debt collection companies were sued for debts they did not owe they would probably feel rather differently about the matter. This argument is raised with surprising frequency even though there is no merit to it. Under the FDCPA it is sufficient for something to be simply false. Whether the statement is minor or major is of no consequence, debt collectors simply cannot make false statements.

Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems. We have saved over 1,800 homes from foreclosure, eliminated $100,000,000 in mortgage principal and consumer debt, and have collected millions of dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence, and fraud.

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorney in connection with any legal issues related to the matters discussed in this article as the applicability of state, local, and federal laws may vary.