Jim Flynn
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Jim Flynn, Money & the Law

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Debt collection is big business.

One source I found said 30 million consumer debts end up in collection annually, resulting in one billion collection agency contacts (most, no doubt, at dinner time). The debt collection industry has never had a stellar reputation, leading to the passage of the federal Fair Debt Collection Practices Act in 1977 and the Colorado Fair Debt Collection Practices Act soon thereafter.

Under the federal and Colorado statutes, deceitful and harassing activities are blatantly illegal. Also, under these statutes, debtors are given a bundle of rights. If a debtor notifies a debt collector to cease further communications, the collector must stop.

In addition, debt collectors are required to give debtors something akin to a Miranda warning at each contact: “We are trying to collect a debt and any information you provide to us can be used against you for that purpose.”

Also, debt collectors must inform debtors in writing that, if they notify the collector within 30 days that they dispute the debt , the collector must verify the debt and mail a copy of the verification to the debtor. The debt collector is prohibited from taking further action until it has complied with this verification process. A violation of federal and state debt collection laws can lead to significant civil damages and fines, and an award of attorneys fees.

Although debt collectors can, and do, add additional language to their written communications to debtors, such additional language cannot confuse, contradict or override the required disclosures. This limitation on content recently made it to the Colorado Court of Appeals in the case of Deborah Garrett v. Credit Bureau of Carbon County . (If you’ve never heard of Carbon County, that’s because it’s in Wyoming. Garrett, however, lived in Colorado.)

Garrett ran up an $834.96 bill at the University of Colorado Hospital which, when not paid, was turned over to the Carbon County Credit Bureau for collection. This resulted in two written demands from the credit bureau, which Garrett claimed were in violation of the Colorado act.

These notices contained the following, boldfaced, statement: “WE CANNOT HELP YOU UNLESS YOU CALL.” Garrett’s position was that this statement was inconsistent with the right given her under the Colorado law to require the collection agency to investigate and verify a claim, and was confusing and resulted in an “overriding” of the required disclosure concerning verification.

A trial court threw out Garrett’s claim. The Colorado Court of Appeals, however, reversed and reinstated the claim. The Court of Appeals’ decision went into a lengthy discussion about the fact that Colorado has adopted the “least sophisticated consumer test” when dealing with matters of confusing, inconsistent or overriding statements by debt collectors. This is an objective test, the court said. Thus, a debtor (including Garrett) suing a collection agency doesn’t have to prove he or she was confused — only that a “least sophisticated consumer” would have been confused.

So, you might ask, what does it take to be a “least sophisticated consumer?” Well, as the decision in the Garrett case demonstrates, the test for this is squishy. Here’s some of what the Court said: “The least sophisticated consumer is one who does not have the astuteness of a Philadelphia lawyer or even the sophistication of the average, every day, common consumer.” And, “this consumer is neither shrewd nor experienced in dealing with creditors.” And, this consumer is “gullible, unwary, trustful, or cowed.”

However, the least sophisticated consumer is “neither irrational nor a dolt” and is assumed to have a “quotient of reasonableness and…a basic level of understanding.” (How’s that for a legal standard?)

As matters now stand, the Carbon County Credit Bureau is on the hook for a damage award in Garrett’s favor and, perhaps causing greater pain, it will have to pay her attorneys fees.

Jim Flynn is with the Colorado Springs firm of Flynn & Wright. You can contact him at moneylaw@jtflynn.com.

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