Remember that time you promised your friend you'd send a letter to his landlord in an effort to get back your friend's deposit? Or that time you made a demand of the contractor because it short-paid your subcontractor client by $500? And in both cases, or in others like them, you might have made some kind of reference to litigation even though you really didn't intend to take much, if any, action beyond the letter?
Don't worry, there's nothing inherently wrong with this approach. But if you ever send such a letter to an individual who incurred his or her debt for a personal, family, or household purpose, that's exactly when your "if-you-don't-pay-we-will-have-no-choice-but-to-consider-litigation" letter can get you into trouble.
It's because of the Fair Debt Collections Practices Act, which was originally enacted to curb all sorts of over-the-top collections tactics in the consumer debt world. Things like threatening "if you don't pay, we'll put you in jail." Or, even worse, "give us the floor plan for your house so the police will know which room is yours when they come to arrest you." These are from real cases, and it's a very good thing that the FDCPA exists to punish folks who make these kind of threats.
But the FDCPA also prohibits all sorts of other actions, too. Asking that a consumer make payment within "thirty days" instead of "thirty days from your receipt of this letter" can constitute a violation. So, too, can threatening to take some kind of legal action that the debt collector does not intend to take.
The second example is what got a debt collector in Wisconsin into potential trouble recently. The debt collector, a collections agency acting on behalf of a local medical center, sent a letter to a consumer advising him of his debt. The letter included the following: "FURTHER DELAY CANNOT BE TOLERATED. IF PAYMENT IS NOT RECEIVED IN THIS OFFICE WITHIN FIVE DAYS, WE WILL CONSIDER OTHER METHODS OF ENFORCING COLLECTION."
The consumer filed suit under the FDCPA, alleging that the debt collector made a threat to take action that it did not intend to take. The debt collector denied making any threat, though. After all, it only said it would "consider" other methods of enforcing collection. It did not say it WOULD file suit. The debt collector therefore asked that the whole case be thrown out.
Unfortunately for the debt collector, the Wisconsin federal court was not persuaded. The court held that the combination of "FURTHER DELAY CANNOT BE TOLERATED," the demand for payment "WITHIN FIVE DAYS," and "WE WILL CONSIDER OTHER METHODS" could be deemed by an unsophisticated consumer to be a threat of imminent action. This threat, combined with the allegation that the debt collector did not actually intend to follow through with the threat, means the consumer will get his day in court.
In all likelihood, the debt collector did not have any intent to sue the consumer for nonpayment, but it no doubt tried to word its letter in such a manner so as to avoid making any kind of threat. Unfortunately, it went just a touch too far.
It just goes to show that you can never be too careful when it comes to consumer demand letters.
There may be a judge or jury ruling in the coming months in the case that resolves whether the wording does in fact constitute a threat and that determines what the debt collector's intent actually was, but this ruling will be irrelevant. That's because the debt collector, now tied up in court because of its demand letter and spending legal fees that likely exceed the amount of the debt, has really already lost.
The case is Bloodworth v. United Credit Service, Inc., 2016 WL 1453520 (E.D. Wisc. 2016).