Ethical Issues in Collections Presented by: William M. Clos April 2012 WWR History 1930 1940 1950 1960 1970 1980 1990 2000 2011 Founded Gardner & Spilka Gardner, Spilka & Weltman Weltman, Weinberg & Associates Weltman, Weinberg & Reis Co., L.P.A. Maurice Weltman Joins Firm Alan Weinberg & Allen Reis Join Firm Robert Weltman Joins Firm Pittsburgh Philadelphia Cleveland Columbus Cincinnati Brooklyn Ht Detroit Chicago Grove City Ft. Lauderdale 2 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WWR Today 10 offices in 5 states More than 100 attorneys and nearly 1,200 legal assistants, collectors and support staff, ranking WWR as the nation s largest creditor s rights law firm Several WWR attorneys are certified as Creditors Rights Specialists by the American Board of Certification Seamless integration allows us to deliver recovery solutions for local, regional, national and international clients 3 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 1
WWR Footprint and Network WWR Footprint WWR attorneys are licensed to practice in Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, Pennsylvania and Florida currently real estate matters only WWR maintains a proprietary Network of National Attorneys with demonstrated proficiency in creditor representation to act as local counsel WWR s Footprint states where WWR provides direct legal representation 4 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WWR Full-Service Capabilities Our range of services allows for the complete handling of files and matters through each step of the collection, legal and recovery process, utilizing one or more of our specialty practice groups or a combination of our services. Skip Tracing Loan Workouts Loss Mitigation Consumer Compliance Litigation Asset Searches Demand Letters Home Preservation Commercial Consumer Leasing Pre-suit Collections B2B Collections Foreclosures Reaffirmations Federal Court Collateral Recovery Pre-suit Collections Evictions Relief from Stay Lending Issues Demand Letters Collection Litigation Title & REO Proof of Claim Loan Review Complex Collections Arbitration/Mediation Fannie / Freddie Adversary Claims Intl. Collections 5 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Communication with Debtors and Other Parties Rule 4.1 Truthfulness in Statements to Others In the course of representing a client, a lawyer shall not knowingly make a false statement of material fact or law to a third person. Rule 4.2 Communication with Person Represented by Counsel In representing a client, a lawyer shall not communicate about the subject of the representation with a party whom the lawyer knows to be represented in the matter by another lawyer, unless the lawyer has the consent of the other lawyer or is authorized by law to do so. 6 6 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 2
Communication with Debtors and Other Parties Rule 4.3 Dealing with Unrepresented Person In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. Rule 4.4 Respect for Rights of Third Persons In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person, or use methods of obtaining evidence that violate the legal rights of such a person. 7 7 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Disclosure Issues Communicating with Unrepresented Persons Attorney must assume that an unrepresented person does not understand the attorney s role in a matter. Attorney must carefully explain to the unrepresented person the attorney s role in the matter. 8 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Disclosure Issues Communicating with Unrepresented Persons When an attorney knows or reasonably should know that the unrepresented party misunderstands the attorney s role, the attorney shall make reasonable efforts to correct the misunderstanding. MRPC 4.3 9 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 3
FDCPA FDCPA does NOT apply to original creditors 15 U.S.C.1692(a) Defines Debt collectors as a person or business: who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owned or due another. This statute specifically excludes original creditors collecting their own debt 10 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Disclosure Issues MI - Regulation of Collection Practices MICHIGAN LAW MCL 445.251 et seq. applies to "Regulated person" which is defined as a person whose collection activities are confined and are directly related to the operation of a business other than that of a collection agency. Includes credit unions MCL 339.915 et seq. applies to Michigan licensed debt collectors. Prohibited activities under these statutes mirror FDCPA. It is possible that a debt collector who staying close to the edge with regard to federal law may well step out of bounds according to Michigan law. 11 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Aggressive Collection Practices Aggressive collection practices are not prohibited; Illegal collection practices are prohibited. Michigan collection practices statutes prohibit: using or threatening to use physical violence in connection with collection of a claim... using a harassing, oppressive, or abusive method to collect a debt, including causing a telephone to ring or engaging a person in telephone conversation repeatedly, continuously, or at unusual times or places which are known to be inconvenient to the debtor... using profane or obscene language... failing to implement a procedure designed to prevent a violation by an employee. MCL 445.252. Penalties: $500 for each violation 12 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 4
Aggressive Collection Practices Social Media Since social media sites have grown in popularity, reports have surfaced of debt collectors not only researching Facebook and other sites to locate elusive debtors, but in some instances, creating fake user names and friending people p in order to get information about a debtor's whereabouts. Recently, a Florida judge ordered a debt collection agency to not use Facebook or any other social media site after the court found that the agency had sent messages to a debtor and her family on the Facebook networking site to have her call the agency about the debt. 13 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Aggressive Collection Practices Social Media In one reported case, a man was friended on Facebook by a young woman in a bikini. The account turned out to belong to a debt collector, which the man realized when the "friend" posted a message on his wall: "Pay your debts, you deadbeat." 14 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Consumer Financial Protection Bureau Created in 2010 for greater oversight of financial institutions New bulletin by the bureau warns that financial institution CAN be held liable for violations committed by 3 rd party vendors including: Independent contractors Collection agencies Attorneys 15 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 5
Effect of CFPB Effect The law is still changing and it is unclear as to the amount of exposure to a financial institution Presumably, the Bureau will be able to investigate 3 rd party vendors, including attorneys for potential violations including: Auditing files On-site inspections Protecting the Credit union Know your vendor Have a system in place to address violations Use only trusted vendors Should provide training and a compliance department 16 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Trusted Vendors Vendors should have: Continuous Training for staff in state and federal laws A working knowledge of the current trends and changes in the law A Compliance department: Oversees training Can answer questions regarding possible violations Makes sure its staff complies with all applicable laws Keeps informed as to all changes and interpretations of these laws 17 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Unauthorized Practice of Law Debt Settlement Companies Whether the actions and advice of debt settlement companies constitute the providing of advice, counsel and direction to debtors, and is a knowing engagement in the unauthorized practice of law. Whether debt settlement companies statements and actions create or reinforce the impression that they are acting in debtors best interests, and know what they are talking about. Whether debt settlement companies derive a benefit from engaging in the unauthorized practice of law. Whether debt settlement companies cause injury to debtors by engaging in the unauthorized practice of law. 18 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 6
Unauthorized Practice of Law Debt Settlement Companies Whether debt settlement companies derive a benefit from engaging in the unauthorized practice of law. Whether debt settlement companies cause injury to debtors by engaging in the unauthorized practice of law. 19 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Questions? 20 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA Contact Us William M. Clos, Associate Litigation and Defense Complex Litigation Group 248-989-3096 wclos@weltman.com 21 WWR Replevin 201 Webinar WELTMAN, WEINBERG & REIS CO., LPA WELTMAN, WEINBERG & REIS CO., LPA 7