Court OKs case against debt collectors for 'outrageous' threats.

A man may sue a credit card company after its debt collectors used illegal threats that may have contributed to his mentally ill wife's suicide, the Sixth Circuit has ruled. In partially reversing a lower court decision, the court found that collections agents for Discover Financial Services engaged in "outrageous conduct" when they threatened the woman with criminal prosecution and imprisonment. (MacDermid v. Discover Fin. Servs., 488 F.3d 721 (6th Cir. 2007).)

In 2002, Nina MacDermid of Linville, Tennessee, applied for a credit card using her husband's name and credit history. She received several credit cards, including three from Discover Financial Services. She also rented a post office box so that she could intercept and use the cards without her husband's knowledge.

Nina had a history of bipolar disorder, alcoholism, drug abuse, and bankruptcy. One of her symptoms during her "manic" phases was going on buying sprees.

In February 2003, Donald MacDermid discovered his wife's surreptitious accounts. He wrote to Discover, explaining that he had not applied for the cards. Over the next few weeks, he had several phone conversations with Discover Card collectors, some of which he recorded and described as threatening. He explained to the collectors that Nina had severe mental illnesses and that constant harassment and threats might lead to Nina's death.

The calls and threats increased in frequency, according to Donald's complaint. In an April 2003 conversation that he taped, an agent said she had already notified the sheriff's office and district attorney's office about the debt, and she told Donald he should "keep a better eye" on his wife.

In June 2003, Nina MacDermid purchased a handgun and used it to kill herself. In an affidavit, the psychiatrist who was treating her at the time of her death said that Nina "was terrified at the prospect of going to jail and causing further embarrassment to her family, particularly her husband."

In October 2003, Donald filed suit against Discover, alleging wrongful death, intentional infliction of emotional distress, violation of the Tennessee Consumer Protection Act and the federal Fair Debt Collection Practices Act, and other claims.

A magistrate judge dismissed the case, granting summary judgment to Discover. The appeals court affirmed on three counts but found that MacDermid had presented a triable claim of intentional infliction of emotional distress. In doing so, the court acknowledged that Tennessee's outrageous-conduct standard is "a formidable one" but that Discover's actions clearly met that standard.

"Even Mr. MacDermid admits that Discover had a right--at least initially--to pursue payment of the charges that Mrs. MacDermid had accrued," Justice Boyce Martin Jr. wrote for the court. "He simply alleges that they went too far in their efforts, by threatening criminal prosecution for a purely civil debt, by threatening in the manner they did even when put on notice of Mrs. MacDermid's condition, and by holding him jointly liable for the debts even though he was wholly unaware of what his wife had done."

Ken Burger, a lawyer in Murfreesboro, Tennessee, who represented MacDermid, said, "Five minutes into my opening statement, the judge stopped me. He said it was clearly unethical and illegal to threaten jail time for any civil debt--he was very adamant."

Burger noted that there is nothing illegal about aggressive--even offensive--tactics in debt collections. "The wall is pretty high for a plaintiff to establish a claim of outrageous conduct," he said. "You need a pretty extreme set of facts. Threatening criminal prosecution falls into that category."

Burger also noted that despite Discover's claims that the tactics were used by only one rogue collections agent, MacDermid heard similar threats from several different agents who called. And, Burger added, Discover's tactics are hardly novel: He recently received a call from a retired police officer in California who said Discover agents threatened to have him arrested for unpaid bills.

Burger said the case is the first of its kind to clear the appeals hurdle and that it sets an important precedent for a largely hidden practice by debt collectors.

"As a small-town trial lawyer, I hear it all the time," Burger said. "Collections agents who call debtors stupid, deadbeats, bums--sometimes they tell them they'll call the sheriff and the debtor will have to go to prison. They threaten and ridicule them. It's a very common practice."

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