Mass-produced letters not `fair debt collection'; court holds attorney liable.

An attorney who sent form-based collection letters to delinquent credit-card holders without sufficiently reviewing their files is liable under the federal Fair Debt Collection Practices Act, the Seventh Circuit Court of Appeals has ruled.

In the class action--filed on behalf of GM Card holders in Illinois who received delinquency letters from the defendant--the appeals court ruled that a debt collection letter from a lawyer implies that he or she "assessed the validity of the debt" and is prepared to take legal action.

"It is this implicit message that `get[s] the debtor's knees knocking' and makes the attorney letter a particularly effective method of debt collection," the court wrote. "If, however, the letter to the debtor is not the product of the attorney's professional judgment ... then the letter is misleading." (Nielsen v. Dickerson, 307 F.3d 623 (7th Cir. 2002).)

In 1997, Household Creditor Services, Inc., which issued the GM credit cards, engaged Virginia attorney David Dickerson and his Virginia Beach firm to send collection letters to delinquent cardholders. The company periodically sent the law firm a computer disk containing data on the delinquent accounts--approximately 2,000 accounts per month--limited to each debtor's name, address, account number, balance, and amount due. The firm then reviewed the data for inconsistencies, duplications, and incomplete information. It also checked the list against bankruptcy filings and flagged accounts from three "prohibited" states, Colorado, Connecticut, and West Virginia, to which Dickerson did not send letters.

The law firm returned the amended data to Household and waited 24 hours to receive further revisions. It then forwarded the final data to a mailing service, which prepared the letters, affixed a facsimile of Dickerson's signature, and mailed them. The letters instructed cardholders to contact "GM Card"--not the law firm--to settle their accounts. Some cardholders responded to the address listed on the letterhead instead, but the firm forwarded all responses to Household. Dickerson took no further action once the responses were handed over to the credit-card company.

In January 1998, Ann Nielsen received one of these letters. She assumed that Dickerson was prepared to take legal action to enforce her debt, and four months later she filed for bankruptcy. She later sued Dickerson, claiming the letters were misleading because they "falsely implied that an attorney had been engaged to help Household collect on the overdue GM Card accounts."

After approving class status, the chief U.S. district judge for the Northern District of Illinois, Charles Kocoras, granted summary judgment on behalf of the plaintiff class, calling Dickerson "merely a rubber stamp for Household Credit." (Nielsen v. Dickerson, No. 98-C-5909, 1999 WL 754566 (N.D. Ill. Sept. 9, 1999).)

The primary issue, the court said, was that the defendant had not been sufficiently involved in preparing and sending the letters: Dickerson testified that he spent about two minutes reviewing a page listing 40 accounts. "Checking for `typos' is admirable; however, it cannot be construed as an attorney exercising independent, trained legal judgment on the validity of a claim," Kocoras wrote.

The Seventh Circuit Court of Appeals agreed, noting that Dickerson and his firm played only a "ministerial role" in handling responses to the letters, were paid a flat fee for their services, and never took legal action in pursuit of any of the debts.

Dickerson argued that he and other attorneys in his firm were involved in reviewing the account data, though they did not review the actual letters before mailing, and that he drafted the form letter sent to cardholders. Kocoras said that this was not enough: "[P]ersonal approval of the `form' of collection letters is insufficient to comply with the requirements of [the Fair Debt Collection Practices Act]. As a result, there will be few, if any, cases in which a mass-produced collection letter bearing the facsimile of the signature of an attorney will comply with the restrictions imposed by [the law]."