Banking & Finance Law Report

Tag Archives: Consumer collections

FDCPA – Sixth Circuit Requires Real Damages


When Congress passed the Fair Debt Collection Practices Act it created a federal statutory right to damages for consumers who suffer abusive debt collection practices. One of those practices, the required disclosures in a communication with the consumer, was the subject of a recent decision by the Sixth Circuit Court of Appeals in Cincinnati.

The decision will give some comfort to consumer lenders and their lawyers in light of the judicial limitation it imposed on Congress when it creates federal statutory causes of action.  Here the decision was in favor of the purported debt collector, the lender’s lawyer.

The FDCPA is frequently the subject of litigation. The possibility of damages for a consumer has prompted federal litigation the way honey draws bees. Here the honey was a claim against the lender’s lawyer and his law firm.

The facts in this case were not in question. This summary is drawn from a very well-written opinion by Judge Jeffrey Sutton of the Court of Appeals available here.

In 2010, James and Patricia Haggy defaulted on a mobile home loan. When foreclosure proceedings were initiated, Mrs. Hagy called the law firm representing the foreclosing lender.  The foreclosure was settled when the Hagy’s …

New Interim Final Rule Governing Garnishment of Accounts-76 Fed. Reg. (Feb. 23, 2011) (to be codified at 31 C.F.R. pt. 212)

A new interim federal rule effective May 1, 2011 protects from garnishment a portion of certain federal benefits direct-deposited into judgment debtor’s account within two months of the garnishment. The interim rule requires banks, credit unions and other financial institutions to change the way they process and respond to garnishments of accounts containing federal benefits, including Social Security benefits, SSI benefits, Civil Service Retirement benefits, Federal Employee Retirement Systems, VA benefits and Federal Railroad retirement, unemployment and sickness benefits. The interim rule does not protect from garnishment federal benefits paid into a judgment debtor’s account by check, cash, money order or other non-direct deposits, and the interim rule preempts inconsistent State or local garnishment laws and exempts certain federal and state child support garnishments.

The interim rule addresses the common practice of financial institutions that freeze a judgment debtor’s account in response to a garnishment without examining whether the account contains exempt federal benefit payments. This practice can leave judgment debtors who receive federal benefits without income or the ability to meet their immediate financial needs.…