From Foti to Davis: Third Party Disclosures in the Answering Machine Age

May 1st, 2007

By Mike Bevel
Associate Editor, insideARM.com
May 2007 

As the first anniversary of Foti v. NCO Financial Systems comes and goes (April 2005), collection agencies are no closer to resolving the voice mail third-party disclosure question. And a new class action suit isn’t clearing the waters any, either.

Foti proved to be a landmark decision, of sorts, finding NCO negligent when pursuing collections against Paul S. Foti, among others. Primarily, the District Court of the Southern District of New York felt that NCO had not done a thorough enough job identifying itself in its message for Foti, a violation of Section 1692e(11) of the FDCPA, commonly known as the “mini-Miranda.”

In the wake of Foti, collection agencies were eager to identify language that would protect them from FDCPA suits while also allowing them to contact debtors through voice mail messages. While not taking any official position, or endorsing any kind of official script, the ACA recommended something along the lines of, “This is a message for [debtor]. If you are not [debtor] please hang up or disconnect. If you are [debtor] please continue to listen to this message.”

This, it was hoped, would alleviate some of the dangers that the Foti case seemed to suggest. Then came Davis v. Windham Professionals, however; and now, that reasoning may not hold true.

On February 21 of 2006, Russell A. Davis filed a class action complaint against Windham Professionals, a Massachusetts corporation, for a potpourri of FDCPA violations; primarily third-party disclosure. Windham left a message, similar to the one above, for Russell A. Davis. Davis is claiming a third-party disclosure violation of Section 1692c(b) of the FDCPA.

This seems to put collection agencies that leave voice mail messages in an uncomfortable “damned if you do, damned if you don’t” position. On the one hand, as Foti proved, leaving a voice mail message that does not adequately identify a company as a collection agency is a violation of the FDCPA. However, it now seems that adequately identifying a company as a collection agency on a voice mail message can easily become another, different FDCPA violation: third-party disclosure. And, with little or no guidance available, most agencies are left to navigate these legal waters on their own. Based on the outcome of Davis, this could prove a watershed moment for consumers who make a practice of listening to their voice mail messages in the presence of others.

When seeking clarification, in the days after Foti, the ACA wrote to the FTC for an advisory opinion: “Must a debt collector identify a corporate name in order to meaningfully disclose the caller’s identity in a telephone call that results in an electronic voice mail message for the debtor? If a corporate name must be disclosed, what specifically must be disclosed when the corporate name implies the collection of a debt, thereby potentially violating the third-party disclosure prohibition?”

Rather than answering, the FTC instead relied on case law to address the ACA’s question: "[T]here is clear court precedent for the proposition that a debt collector leaving a voice mail message must reveal the name of his employer, even if the name indicates that the message involves a debt." They list Hosseinzadeh v. M.R.S. Associates, Inc.; Joseph v. J.J. MacIntyre Cos, L.L.C.; and, Wright v. Credit Bureau of Georgia, Inc. in support of their position.

The FTC went on to say, "Courts also have addressed the issue of whether a debt collector leaving a voice mail message must convey the mini-Miranda disclosure. The decisions are uniform in concluding that a collector failing to do so violates Section 807(11)." They cited Stinson v. Asset Acceptance, LLC; Foti; Hozzendiah; and, Chlanda v. Wymard.

What does this mean, then, for collection agencies seeking to use a tool that’s basically risk-free for 99 percent of the rest of the business community? Cynically (and uncharitably), some might say, it means, without having to state so explicitly, that the FTC and the FDCPA are effectively eroding the rights of collection agencies to use voice mail as a means of communicating with debtors. For the FDCPA, there’s power in being vague.

What does appear clear is that collection agencies that utilize voice mail messages as part of their cadre of collection tools, at least for the moment, are doing so with some risk.

insideARM and produces a daily newsletter, The ARM Insider™. Contact the editor at editor@kaulkin.com.

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