Debt collection attorneys who file affidavits in state courts in order to obtain wage garnishments can be sued by consumers under the Fair Debt Collection Practices Act. This key decision, unheld on appeal to the 6th Circuit Court of Appeals, is an important victory for consumer advocates and other critics of the collection industry. For decades, collection attorneys have been filing bogus documents with the courts, and getting away with it because of supposed “immunity” as a “witness” in the case. The real-world result of this loophole has been extensive abuse of the rules. Basically, in practical terms, a collection attorney has been able to file a false affidavit about their knowledge regarding a debtor’s ability to pay a debt. Even in cases of obviously false or bogus statements or documents, consumer victims have been blocked from suing the collection attorneys because of this immunity exemption. In ruling that this exemption does not apply to collection attorneys, the 6th Circuit Court of Appeals got it exactly right.
What’s the practical effect? Well, for starters, collection liars (sorry, lawyers) will have to pay a little more attention when they sign their name to the claims documentation. What’s important to understand here is that most collection attorney firms are little more than collection agencies headed by an attorney. Since they deal on a volume basis, thousands of files run through their office on a monthly basis. Because of the immunity factor, collection attorneys in the past have thought nothing of rubber-stamping huge volumes of documents for submission to the courts, with little or no concern for factual truth. A good example is the case that led to this decision. A collection attorney obtained a default judgment against a debtor, and then filed an affidavit with the court when seeking to collect via wage garnishment. The affidavit stated that the collection attorney had a reasonable basis to believe that the property to be garnished (i.e., income), was not exempt from garnishment. Problem: The income in question was from Social Security benefits, which are exempt from garnishment. So the collection attorney filed a false affidavit, got sued for it, lost, appealed, and lost again. Naturally, consumer attorneys love this decision, while those in the collection industry hate it. Of course, the losing party is attempting additional manuevers, but the 6th Circuit Court wrote that “the purpose of immunity is to preserve the integrity of our judicial system, not to assist a self-interested party who allegedly lies in an affidavit to initiate garnishment proceedings.”
Now at least collection attorney paper-mills will have to exercise a little caution before filing undocumented declarations about debtors’ assets, or risk getting counter-sued for violating Federal law. It’s about time!