Collection agencies that fail to register with state of Florida may expose themselves to potential litigation

IT’S NO SECRET, with the falling economy, that collection practices and lawsuits against debt collectors have been on the rise.  One recent court decision may have given consumers in Florida even more protections from unscrupulous creditors.

In Florida, like in many states, debt collectors must comply with at least two bodies of statutory law.  First, there is the Fair Debt Collection Practices Act (FDCPA), a federal law enacted by Congress in 1978 that establishes general standards of conduct, defines and restricts abusive collection practices, and provides specific rights for consumers.  Next, the Florida Consumer Collection Practices Act (FCCPA), a state law enacted by the Florida legislature in 1993, gives consumers additional protections.

With some exemptions, the state act (specifically, Fla. Stat. § 559.555) requires collection agencies engaging in business within the state of Florida to register with the Florida Office of Financial Regulation.  To register, they must pay a $200.00 fee and provide certain information to the Office, and they must renew their registration annually. Although the state act allows consumers to sue debt collectors for various other reasons, it provides no private right of action for a consumer to sue a debt collector for its failure to register.

However, a few months ago, in LeBlanc v. Unifund CCR Partners, 601 F.3d 1185 (11th Cir. 2010), the United States Court of Appeals for the Eleventh Circuit addressed whether a consumer in Florida could, pursuant to the federal act, sue a collection agency for its failure to register with the Florida Office of Financial Regulation in violation of the state act.  After considering the legislative objectives of and the interplay between both the federal and state acts, the court held that a violation of the state act could support a federal cause of action.

In LeBlanc, a collection agency that had not registered with the Florida Office of Financial Regulation sent the consumer a letter that, among other things, included:

If we are unable to resolve this issue within 35 days we may refer this matter to an attorney in your area for legal consideration.  If suit is filed and if judgment is rendered against you, we will collect payment utilizing all methods legally available to us, subject to your rights below.

The consumer in that case argued that the collection agency could not threaten to sue him because its failure to register would prohibit it from legally filing suit in Florida.

The court explained that, by its own terms, the federal act does not “annul, alter, affect, or exempt” collection agencies from complying with state law (quoting 15 U.S.C. § 1692n), but rather “establishes minimum boundaries for unlawful debt collection, leaving intact state laws which provide higher levels of consumer protection from collection activity” (quoting 104 AM. JUR. Proof of Facts 3d 1, § 5 (2009)).  The court also explained that Florida act, even though it did not provide for a private civil cause of action for non-registration, showed that the state was serious about addressing such a violation because the legislature had made a violation of the registration requirement a criminal misdemeanor (Fla. Stat. § 559.555).

However, the court explained that debt collector actions that violated state laws were not per se violations of the federal act.  Rather, the court said, the collection agency’s conduct or communication would also have to violate the relevant provision of the federal act.  Therefore, LeBlanc’s suit against the agency would only be as valid as was his claim under section 1692e(5) or 1692f of the federal act.

The court considered LeBlanc’s claim under section 1692e(5) of the federal act using a two-part analysis. First, was the agency’s dunning letter a “threat to take action which could not legally be taken” in violation of the section?  The court had to decide, first, was the language of the letter a threat or merely informative? The court reasoned that, because the federal act does not define “threat,” and because the letter could be viewed potentially as either threatening or informative, the first question would have to be answered by a jury, using the “least-sophisticated consumer” standard.  Second, if it was a threat, could the threatened legal action be legally taken?  The court decided that, in that case, the agency could not have legally taken action in Florida because it was not registered and not exempt from the registration requirement.

The court then considered LeBlanc’s claim under section 1692f of the federal act and asked whether the agency’s failure to register had amounted to an “unfair or unconscionable” means of collecting a debt in violation of the section.  Again, the court held that it was possible but a question for the jury to decide.

What does this decision mean for debt collectors?

If debt collectors plan to attempt collection of debts from people within the state of Florida, they should be advised of not only federal laws but also state requirements.  Unless they are exempt, they must, pursuant to Florida Statute, register with the Florida Office of Financial Regulation.   Florida has acts regulating both consumer collections and commercial collections, and lawsuits for violations of these laws have been on the rise in recent years.  To make sure that debt collectors are proceeding in accordance with law, it is important that they consult with an attorney.

Additionally, debt collection companies structured as partnerships must be aware that their partners may be found vicariously liable for the partnership’s actions.  (In LeBlanc, the court held that the agency’s general partners could be liable.) Therefore, to protect themselves, it is important that the company’s founders consult with an attorney prior to finalizing the company’s organizational structure, and, after the company is formed, that they ensure that the company abides by all applicable state and federal laws and requirements. 

What does this decision mean for consumers?

If Florida consumers receive communications from collection agencies, they may be able to file civil lawsuits against those agencies if they are not registered with the Florida Office of Financial Regulation and if they have violated the FDCPA or the FCCPA.  The OFR’s website includes a free service for consumers to search for debt collectors to see if they are registered.

If you are a consumer who thinks a debt collector may be violating state or federal collection-practices laws, consult with an attorney to more fully understand your rights. If you would like to schedule a consultation with Attorney Conlin, call our office at 407-965-5519 or schedule a consultation here.