Consumer Protection: Suing Debt Collectors

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From LawHub, this is I Am The Law, a podcast where we talk with lawyers about their jobs to shed light on how they fit into the larger legal ecosystem. In this episode, Debby Merritt interviews a consumer protection lawyer who talks about suing debt collectors who harass consumers in violation of federal law.

Debby Merritt:

We're joined today by Pete Barry, a consumer lawyer in Minneapolis, Minnesota who attended William Mitchell College of Law. Although Pete has a partner in his practice now, he started out solo immediately after graduating from law school in the 1990s.

Pete, why did you choose a solo practice?

Pete Barry:

Well, I always knew that I wanted to have my own practice. My father is a CPA and he had run his own tax practice for many, many years. I saw the benefits of working for myself, and so my goal in going to law school was to create a franchise for myself.

Debby Merritt:

You operate now under Law Point?

Pete Barry:

Well, we have a website, lawpoint.com. I got that web name probably sometime around '93, maybe early '94 when the internet was just kind of getting on its first legs.

Debby Merritt:

What was your reasoning about getting a brand name like that?

Pete Barry:

Well, at the time, I recognized that the internet was going to be huge, and so I went out and got several domain names. For a while, I had Tax Man, Tax Point, Law Point, and some other names.

Debby Merritt:

Now today, you have a partner. Why did you decide to bring somebody else in?

Pete Barry:

Well, my law partner, Pat Helwig, is one of my former law students and he's just a great friend and a great lawyer, smart, helpful. He's sort of the yin to my yang and helps balance me out when I'm overzealous or frustrated. He's a calming influence in my practice and he's just been a great friend and a great law partner.

Debby Merritt:

Are there ways that you divide up the work between you?

Pete Barry:

Well, for the most part on our cases, on smaller cases, we more or less eat what we kill, meaning we do our own cases, we have our own book of business, we split our expenses and marketing expenses, advertising expenses and the like, and then we just basically pluck off the business that appeals to us. And if I don't want it, then Pat can take it, and if Pat doesn't want it, then I can take it or we can walk away. We're not a bus, we don't have to stop for everybody. We try to get people the help that they need if we can't help them, but at the same time, there's always plenty of business.

Debby Merritt:

Let's talk about the type of help that you provide. Your focus now is on suing debt collectors. Why don't you explain to us what sort of misconduct gives rise to a suit? What is it that a debt collector does wrong?

Pete Barry:

Well, there's a federal law called the Fair Debt Collection Practices Act, or the FDCPA, and the FDCPA prohibits the use of harmful, oppressive or abusive debt collection tactics in the collection of consumer debts. Basically, the FDCPA is a bill of rights for consumers that prohibits debt collectors from treating them with anything other than truth, fairness, dignity and respect.

Debby Merritt:

And I take it that doesn't always happen?

Pete Barry:

Unfortunately for American consumers, no, it doesn't always happen.

Debby Merritt:

I confess that I've gotten calls from debt collectors that weren't really intended for me. It was a different Deborah Merritt.

Pete Barry:

And that's a fairly common phenomenon, less so these days with the use of skip tracing methodology and the more high-tech approaches to collecting debt and the increased amount of compliance as well as the increased amount of private regulations through civil suits.

Debby Merritt:

Tell us a little bit about the regulations themselves. Where do these causes of action come from?

Pete Barry:

The FDCPA is a Federal Consumer Protection Statute, 15 U.S.C. 1692, which essentially lays out the dos and don'ts of collecting debts for debt collectors and it provides consumers with a private right of action or a way to sue a debt collector who has harassed, oppressed, or abused them.

Debby Merritt:

Pete, why don't you give us an example of the type of conduct that might bring somebody to your door?

Pete Barry:

Well, anytime a consumer has been treated unfairly or disrespectfully by a debt collector, they typically show up at my office. Every lawsuit begins with a misunderstanding. That's the kernel of every suit. People who like each other and are getting along well don't sue each other. People who don't like each other and who feel mistreated by one another do sue each other.

And so what often happens is a consumer gets a harassing phone call late in the evening, disrupts their dinner hour, disrupts their work routine, or a contact to a neighbor. Those are pretty common examples of collection abuse that we see in our office.

Debby Merritt:

Now, is just a phone call that occurs in the evening, is that enough to sue over?

Pete Barry:

No, and I'm not suggesting that debt collectors don't have a right to collect debts. Debt collection is a legitimate business. The collection industry has been around for as long as debt has been around. But at the same time, it's a regulated industry and anytime a debt collector contacts a consumer at an inappropriate time, like before 8:00 AM local time or after 9:00 PM, it's illegal.

In addition, the FDCPA says that if a debt collector contacts you at a time that they know is inconvenient to you, that is also illegal, and that's really viewed on a case-by-case basis.

Debby Merritt:

So if a collector called me at 4:00 PM and I said, "I can't talk to you now, I'm always nursing my baby at this hour," and then he called back the next day, is that the kind of thing you mean?

Pete Barry:

It's a perfect example. I've represented folks who work the third shift, and so for them, 8:00 AM is bedtime.

Debby Merritt:

Ah, right.

Pete Barry:

So when they get phone calls and they get awakened by a debt collector and they tell the debt collector, "Hey, look, I worked a third shift here at the plant, don't call before 4:00 PM," the debt collector has to respect that, and when they don't, that debt collector has violated the FDCPA and they get sued by me.

Debby Merritt:

Now, how do the clients find you? Because I'm, as a lawyer, not that familiar with this Debt Collection Act, and I imagine many consumers aren't either.

Pete Barry:

Over the past 19 years, I've tried to figure out how my clients find me, and the only answer I can come to is that if you do a good job for your clients and you tell people what you do, you'll have more clients. A lot of my marketing is simply telling people what I do for a living. When people ask me what I do for a living, I don't say I'm a lawyer or I'm a consumer rights lawyer because that doesn't mean anything to people. What I tell people is plainly and simply, "I sue debt collectors," and that always triggers a conversation.

Given the fact that, according to the Urban Institute, approximately 35% of Americans are in active collections on at least one account in the United States, it's not hard to find a client who's been contacted by a debt collector.

Debby Merritt:

Just as you've been telling me this story, I'm starting to think, maybe I could get rid of these people who keep calling for the other Deborah Merritt.

Pete Barry:

Anytime a debt collector contacts the wrong party more than once after being told that they're in fact the wrong party, that debt collector's in violation of the FDCPA.

Debby Merritt:

Ah ha.

Pete Barry:

So debt collectors oftentimes want to contact anyone that they think will listen to them or pick up the phone, and interestingly enough, the fact that you are answering the phone causes them to want to call you more because the perception is that if you'll answer the phone, you might pay.

Debby Merritt:

Well, how do you choose the clients then? Out of all these people who want your services, I imagine some cases are more promising than others.

Pete Barry:

Regardless of what kind of law practice you're in, I think especially when you're doing contingency fee work where you get paid if you're right and you don't get paid if you're wrong, it's imperative that you do good client screening. So I start out with a thing I call the four abilities: presentability, credibility, reliability, and stability.

I'm always looking for clients that I think are reasonably presentable. They need to put on a pair of khakis and a button down shirt to go to a deposition or to a summary judgment hearing or to a mediation. They can do that. All my cases are in federal court and because of that, there's a higher standard on these cases and a higher expectation of client involvement than there would be in a municipal court or a state court.

Debby Merritt:

Do these cases take a lot of the client's time? Are there a lot of depositions and other hearings to go to?

Pete Barry:

Every case is different. I would say probably somewhere between 40 to 50% of the cases settle out fairly quickly without any significant discovery or without depositions, and the balance of the cases have some level of discovery. I would think in probably maybe 15% of the cases, there are depositions taken. It all depends on the facts, it all depends on the defendant, and it all depends on just the willingness of that defendant to own up to their conduct and make things right with the consumer.

Debby Merritt:

Do the cases ever go to trial?

Pete Barry:

It's very rare for an FDCPA case to ever go to trial. The FDCPA, because it's a federal statute, you're inevitably almost always in federal court and the federal court system is such that between the rules of civil procedure and the mechanisms involved in trial, that almost never does an FDCPA case get tried.

Debby Merritt:

Both parties know enough about what the other is going to say and there's encouragement to settle, so they go ahead and settle.

Pete Barry:

Sometimes parties settle because they recognize that the conduct violates the law, but most often, there's a fight over whether or not the conduct, the agreed upon conduct, and when I say, "Agreed upon," I mean the parties have agreed on the facts, if the parties agree on the facts, there's no material dispute of facts and Rule 56 kicks in, the summary judgment standard. If there's no material dispute of facts, then the parties can put it to the court and the court will ultimately decide that case.

Many of these cases are resolved either on a motion to dismiss under Rule 12 or a motion for summary judgment under Rule 56. It just depends on the circumstances. If the conduct is egregious enough and there's actual damages or emotional abuse, those kinds of things, then the cases, almost without exception, get settled. It's very rare to see any kind of trial on an FDCPA case involving abusive conduct or screaming or threats or any kind of vulgar language or racial epithets or things like that. Very rare to see those trials. When those cases do get tried, the collection industry gets delivered the justice that it so well deserves.

Debby Merritt:

Are there punitive damages available in those cases?

Pete Barry:

The FDCPA does not permit punitive damages. They can get statutory damages of up to $1,000. Those are more or less considered punitive damages under the statute.

Debby Merritt:

Statutory damages means anyone who shows that there's been a violation is entitled to that, right?

Pete Barry:

Exactly. The FDCPA is a strict liability statute, so if you establish that a violation occurred, you're entitled to statutory damages of up to $1,000.

Debby Merritt:

Pete, would that be per contact with the debtor?

Pete Barry:

No. The FDCPA provides for statutory damages of up to $1,000 per lawsuit.

Debby Merritt:

Tell us a little bit more about how you collect your fee. You mentioned that it's a contingency fee.

Pete Barry:

Yeah. I don't charge my clients for the work that I do. I front all the costs in the case and all my time. The fees that I generate are paid by the defendant if I prevail on the action. So if I win for the client, the client gets their damages, their statutory and actual damages if they have any and can prove any actual damages, and I get my attorney's fees and costs paid by the defendant.

Debby Merritt:

Because the statute provides for attorney's fees.

Pete Barry:

Exactly.

Debby Merritt:

What kind of recoveries are we talking about for the clients? You said that $10 would be pretty unusual. What's a more usual range?

Pete Barry:

Well, if it's a statutory damages case, the usual range is $1,000.

Debby Merritt:

And actual damages?

Pete Barry:

Actual damages can range from $1,000 all the way up to I've seen damages go as high as $1.5 million on a case.

Debby Merritt:

Wow. What kind of conduct was in that case?

Pete Barry:

That conduct was a case down in Texas involving the use of a lot of racial epithets left on a voicemail system.

Debby Merritt:

What's one of the more unusual cases you've handled?

Pete Barry:

The first case that comes to mind, I represented a consumer that had a debt collector who came out to repossess a vehicle and the consumer had been instructed not to surrender the vehicle to the repo agent and to keep it in a storage locker. When the consumer later left their house driving a different vehicle, the repo agent chased them up to a local gas station and blocked them in and used the overhead speaker system that was mounted on the tow truck to tell everybody at the gas station that my client was a deadbeat.

Debby Merritt:

Hopefully you recovered in the end.

Pete Barry:

We did. We did try that case.

Debby Merritt:

You recover attorney fees under the federal statute. Are those set by the court? Are they determined per hour? What do you usually look for in the way of attorney fees?

Pete Barry:

Well, the Fair Debt Collection Practices Act provides for the recovery of a reasonable attorney fee, so I track my time contemporaneously. I use a piece of software called clicktime.com, and Click Time permits me to track my time either from a phone or laptop as I'm working on a project, working on a case. At the end of the case, I can just run a report of my time and submit that along with a brief and an affidavit to the court for my time.

As a practical matter, most disputes over the payment of fees get resolved between the parties, and it's very common for the defendant to agree to pay the $1,000 in statutory damages and to agree to pay a reasonable amount of fees for my time. The most important thing for those defendants is they want to see what work I did and when I did it, and so I use Click Time to drive that. Essentially, it's world-class billing software that a guy like me can afford and can use very effectively.

Debby Merritt:

What do the defendants consider reasonable? Are we talking $200 an hour, $500, $1,000?

Pete Barry:

I currently bill here in Minneapolis at $495 an hour. I've been approved at $425 an hour for work performed in 2009-2010. I've gradually raised that rate. Certainly for somebody with 19 years of litigation experience in this area, $350 to $400 an hour would not be uncommon in a major metropolitan area. I'm probably shooting over my head a little bit to ask for $495 an hour here in Minneapolis, but at the same time, the only way to get a raise is to ask for it.

Debby Merritt:

In fact, you're something of a national expert on litigating these cases. I understand that you run boot camps for other attorneys.

Pete Barry:

Something is right, something of an expert.

Debby Merritt:

Something. Tell us a little bit about the boot camps.

Pete Barry:

Well, I've been training lawyers in how to sue debt collectors since 2001. I run a boot camp at fdcpabootcamp.com, which essentially provides three days of training for lawyers who are new to this area practice or who want a refresher in this area of practice on everything from litigation strategy, settlement strategy, trial strategy through settlement, as well as marketing and other technology-type issues.

Debby Merritt:

And why do you run these boot camps? You're training your competition, I think.

Pete Barry:

You could ask Elon Musk why he's giving away all his patents for solar technology. He likes the competition. And I've always seen competition as important and healthy. I can't possibly do all the cases that are out there in the United States.

Debby Merritt:

So you run the boot camps and these also provide a revenue stream for you?

Pete Barry:

Yeah. When I first started out, I did them for free, and then my wife intervened and told me that I had to stop spending time and money away from home training lawyers and not getting paid for it. So with that impetus, I decided to charge money to train people, and once I started charging money, then a lot more people came. It got much more popular.

Debby Merritt:

Now, one of the questions I would have for you attending these seminars would be, well, what can I expect to get out of this financially compared to what the client gets? If the client is getting only $1,000 recovery, what can I expect in attorney's fees?

Pete Barry:

Well, it all depends on the case. It's very common in these cases with statutory damages that if the defendant fights, which is their right to do and they lose, they may pay me $45,000 in fees and my client gets their $1,000 statutory recovery. That's a very common outcome, as it should be. There are lots of laws with fee-shifting provisions, Family Medical Leave Act, Fair Labor Standards Act, Equal Credit Opportunity Act, all kinds of federal statutes which provide for fee shifting.

Congress, in their wisdom when they passed the FDCPA and lots of other consumer credit protection laws, decided that they weren't going to set up a federal agency to enforce the law. They were going to allow attorneys to become their private attorneys general so that they didn't have to set up a separate government agency.

Debby Merritt:

It does sound like a nice balance in terms of how the law is enforced. You're obviously passionate about this area and your practice. Can you just hit quickly on the things that are most enjoyable day-to-day? Why do you like this so much?

Pete Barry:

I like to help individual consumers that are getting abused and harassed by debt collectors because debt collection, when you have no knowledge about what's legal and what's illegal, you're at a major disadvantage. You're weak. When you know what your rights are and you know how to enforce those rights, it puts you in a position of strength.

I want to be clear that people should pay their just annoying debts and that the collection industry is a legitimate industry that serves an important economic purpose in our society. If there weren't collection agencies and debt collectors, people would be less apt to make good on their debts. At the same time, we live in a civilized society and our civilized society has determined that collection conduct has to fall within certain parameters, and when it doesn't, consumers have a right to sue and they should because it helps the industry to police itself. And without the FDCPA, consumers would be in a much worse position today than they have been in the past 40 years or so.

Debby Merritt:

Are there any drawbacks to your practice? What are the days when you say, "Oh no, not this again"?

Pete Barry:

My practice is the miracle of self-employment. You get to pick whatever 85 hours a week you want to work.

The only drawback I would say about any law practice is that I don't have enough time with my children, I don't have enough time with my wife, I don't have enough time to do a lot of the things that other people seem to get to do, but at the same time, the reward is the satisfaction of knowing that I've helped people.

Regardless of how hard you worked in law school, you'll never work harder than when you're in private practice. You just won't. That's sort of the nature of the practice of law. I think it attracts people who are, to some extent, workaholic and I think that because everybody who's involved is a workaholic, they all set expectations for themselves that are probably unrealistic for normal human beings who love their families and want to spend time with them.

Debby Merritt:

Is this an area though where the attorney could make that choice more readily than in some areas? It doesn't sound, for example, like your clients would call you regularly in the middle of the night or demand that you work on the weekend.

Pete Barry:

I've never had a client demand that I work on the weekend and I've never had a client in my FDCPA practice call me in the middle of the night. It is not the kind of practice where there are emergencies. We don't have to have restraining orders in place. There isn't a sudden hearing that gets called and set in the middle of the following business day. It's just not that kind of practice. It's a slower practice. There's a lot more litigation strategy and there's a lot of brief writing. I write far more now as a lawyer than I ever did in law school, and I like it.

One thing I sort of regret about my practice is I don't have more time to write. I spend a lot of time on the phone trying to negotiate and settle cases. I spend a lot of time running interference over discovery disputes and the like. It would be nice if I could have more time for just thought and reflection and writing.

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