In an important ruling for debt-collection law firms, the United States Supreme Court held in Sheriff et. al v. Fillie et. al, Docket No. 15-338 (2016), that when a debt-collection firm is hired by the Attorney General to collect debts on behalf of the State, use of the Attorney General’s letter head does not violate the Fair Debt Collection Practices Act (“FDCPA”). In doing so, the Court reasoned that the letters did not contain false information or misleading representations.
In Sheriff, Plaintiffs brought a putative class action against debt-collections attorneys and their firm alleging they violated the FDCPA by sending debt-collection notices on the Ohio Attorney General’s letterhead rather than the letterhead of their private firms. Under Ohio law, debts owed to the State or State-owned agencies are certified to the Attorney General for collection. The defendant firm had been appointed by the Ohio Attorney General to act as “special counsel” to collect debts on behalf of the State. The firm was required to use the Attorney General’s letterhead, but also included that the attorneys and firm were appointed “special counsel” and provided the name and addresses of the firm.
The FDCPA prohibits “abusive debt collection practices” 15 U.S.C. § 1692(a)-(d), and specifically prohibits “false, deceptive, or misleading representation[s]… in connection with the collection of any debt.” But the FDCPA excepts from the definition of a debt collector “any officer… of… any State to the extent that collecting… any debt is in the performance of his official duties. Id., § 1692a(6)(C).
The District Court granted summary judgment for the defendants, holding that special counsel were officers of the State. The Sixth Circuit vacated the District Court’s judgment holding that the firms were independent contractors and not entitled to the protection of § 1692a(6)(C), and that there was a genuine issue of material fact whether an unsophisticated consumer would be misled into “believing it is the Attorney General who is collecting on the account.”
The Supreme Court did not analyze whether special counsel were “state officers” and were therefore protected by § 1692e. Instead, the court assumed arguendo that they were not but, nonetheless, held that their use of the Attorney General’s letterhead was not “false” or “misleading.” The Court reasoned that the letterhead “identified the principal—Ohio’s Attorney General—and the signature block named the agent—a private lawyer hired as outside counsel to the Attorney General.” Sherriff, at *7 (slip opinion). Including the following sentence in the letter would have had the same effect: “We write to you as special counsel to the Attorney General who has authorized us to collect a debt you to [the State or an instrumentality thereof].” Id. Because that representation is true, it cannot be “false” or “misleading.” Special counsel did not use any other name than their “true name,” as required by § 1692e(14), because the letters identified that that the firms was working on behalf of the Attorney General’s office and provided the firm’s name and address.
Also, special counsel worked closely with the Attorney General’s office. Assistant Attorneys General would often assist in preparing pleadings, sometimes join as co-counsel, and cover proceedings in ongoing litigation. Therefore, a debtor’s impression that the letter from special counsel is a letter from the Attorney General’s office would be “scarcely inaccurate.” Id. at *8 (slip opinion). Use of the Attorney General’s letterhead conveyed on whose authority special counsel wrote to debtors, alerting them to the basis for the payment obligation and the state official responsible for enforcement of debts. It is important to take acknowledge footnote 5 to the opinion, which indicates that the Court only addressed the facts of this case and the considerations relevant to this analysis may not carry over to other debt-collector relationships
Although the Sixth Circuit was concerned that use of the Attorney General’s letterhead would “place pressure on those individuals receiving the letters” to pay their state debts, the Supreme Court found this concern unfounded for two reasons. First, nothing in the letter threatened criminal prosecution, civil penalties, or any other action. The letter merely clarified that the debt was owed to the State and the Attorney General is the State’s debt collector. Second, the State does have enforcement powers beyond those afforded to private creditors, such as applying a debtor’s tax refund in satisfaction of the debt. State debts take priority over most private debts. “In other words, § 1692e bars debt collectors from deceiving or misleading consumers; it does not protect consumers from fearing the actual consequences of their debts.” Id. at *11 (slip opinion).
This case will serve as an important guide to debt-collection firms who have been delegated the power to collect on debts from the State.