Bruce A. Nants, Esquire
13 South Magnolia Avenue
P.O. Box 547871
Orlando, Florida 332854

Dear Mr. Nants:

This is in reference to your April 1, 1988, correspondence to the Federal Trade Commission's Office of General Counsel concerning the application of the Fair Debt Collection Practices Act (the "Act"), 15 U.S.C. §1692 et sea., to attorneys.⁽¹⁾ It is our understanding, based on your telephone conversations with Lawrence DeMille Wagman of that office, that you desire our informal views on the eleven questions posed in your correspondence.

Accordingly, pursuant to your request, I am treating your correspondence as a request for an informal staff interpretation. In this regards and as you have been previously advised, we generally refrain, as a matter of policy, from issuing opinions on matters in private litigation. In this connection, we also note that the opinions expressed in this letter, and in prior staff interpretations previously sent to you, are those of the Commission's staff and as such are not binding on the Commission or any court. However, inasmuch as the questions you raise have been, in most instances, previously addressed by us, we are willing to accommodate your request. Further, because our prior staff interpretations discuss in greater detail the issues raised in your letter, we are responding summarily to the questions you posed.

Ouestions A, B, C, D and H

These questions pertain to Section 803 (6) of the Act, 15 U.S.C. §1692a (6), defining the term "debt collector." It is our opinion that generally, to come within the definition of a debt collector, an attorney must perform some tasks that are functionally indistinguishable from those traditionally performed by debt collection agencies.⁽²⁾ Traditional debt collection activities intended to be covered by the Act include, for example, locating the debtor when necessary, communicating with him about the amount owed, and negotiating repayment arrangements.

The Act does not define the level of activity that will constitute collecting debts "regularly." Factors such as the frequency of such collection work may be considered, on a case by-case basis, in determining if an attorney "regularly" collects debts owed to others. The percentage of a law practice that is devoted to collection work may be less significant than whether debt activities are an established part of the practice. On the other hand, when the number of collection efforts engaged in is de minimis, Congress has made clear that the Act does not apply.

Consistent with the history and purposes of the Act, we have interpreted the term "debt collector" to encompass both natural persons and artificial persons, i.e., business organizations. When lawyers practice together under a ,common name, the individuals-who comprise such a firm and their employees would be required to comply with the requirements of the Act to the extent that the Act applied to their business activities.⁽³⁾ In our view, the relevant inquiry is whether the firm regularly collects debts for others.

Question E

Prior to the 1986 amendment to the Act, the Commission issued a statement clarifying its enforcement policy regarding traditional debt collection agencies which happen to be owned or operated by an attorney.⁽⁴⁾ The Commission also published a proposed version of a staff commentary on the Act.⁽⁵⁾ The commentary summarizes over 1,000 pages of informal staff interpretations that Commission staff had issued since the Act went into effect in 1978.

Question F

A civil penalty of up to $10,000 for each violation of the Act is authorized.⁽⁶⁾ Among the factors to consider in determining the amount of a civil penalty are: the good or bad faith of the defendant; its ability to pay; and the necessity of vindicating the authority of the Federal Trade Commission in deterring further violations.

Question G

The Federal Trade Commission does not have jurisdiction over banking institutions. Responsibility for their regulation lies with the federal regulatory agencies identified in Section 814 (b) of the Act, 15 U.S.C. §16921 (b).

Question I

The Commission staff selects matters for further investigation when complaints from consumers, state and local agencies, or from industry members suggest a pattern of law violations not suited to voluntary compliance efforts. Case selection is based primarily on the extent of possible consumer injury. In appropriate instances we initiate non-public formal investigations of debt collectors to determine whether they are or have engaged in serious violations of the Act.

When further investigation produces evidence confirming such violations,.the staff will attempt to negotiate a settlement of the case prior to recommending the issuance of a complaint, provided there is a likelihood that appropriate civil penalties and other affirmative relief can be obtained. When a negotiated settlement that effectively addresses the violations at issue cannot be reached, however, the Commission, through the Department of Justice, may bring suit to enforce the law. In light of the foregoing and in the absence of sufficient facts to make a determination, the Commission's staff is unable to formulate a response to the latter part of this question.

Question J

See court decisions cited in response to Question E above.

Question K

In our view, if an attorney is a debt collector and "communicates," as that term is defined in the Act, with a consumer, the debt validation and notice requirement in Section 809 (a), 15 U.S.C. §1692g, applies.⁽⁷⁾ The notice must be provided within five days of the collector's initial "communication" with the consumer. Although a collector may include the notice in his initial "communication" with the consumer, there is no requirement that he do so.

The foregoing views represent the staff's present enforcement position. As previously indicated, they are not binding on the Commission or upon a court.

Sincerely,

Rachelle V. Browne
Attorney
Division of Credit Practices

Enclosures
cc: Larry DeMille Wagman, Esquire
Office of General Counsel

1. As you are aware, on July 9, 1986, Congress amended the Act by repealing former Section 803 (6) (F), which had exempted collecting a debt as an attorney on behalf of and in the name of a client." Thus, as amended, the Act covers attorneys who regularly collect or attempt to collect debts owed or due or asserted to be owed or due another.

2. See letters dated December 10, 1986, January 8, 1987, January 9, 1987, January 20, 1987, and January 21, 1987, to David S. Miller, Francis A. Polito, Jonathan P. Barstow, Daniel W. Dreyfuss and James D. Broadway, respectively.

6.Section 5 (m) (1) (a) of the Federal Trade Commission Act, 15 U.S.C. §45 (M) (1) (a); Section 814 (a) of the Act, 15 U.S.C. §16921.

7. See letters dated September 12, 1986, November 17, 1986, and February 6, 1987, to Sheldon H. Pressler, Deborah M. McPhee and Paul A. Peters, respectively.