FDCPA Reform Bill with "Foti Fix" Gains Industry Support

Accounts receivable management industry trade group ACA International has thrown its support behind a bill that would exempt debt collectors from liability when leaving voice messages.

Introduced by U.S. Rep. Barney Frank (D-Mass.) two weeks ago, the so-called “Fair Debt Collection Practices Clarification Act of 2012” (H.R. 4101) specifically exempts debt collectors from liability when leaving voice messages. Debt collection agencies have long been caught in a tricky paradox concerning voice mail due to seemingly conflicting regulations and a court ruling in the case Foti v. NCO Financial Systems, Inc.

“We appreciate Representative Barney Frank for highlighting the Foti issue and look forward to working in a bipartisan fashion to help pass this important legislation,” said ACA CEO Pat Morris.

The Foti decision forced debt collectors to unambiguously disclose their identity on voice mails and messages left on answering machines. The disclosure is often referred to as the “mini-Miranda” warning and lets the consumer know that the message is from a collection agency.

But since third parties can often gain access to voice mails, many debt collectors were being sued under the Fair Debt Collection Practices Act for violating provisions against third party disclosure. In short, if another person listened to the message, it would be obvious that the intended party was being pursued by debt collectors. So in many cases, the ARM industry has opted out of leaving voicemails, especially automated ones.

H.R. 4101 would exempt debt collectors from liability when they leave voice messages, as long as they use language to be developed and approved by the Consumer Financial Protection Bureau.

ACA International said late last week that it is supporting the bill.

“After considerable deliberation, ACA’s Legislative Council and Executive Committee have voted to support H.R. 4101, The Fair Debt Collection Practices Clarification Act,” said Morris. “This legislation provides an essential fix to the “Catch-22” situation that ACA members face when reaching a consumer’s voicemail.  By finding a safe harbor for leaving voice messages, H.R. 4101 has the potential to significantly reduce the frivolous lawsuits ACA members face. Lawsuits relating to this so-called “Foti” problem have been recognized by ACA’s members as their number one problem, and this loophole for consumer litigation was targeted as a top priority for reform during ACA’s Legislative and Regulatory Strategic Planning Meeting for the 112^th Congress.”

The ACA has developed and proposed its own Foti-compliant language for members to use, language that was recently debated at an FTC roundtable meeting. But the CFPB will provide a definitive resolution to the matter once approved.