What RCK may mean to Hyper-Technical FDCPA Suits
In the past weíve published stories on the FDCPA, the Fair Debt Collection Practices Act, and in issue 98:09:02, we explained RCK, Represented Check Entry. But, how does the FDCPA apply to the RCK process? What should anyone collecting on debits know about RCK and the FDCPA?
First, one should know that the FDCPA prohibits false or misleading representations when attempting to collect a debt. This simple concept has been the basis of thousands of hyper-technical lawsuits over the years, most of which have resulted in getting the debtor out of paying the debt and, in many cases, receiving $1,000 for his/her trouble. While NACHA wrote the rules on how to process an RCK entry, it is likely to be the legal profession that will establish the potential penalties under the FDCPA. As it stands now, collectors using RCK could encounter problems if they:
The FDCPA also prohibits unfair practices when attempting to collect a debt. Again, collectors could be violating the act if they:
Finally, the FDCPA prohibits the harassment and abuse of consumers. If collectors are using RCK, they could be accused of harassment if they:
One of the most interesting questions yet to be determined, however, is if an RCK collection requires "Miranda-izing." The FDCPA requires that a consumer be notified if a consumer contact that is an attempt to collect a debt, is an attempt to collect a debit (the FDCPA has recommend language, referred to as "Miranda-izing" the consumer). In two separate arguments with state attorneys general last year regarding what type of activities are collections and which are not, a great deal of time was spent on the possibility of a simple re-depositing of the check functioning as a collection event, subject to state and federal collection law. In both cases, it was determined that the re-depositing of the check by the RDFI is a banking activity, not a collection activity, and therefore not subject to collection law. It was also determined that the holder of the check, which received title before it was a debt, could also redeposit items and not be subject to state collection laws which, in both cases, were the adopted federal statutes. This, of course, means that third party collectors who receive items to collect after they became debts may need to Miranda-ize, even if the ultimate method of collection was re-depositing. The question, then, is: Does the conversion of a "check" or another form of collection medium trigger a "collections event" and everything a collection event entails?
This question of Miranda-izing the consumer has become so debated that recent SEC interpretation has even required attorneys to provide the mini-Miranda statement on anything they do that is even remotely a debt collection activity. In fact, some attorneys are being sued for having added Miranda language to their normal letters too broadly, which is being argued as misleading because many of these letters really are not an attempt to collect a debt.
So, while RCK may solve some collection problems, it does not eliminate a debt collectorís liability or responsibility under the law. It will be interesting to see how many organizations are named in any particular consumer suit under the argument that the third-party RCK consolidator, RDFI bank, and the original payee (merchant) might each be responsible for the legal maximum fine when collection rights are abridged.
