Despite a spate of unsuccessful attempts, plaintiffs attorneys do not seem to be dissuaded from filing what have become known as “reverse Avila” lawsuits against collection agencies, but the specter of an Appeals Court decision could turn the tide back in their favor, a panel of compliance experts noted during a webinar yesterday.
The webinar, which was sponsored by Barron & Newburger, was on the topic of how to manage and defend against reverse Avila lawsuits. A copy of the webinar recording can be accessed here.
Avila refers to Avila v. Riexinger, an Appeals Court decision which ruled against a collection agency for not including language in its disclosures that the amount of the debt may increase over time, if interested and late fees are being charged to the account. Plaintiffs’ attorneys took that decision and subsequently started suing collection agencies if the collection letters did not include language indicating that interest and fees are not accruing.
Calling it a circumstance of unintended consequences, Judd Peak, the chief compliance officer at Frost-Arnett, said that while the line of thinking seems logical insofar as “if you collect X then you need to disclose Y,” plaintiff’s attorneys are now asserting that collection agencies also need to say, “if you are not doing X or collecting X then you need to disclose Z.”
Said Katie Grzechnik Neill, the compliance and litigation counsel for ARS National Services: “This is a perfect storm for the industry. You don’t know what to put in these letters. You don’t know how to comply with these laws.”
To date, the companies that have decided to defend these lawsuits have done an effective job of obtaining summary judgments in the cases’ early stages, but there is a case that was recently argued before the Court of Appeals for the Second Circuit that could impact reverse Avila lawsuits going forward.
Taylor v. Financial Recovery Service is a lawsuit where the plaintiff alleged the defendant violated the Fair Debt Collection Practices Act by not specifically indicating that fees and interested had stopped accruing on the account. The District Court ruled the defendant did not violate the FDCPA, and the plaintiff appealed the decision. Should the Appeals Court rule in the plaintiff’s favor, it would provide ammunition to plaintiff’s attorneys filing reverse Avila lawsuits, the panel agreed.
Plaintiffs “may get sympathy from the appeals court,” said Arthur Sanders from Barron & Newburger.
The key for the industry, is to not settle reverse Avila lawsuits and to keep winning in court, the panel said.
“It is well worth the money to defend these,” Sanders said. Plaintiff’s attorneys “will be scared off if they see every case will be a battle.”
