The Supreme Court has held unanimously that private attorneys hired by the Ohio Attorney General to collect debts owed to agencies of the State of Ohio did not violate the Fair Debt Collection Practices Act (FDCPA) by sending out demand letters on the Attorney General’s letterhead. Sheriff v. Gillie, No. 15-938, 2016 WL 2842453 (U.S. May 16, 2016). The opinion reverses a decision by the Sixth Circuit holding that the letters did violate the FDCPA.
The Ohio Attorney General has hired private attorneys as special counsel to collect debts owed to Ohio agencies such as student loans and medical bills. Special counsel enter into year-long retention agreements as independent contractors. They are paid based on a percentage of their recoveries. Special counsel can continue to represent private parties. The Ohio AG requires special counsel to use Ohio AG letterhead when contacting debtors on behalf of the state. Debtors sued two different special counsel alleging that the collection letters they received from the special counsel were “false, deceptive or misleading” because they gave the impression they were from the Ohio AG. The federal district court granted summary judgment holding that the special counsel were “officers” of the State of Ohio, which exempted them from the FDCPA, and that the use of the letterhead was not false or misleading. The Sixth Circuit reversed because the special counsel were independent contractors, not State officers, and there was an issue of fact as to whether unsophisticated debtors would find the letters misleading.
The Supreme Court did not address whether the special counsel were exempt state officers. Rather, it held the letters on AG letterhead were not false or misleading for several reasons. The signature block of the letters identified the special counsel as private attorneys with separate contact information. There is nothing misleading about a letterhead that indicates the special counsel work on behalf of the AG. The special counsel work closely with the AG’s office in collecting debts and often cover each other’s court appearances in debt-collection litigation. Finally, the Court noted a federalism concern. The State of Ohio has chosen this particular method to collect debts owed to it and “[t]here is no cause, in this case, to construe federal law in a manner that interferes with ‘States’ arrangements for conducting their own governments.'”
This situation seems far different than the circumstances that Congress intended to remedy and which courts have previously addressed. Typically, what has happened is that a creditor or a collection agency has used the letterhead of a law firm for its collection letters. These letters falsely indicate that suit is imminent because the creditor has apparently retained a law firm to collect the debt.
Sheriff v. Gillie, No. 15-938, 2016 WL 2842453 (U.S. May 16, 2016).
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