Amicus Curiae Brief — Sheriff v. Gillie, 136 S. Ct. 614 (2015) (No. 15-338)

No. 15-338

IN THE

Supreme Court of the United States

MARK J. SHERIFF, SARAH SHERIFF, WILES,

BOYLE, BURKHOLDER & BRINGARDNER CO.,

LPA, AND MICHAEL DEWINE, ATTORNEY

GENERAL OF OHIO,

Petitioners,

Vv.

PAMELA GILLIE AND HAZEL MEADOWS,

Respondents.

On Writ of Certiorari To The United States

Court Of Appeals For The Sixth Circuit

BRIEF FOR AARP AS AMICUS CURIAE

SUPPORTING RESPONDENTS

JULIE NEPVEU*

*COUNSEL OF RECORD

WILLIAM ALVARADO RIVER.A

AARP FOUNDATION LITIGATION

601 E STREET, NW

WASHINGTON, DC 20049

(202) 434-2060

March 2, 2016 Counsel for Amicus Curiae AARP

il

TABLE OF CONTENTS

Page

- F fe gi, , EE eeeeaeasEnEee iv

STATEMENT OF INTEREST ...................00ececceeeeeeees 1

SUMMARY OF ARGUMENT .................0022002....000.0000 2

a eieaal 4

I. CONSUMERS NEED PROTECTION

FROM ABUSIVE, DECEPTIVE, AND

UNFAIR COLLECTION PRACTICES

USED BY THIRD-PARTY DEBT

COLLECTORS TO EXPLOIT

FINANCIAL, EDUCATIONAL, AND

CIRCUMSTANTIAL

VULNERABILITIES OF DEBTORS .............. 4

A. Increasing complaints about

abusive debt collection practices

corresponds to mounting

consumer debt loads....................0..0000+ 7

B. The bulk of debt in collection is

related to unavoidable and

unaffordable health care, which

can compromise a debtor’s ability

to pay other debt that otherwise

would be manageable.......................... 12

IT.

ill

Economically insecure consumers

may be plunged into a collection

“nightmare” by unavoidable and

unaffordable medical expenses

and other financial shocks. ................. 14

Debt collectors cause severe

distress by intentionally

targeting unsophisticated

debtors and older people and

using abusive debt collection

practices in order to exploit

their vulnerabilities ............................ 16

THE FDCPA ESTABLISHED A

MINIMUM NATIONAL STANDARD

OF CONDUCT THAT PROTECTS

DEBTORS AND DOES NOT UNDULY

LIMIT STATES FROM COLLECTING

CONSUMER DEBT USING THIRD-

PARTY DEBT COLLECTORG. .................... 22

A.

The FDCPA established a

minimum national standard of

conduct to protect vulnerable

consumers from the abusive

practices of third-party debt

a 22

The practices prohibited by the

FDCPA should not be allowed by

ESTE RTE HIE Ae Oe EER 23

IT ceiniceainiesiiianininssinitsinantihcnaidusdbamniidiibduiintie 26

1V

TABLE OF AUTHORITIES

Page

Cases

Commissioner v. Clark,

TEENIE epee dpe 26

Gillie v. Law Office of Eric A. Jones, LLC,

785 F.3d 1091 (6th Cir. 2015), cert.

granted sub nom Sheriff v. Gillie,

193 L. Ed. 495 (U.S. Dec. 12,

Sea a a I Te 3, 16, 17, 23

Jerman v. Carlisle, McNellie, Rini, Kramer &

Ulrich LPA, 559 U.S. 573 (2010).................. 24

Maracich v. Spears,

I 26

Staub v. Harris,

636 F.2d 275 (Sd Cir. 1960) .......................... 24

Statutes

EERIE a ee ITT 2,21

I i 4

| ESR ae See eres e 19

Re TITY itisiciiciitesioinininicnvnniinnierpianninaiicinliadiainnsiie 20

Vv

Credit Card Accountability Responsibility and

Disclosure Act of 2009, Pub. L. 111-24,

Title I, § 108, 123 Stat. 1743 (May 22,

2009) (15 U.S.C. § 1602) .......ecccecccccceceeeeeeeeees 10

Fair Debt Collection Practices Act,

Ft FF ae passim

Regulations

Defining Larger Participants of the Consumer

Debt Collection Market, 77 Fed. Reg.

I I I i iniitircsiainisctencditnmniteteinindibnnen 5

Legislative History

Senate Comm. on Banking, Housing and

Urban Aff., Markup Session: S. 1130—

Debt Collection Legislation (July 26,

S. Rep. No. 95-382, reprinted in 1977

nT il 2, 8, 22, 23

Examining The Billing, Marketing, And

Disclosure Practices Of The Credit

Card Industry And Their Impact On

Consumers, Before the S. Comm. on

Banking, Housing & Urban Affairs,

110% Cong. 3 (Jan. 25, 2007)

(statement of Prof. Elizabeth Warren).......... 10

vi

Administrative Reports

Bd. of Governors of the Fed. Res. Sys.,

Report on Economic Well-Being of U.S.

Households in 2014 (May 2015), http://

I cesimsine 15

Bd. of Governors of the Fed. Res., Consumer

Credit Outstanding, http://1.usa.gov/

a micnin 8

Bd. of Governors of the Fed. Res., Statistical

Release: Consumer Credit (Feb. 5,

2016), http://l.usa.gov/ 1XJ7rs1. ..................... 9

Consumer Fin. Prot. Bureau, Annual Report

2012: Fair Debt Collection Practices Act

(2012), http://1.usa.gov/IPWCGNh................ 6

Consumer Fin. Prot. Bureau, Annual Report

2015: Fair Debt Collection Practices

Act (Mar. 2015), http:// l.usa.gov/

EEE ES Sa passim

Consumer Fin. Prot. Bureau, CARD Act

Report (Oct. 1, 2013), http://1l.usa.

EES OEE ATR SO 11

Vll

Consumer Fin. Prot. Bureau, Office for Older

Americans, A snapshot of debt collection

complaints submitted by older

consumers (2014), http://1.usa.gov/

EY scicricccetnisennintihiiiaaiadeieeeieaiianaln

Consumer Fin. Prot. Bureau, Student Loan

Servicing: Analysis of public input and

recommendations for reform (2015),

http://1.usa.gov/1TDQa4a ...................c.000ee

Fed. Trade Comm'n, The Structure and

Practices of the Debt Buying Industry

(2013), http://1.usa.gov/1R7OVv0O0O ...............

U.S. Gov't Accountability Office, GAO-06-929,

Credit Cards: Increased Complexity in

Rates and Fees Heightens Need for

More Effective Disclosures to Consumers

16 (2006). http://1.usa.gov/ LRjoYnT ..........

Other Authorities

Meta Brown, The Graying of American Debt,

Fed. Res. Bank of N.Y. (Feb. 12, 2016),

http://nyfed .org/1QmxxZ9 .................ccceceeeeees

Craig Copeland, Debt of the Elderly and Near

Elderly, 1992-2013, Employee Benefit

Research Institute Notes, Vol. 36, No. 1,

(Jan. 2015), http://bit.ly/1QYh1SG .............

vill

Donna S. Harkness, When Over-The-Limit is

Over The Top: Addressing The Adverse

Impact of Unconscionable Consumer-

Credit Practices on the Elderly, 16 Elder

TE A 10

David U. Himmelstein, et al., Medical

Bankruptcy in the United States, 2007,

122 Am. J. Med. 741 (2009), http://

a seetonnnedon 12

Blake Ellis & Melanie Hicken, The secret

world of government debt collection: A

CNNMoney Investigation, CNN Money

(Feb. 17, 2015), http://cnnmon.ie/

EERE SS Se REE RAERSE 25

Heather C. McGhee & Tamara Draut,

Retiring In The Red: The Growth Of

Debt Among Older Americans, Demos

(2004) http://bit.ly/IXVvLHd..................... 3, 11

Melissa B. Jacoby & Elizabeth Warren,

Beyond Hospital Misbehavior: An

Alternative Account of Medical-Related

Financial Distress, 100 NW U. L. Rev.

TT Se 13, 14

Naomi Karp & Ryan Wilson, Protecting Older

Investors: The Challenge of Diminished

Capacity, AARP Pub. Pol'y Inst. (Nov.

2011), http://bit.ly/1KQXORe ........................ 15

ix

Matthew W Ludwig, Abuse, Harassment,

and Deception: How the FDCPA is

Failing America’s Elderly Debtors, 1

Elder L.J. 135 (2008) ...............-..2see00 17, 19, 21

Medical Debt Among People with Health

Insurance, The Henry J. Kaiser

Family Foundation Report (Jan. 2014),

http:// bit.ly/24mBUk¢9. ..................... 12, 13, 14

Older Adults and Debt: Trends, Trade-offs,

and Tools to Help, National Council on

Aging (May 2015), http://bit.ly/1XJ6I1£N.... 8, 13

John A. E. Pottow, The Rise In Elder

Bankruptcy Filings And The Failure

Of U.S. Bankruptcy Law, Law &

Economics Working Papers, Paper 17,

(2012), http://bit.ly/24pjak2 ......................00 22

Brad Reid, May You Be Imprisoned For

Failing to Pay a Debt?, Huffington Post

Blog (Sept. 16, 2015 12:15 PM), http://

al srincinesaciiinabaiititinannieetah 18

Joseph Shapiro, Lawsuits Target ‘Debtors’

Prisons’ Across the Country, NPR

Special Series (Oct. 26, 2015 2:49 PM), ........ 18

Michelle Singletary, Be attuned to seniors

who carry a burden of debt, The

Washington Post (Feb. 9, 2016), http://

Is sectrcniennieintnsnniintntettones 3

x

Rebecca Thiess & Ellen Taverna, Cleaning Up

Debt Collection: New rules are necessary

to end abusive debt collection practices,

U.S. News (Mar. 24, 2014, 10:45

a.m.EDT), http://bit.ly/1QydhwP .................. 18

Deborah Thorne, Elizabeth Warren, & Teresa

A. Sullivan, Generation of Struggle 1,

AARP Pub. Pol’y Inst. (June 2008),

III scitncanintiichsinnatdennnsantncncesied 12

Amy Traub, In the Red: Older Americans and

Credit Card Debt, AARP Pub. Pol’y Inst.

Middle Class Security Project (Jan.

2013), http://bit.ly/1KHjww0O................ 3, 6, 12

Darren Waggoner, Hospital Computer Glitch

Wrongly Sends Accounts to Collections,

Collections&CreditRisk (Feb. 22, 2016),

Re 24

Claudia Wilner et al., Debt Deception: How

Debt Buyers Abuse The System To Prey

On Lower-Income New Yorkers,

Neighborhood Econ. Dev. Advocacy

Project (2010), http://bit.ly/1p]9kQ4............ 16

Ke Bin Wu, Sources of Income for Older

Americans, 2012, AARP Pub. Pol’y Inst.

a cineeabianal 11, 20

1

STATEMENT OF INTEREST'

Many older people are vulnerable to the

serious and lasting impact of abusive, deceptive, and

unfair debt collection practices, which may leave

them without sufficient resources to pay for basic

necessities such as food, shelter, and medical care.

AARP is a nonpartisan, nonprofit organization with

a membership dedicated to addressing the needs and

interests of people age 50 aad older.

AARP has a strong interest in participating as

amicus curiae in this case. It has the potential to

eliminate an important protection against abusive,

deceptive, and otherwise unfair debt collection

practices by third-party debt collectors, whom

Congress has found have a strong financial incentive

to collect debts by any means. Having been hired by

the state does not alter this incentive. They may or

may not use abusive—or even egregious—practices,

such as false threats of prosecution or taking one’s

home or Social Security payments. The protection

provided by the FDCPA is essentially the only

protection vulnerable consumers have to stop such

abuses. AARP’s participation in this case will assist

the Court in understanding the vulnerability of older

people to abusive, deceptive, or unfair debt collection

practices and that protecting these vulnerable

1 No counsel for a party authored any part of this brief and

no counsel or party made a monetary contribution intended to

fund the preparation or submission of the brief. Only AARP or

their attorneys have paid for the filing and submission of this

brief. Pursuant to Rule 37.3(a), all parties consented to the

filing of this brief. Letters by all parties consenting to AARP

filing a brief amicus curiae are being filed with the Court.

2

debtors does not unduly limit states from collecting

debts.

SUMMARY OF THE ARGUMENT

Congress enacted the Fair Debt Collection

Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., to

protect financially vulnerable and unsophisticated

consumers from the practices of a necessary but

abuse-ridden industry. It found “abundant evidence

of the use of abusive, deceptive, and unfair debt

collection practices by many debt collectors.” 15

U.S.C. § 1692(a). Put simply, the use of abusive,

deceptive or unfair collection practices is not

justified just because a consumer owes a debt.

Congress debunked the myth that all debtors are

deadbeats who are capable of paying their bills but

willfully refuse to do so or who incur debt without

the intention of paying. S. Rep. No. 95-382, at 3,

reprinted in 1977 U.S.C.C.A.N. 1695, 1696 (finding

that consumers often are subject to collections due to

an “unforeseen event such as unemployment,

overextension, serious illness, or marital difficulties

or divorce”).

The debt collection industry has changed and

grown dramatically since the FDCPA was enacted.

Unfortunately, abusive, deceptive, and unfair debt

collection practices continue to plague vulnerable

consumers. Debt collection is the leading source of

consumer complaints to the Consumer Financial

Protection Bureau (CFPB). Consumer Fin. Prot.

Bureau, Annual Report 2015: Fair Debt Collection

Practices Act (2015) {hereinafter CFPB 2015 Annual

3

Report], http://1.usa.gov/1QYTr8l (reporting

approximately 88,300 consumer complaints in 2014).

Many older people are particularly vulnerable

to debt collection abuses. Increasingly, they are

nearing their retirement years saddled with

unaffordable debt loads, lagging income, and rising

costs for medical care, housing, and other

necessities. Heather C. McGhee & Tamara Draut,

Retiring In The Red: The Growth Of Debt Among

Older Americans 2, Démos, (2004)

http://bit.ly/IXVvLHd. Nearing their retirement

years, older people “can’t rely on raises or job-

hopping for better pay to help dig them out.”

Michelle Singletary, Be attuned to seniors who carry

a burden of debt, The Washington Post (Feb. 9,

2016), http://wapo.st/1IRXMB7M. And the value of

their assets was decimated during the Great

Recession, or depleted to cover long periods of

unemployment. See Amy Traub, Jn the Red: Older

Americans and Credit Card Debt 3-4, AARP Pub.

Pol'y Inst. Middle Class Security Project (Jan. 2013),

http://bit.ly/1KHjww0.

This Court should affirm the Sixth Circuit's

decision. See Gillie v. Law Office of Eric A. Jones,

LLC, 785 F.3d 1091, 1101-1102 (6th Cir. 2015), cert.

granted sub nom Sheriff v. Gillie, 193 L. Ed. 495

(U.S. Dec. 12, 2015) (No. 15-338). A narrow

construction of the “state officer” exception to the

definition of “debt collector” preserves the FDCPA’s

remedial purpose of protecting vulnerable consumers

from abusive, deceptive, or otherwise unfair

treatment by third-party debt collectors. The

interpretation advocated by Petitioners will prevent

4

consumers from challenging explicitly prohibited

abuses—regardless of how egregious—that may be

committed by participants of the industry that

Congress enacted the FDCPA to police.

Requiring third-party debt collectors hired by

a state to comply with the minimal national

standard of conduct Congress established when it

enacted the FDCPA does not prevent states from

outsourcing collection of consumer debt owed to a

state. It only requires any such collectors to use

“[mjeans other than misrepresentation or other

abusive debt collection practices [that] are available

for the effective collection of debts.” 15 U.S.C.

§ 1692(c).

AARP urges this Court to affirm the decision

of the Sixth Circuit.

ARGUMENT

I. CONSUMERS NEED PROTECTION

FROM ABUSIVE, DECEPTIVE, AND

UNFAIR COLLECTION PRACTICES

USED BY THIRD-PARTY DEBT

COLLECTORS TO EXPLOIT FINANCIAL,

EDUCATIONAL, AND

CIRCUMSTANTIAL VULNERABILITIES

OF DEBTORS.

The debt collection industry has grown into “a

$13 billion dollar industry. Around 35 percent of

adults, or 77 million of the 220 million Americans

with credit files, show debts in collections.” CFPB

2015 Annual Report, supra, at 7. Not surprisingly,

5

“debt collectors generate most of their revenue from

collections of medical debt, student loans, and

financial services obligations such as credit cards,

auto loans, and mortgages.” Jd.

The sheer amount of consumer debt in

collection makes it one of the most important

consumer protection concerns in the nation:

Whether or not consumers owe and are

liable for the debts collectors are

attempting to _ recover, unlawful

collection practices can cause significant

reputational damage, invade personal

privacy, [ } inflict emotional distress|,}

interfere [] with a consumer's

employment relationships [and]

impair the consumer's ability to repay

debts.

Defining Larger Participants of the Consumer Debt

Collection Market, 77 Fed. Reg. 65775-01, 65777

(Oct. 31, 2012) (to be codified at 12 C.F.R. pt. 1090).

Indeed, “[iJn 2014, the CFPB and the FTC provided

almost $700 million in relief to consumers who were

subject to illegal collections practices; the CFPB

collected $13 million in fines, and took seven

enforcement actions involving egregious debt

collection violations; the FTC’s enforcement actions

resulted in 47 businesses and individuals being

banned from the debt collection business.” CFPB

2015 Annual Report, supra, at 3.

“Today's collection industry is markedly

different from the industry contemplated by the

6

FDCPA 35 years ago.” Consumer Fin. Prot. Bureau,

Annual Report 2012: Fair Debt Collection Practices

Act 4 (2012), http://1.usa.gov/1LPWCGNh (explaining

the industry has been revolutionized by automation,

technological advances, and new key players,

including attorneys). “But, even as the industry has

changed, abuses remain an issue. The collection

industry continues to be a top source of complaints.”

Id.; see also Fed. Trade Comm’n, The Structure and

Practices of the Debt Buying Industry i (2013),

http://1.usa.gov/1R7OvOO (same).

Complaints to the CFPB about debt collection

abuses outnumber complaints about any other

industry, product or service. Consumers lodged

approximately 88,300 such complaints in 2014.

CFPB 2015 Annual Report, supra at 12-13. Of those

complaints, 37 percent reported they did not owe the

debt being collected because it: did not belong to

them (64 percent); had been paid already (26

percent); resulted from identity theft (6 percent); or

had been discharged in bankruptcy (4 percent). Jd. at

13. An additional 5 percent of complaints reported

that consumers were being pursued for greater

amounts of debt than they owed. Z/d. at 15.

Communication tactics were the source of 20 percent

of the complaints. Jd. at 14. In 12 percent of the

complaints, consumers reported abusive debt

collection tactics, including threats to arrest or jail

consumers if they did not pay, seizure or attempts to

seize property, and collection or attempts to collect

exempt funds. Id. at 14-15.

Many older people are living in financially

precarious situations: they have growing debt loads,

7

lagging income, and depleted assets in the aftermath

of the economic recession. See Traub, supra at 3-4;

see also Meta Brown, The Graying of American Debt,

Fed. Res. Bank of N.Y. (Feb. 12, 2016),

http://nyfed.org/1Qnxxz9 (showing that the debt of

Americans age 50 to 80 increased 59% since 2013).

Such consumers are particularly vulnerable to debt

collection abuses. See Consumer Fin. Prot. Bureau,

Office for Older Americans, A snapshot of debt

collection complaints submitted by older consumers

5-6 (2014), http://l.usa.gov/IKQeWeW Fully one

third of all complaints by people over age 62 relate to

debt collection. Jd. (reporting that “[bletween July

10, 2013 and September 30, 2014, the CFPB handled

approximately 25,800 complaints from _ older

consumers [o]ver one-third of those complaints

were about debt collection.”).

Collecting consumer debts using practices

prohibited by the FDCPA exacerbates the suffering

of vulnerable consumers, causing serious distress

and depriving many of necessities basic to human

survival, such as food, shelter, and medical care.

A. Increasing complaints about

abusive debt collection practices

corresponds to mounting consumer

debt loads.

Congress sought to protect consumers from

debt collection abuses specifically because it

recognized that debtors facing collection are rarely

“deadbeats.” As the FDCPA’s legislative history

reveals,

8

[o]ne of the most frequent fallacies

concerning debt collection legislation is

the contention that the _ primary

beneficiaries are “deadbeats.” In fact,

however, there is universal agreement

among scholars, law enforcement officials,

and even debt collectors that the number

of persons who willfully refuse to pay just

debts is minuscule the vast majority

of consumers who obtain credit fully

intend to repay their debts. When default

occurs, it is nearly always due to an

unforeseen event such as unemployment,

overextension, serious illness, or marital

difficulties or divorce.

S. Rep. No. 95-382, at 3. Such unforeseen events

continue to be the primary precipitating cause of

default. See Older Adults and Debt: Trends, Trade-

offs, and Tools to Help 1, National Council on Aging

(May 2015) {hereinafter National Council on Aging

Report], http://bit.ly/1LXJ6LE£N (explaining

“unexpected costs—an unforseen hosipitalization, a

vehicle requiring repair, or even emergency

veterinary care for a sick pet—can plunge seniors

into unmanageable debt”).

The steadily growing volume of complaints

about debt collection abuses correspond to a period of

steep expansion of credit followed by a sharp

economic downturn. See CFPB 2015 Annual Report,

supra, at 7-8. At the beginning of 1977—the year the

FDCPA was enacted—consumers carried revolving

debt worth approximately $32 billion. Bd. of

Governors of the Fed. Res., Consumer Credit

9

Outstanding, http://l.usa.gov/1IT2w8AP By 2015,

revolving debt increased more than 29 times to $935

billion. Bd. of Governors of the Fed. Res., Statistical

Release: Consumer Credit (Feb. 5, 2016),

http://1.usa.gov/1XJ7rs1.

Student loan debt has also. increased

dramatically; “the volume of outstanding federal

student loan debt has more than doubled, rising

from $516 billion in 2007 to greater than $1.2 trillion

in the third quarter of 2015, surpassing all other

categories of consumer debt aside from mortgages.”

Consumer Fin. Prot. Bureau, Student Loan

Servicing: Analysis of public input and

recommendations for reform 8 (2015),

http://1.usa.gov/1TDQa4a (reporting “[m]Jore than 41

million Americans collectively owe more than $1.2

trillion in student loan debt”). The CFPB estimates

that “a quarter of student loan borrowers are,

collectively. either delinquent or in default on more

than $175 billion in student debt.” Jd. at 9. That

subset is comprised primarily of “borrowers who

attend proprietary schools and borrowers who do not

successfully complete a program of study.” Id. at 9-

10.

Not only do more Americans carry more debt

than ever before, but more people have debt that is

unaffordable (i.e., the minimum payments consume

more than 40 percent of their income). Craig

Copeland, Debt of the Elderly and Near Elderly,

1992-2013, Employee Benefit Research Institute

Notes, Vol. 36, No. 1, 10 (Jan. = 2015),

http://bit.ly/1QYh1SG (explaining that “a traditional

threshold measure of debt-load trouble” is debt

10

payments that consume 40 percent of one’s income).

The increasing consumer debt load is especially

acute for older age groups: the proportion of near-

elderly (age 55-64) and elderly families (age 65 and

over) with unaffordable debt loads increased from

5.8 percent in 1992 to 9.2 percent in 2013. Id. at 7

Debt load has increased, in part, because

income is not keeping pace with rising costs, forcing

people to borrow simply to pay for necessities such

as shelter, food, and medical expenses.? Id. See also

2 Abusive credit origination and billing practices also

contributed significantly to the increased debt load carried by

older people. See Donna S. Harkness, When Over-The-Limit is

Over The Top: Addressing The Adverse Impact of

Unconscionable Consumer-Credit Practices on the Elderly, 16

Elder L.J. 1, 9-11 (2008). Many consumers were lured into

opening accounts that unbeknownst to them charged high

interest, fees, and penalties even if they were making minimum

required payments. See U.S. Gov't Accountability Office, GAO-

06-929, Credit Cards: Increased Complexity in Rates and Fees

Heightens Need for More Effective Disclosures to Consumers

16 (2006). http://l.usa.gov/IRjoYnT. Despite paying their

minimum balances every month and not making additional

purchases, the balances on many credit card accounts increased

substantially over time. The products were designed to

generate revenue from penalty fees and consumer default and

rather than repayment. See Examining The Billing, Marketing,

And Disclosure Practices Of The Credit Card Industry And

Their Impact On Consumers, Before the S. Comm. on Banking,

Housing & Urban Affairs, 110% Cong. 3 @Jan. 25, 2007)

(statement of Prof. Elizabeth Warren) (testifying that such

credit and billing practices meant that “[a] debtor could pay

nearly 100 percent of what she owed every year for the rest of

her life, and thanks to the traps built in to her credit card, she

would keep paying until she died—and still not pay off her

card.”). Congress passed the Credit Card Accountability

Responsibility and Disclosure Act of 2009, Pub. L. 111-24, Title

11

Ke Bin Wu, Sources of Income for Older Americans,

2012 AARP Pub. Pol’y Inst. 1 (Dec. 2013) (reporting

“fiJn 2012, people aged 65 and older had an average

(mean) income of $31,742, but half (median) had

income less than $19,604.”). Reduced availability of

pensions as an employment benefit, low interest

rates that depress investment growth, and waning

employment prospects with longer periods of

unemployment also make older people more

economically insecure. McGhee, supra at 5.

Moreover, “the value of savings-based sources of

income has steadily declined, making Social Security

the linchpin of the majority of seniors’ livelihoods.”

Id. at 5.

With reduced income and fewer retirement

assets at their disposal, older people have “become

more vulnerable to the financial stresses of aging.

Events like job loss and retirement, illness, death of

a spouse, even repairs to aging homes and cars can

force seniors to borrow—using credit cards, payday

loans, home loans—if they have little savings to rely

upon.” Jd. Over one-third of indebted older people

have had to rely on credit cards to “pay for basic

living expenses such as rent or mortgage payments,

groceries, utilities, or insurance because they did not

have enough money in their checking or savings

accounts.” See Traub, supra at 6.

I, § 108, 123 Stat. 1743 (May 22, 2009) (15 U.S.C. § 1602)

(hereinafter CARD Act] to eliminate the worst of such

practices. The CARD Act is credited with helping consumers

avoid $6 billion in hidden and unfair fees and charges following

the first year in which it was implemented. Consumer Fin.

Prot. Bureau, CARD Act Report 21-22 (Oct. 1. 2013),

http://1.usa.gov/1Q6R_g2t.

12

B. The bulk of debt in collection is

related to unavoidable and

unaffordable health care, which

can compromise a debtor’s ability

to pay debt that otherwise would

be manageable.

Health related events may _ result in

unavoidable and unaffordable medical bills. “Medical

bills account for the majority of debts that are

referred to third-party collection agents.” Medical

Debt Among People with Health Insurance, The

Henry J. Kaiser Family Foundation Report 14 (Jan.

2014) {hereinafter Kaiser Report],

http://bit.ly/24mBUk9. People living in households

with high medical debt may “deplete[ ] retirement or

college savings, [lose their] homes to foreclosure,

[do] without basics such as home heat. [incur]

damage to their credit rating permanently

reduce{[ ] their standard of living [and]

experience|[ | barriers to care.” Id. at 4. Many people

with unaffordable medical debt are forced into

bankruptcy. Jd.’

3 Health concerns triggered the majority of bankruptcies

filed by older people (62.1 percent in 2007). David U.

Himmelstein, et al., Medical Bankruptcy in the United States,

2007, 122 Am. J. Med., 741, 743 (2009), http://bit.ly/1LOAQ59v.

Bankruptcy filings among people 55 and older rose sharply

between 1991 and 2007, with the greatest increases among

those 75 and older (up 566.7 percent) and those ages 65 to 74 (a

177.8 percent increase). Deborah Thorne, Elizabeth Warren, &

Teresa A. Sullivan, Generation of Struggle AARP Pub. Pol'y

Inst. 1 (June 2008), http://bit.ly/1 UjOvIC.

13

The precarious financial condition of many

older people, especially in the in the aftermath of the

recession, is exacerbated by economic shock. As

people age, it is not uncommon for them to incur

substantial medical expenses from chronic or acute

health conditions as they advance to older ages,

corresponding with subsiding income as they begin

to retire. “The economic and personal impact of

medical debt can be devastating.” Kaiser, supra at 4.

“{[M]edical debt [is one of] the most significant

barrier[s] to the economic wellbeing of seniors. r

National Council on Aging Report, supra, at 1-2.

Even if people have health insurance, many do

not have the income or assets necessary to cover

unavoidable medical expenses for doctors, hospitals,

prescriptions, co-payments, and more. Kaiser, supra

at 3-4. Additionally, “[o]ften significant health events

trigger[ ] loss of income, rendering unaffordable bills

that might otherwise have been manageable.” Id.

“[A]bout one in five debtors (21%) indicated that

they had lost at least two weeks’ income because of a

medical problem” of either a wage earner or spouse.”

Melissa B. Jacoby & Elizabeth Warren, Beyond

Hospital Misbehavior: An Alternative Account of

Medical-Related Financial Distress, 100 NW U. L.

Rev. 535, 549 (2006). Such loss of income can

“constitute[] a hard financial blow for families of

modest means.” Jd. Unavoidable debt becomes even

more unaffordable when consumers are forced to

stop working permanently due to their own health or

to care for a child, spouse, or parent. Jd.

14

C. Economically insecure consumers

may be plunged into a collection

“nightmare” by unavoidable and

unaffordable medical expenses and

other financial shocks.

Deepening economic insecurity makes many

unsophisticated, low-income, and older people

particularly vulnerable to collection abuses that

cause substantial distress and exacerbate already

precarious personal and financial situations. See

Jacoby, supra at 582 (“worrying about medical-

related financial distress may exacerbate health

problems”). People who already lack adequate

financial means to afford the basic necessities of

daily living typically do not have the resources to

recover from an economic shock.‘ A chronic health

condition or acute injury can result in unaffordable

medical expenses and loss of household income that

can cascade into a debt collection nightmare. Kaiser

Report, supra, at 16-17 (outlining the emotional

distress “nightmare” for people who find themselves

in medical debt).

‘ See Bd. of Governors of the Fed. Res. Sys., Report on the

Economic Well-Being of U.S. Households in 2014 1 (May 2015),

http://1.usa.gov/loAZNne (finding “[a]lthough economic

hardships are common, many individuals are ill-prepared for a

financial disruption and would struggle to cover emergency

expenses Forty-seven percent of respondents say they

either could not cover an emergency expense costing $400, or

would cover it by selling something or borrowing money.

Thirty-one percent of respondents report going without some

form of medical care in the 12 months before the survey

because they could not afford it.”).

15

A person with a serious medical condition can

find it extremely difficult to cope with large volumes

of confusing medical bills. The effect of an illness or

medical event itself can compromise a debtors’

ability pay their bills or manage their debts. See id.

at 4. “Significant health events can also compromise

a person’s ability to manage the paperwork of

medical bills[,]” which can be overwhelming due to

sheer volume. /d. (finding most survey respondents

emphasized “[t]hey had trouble tracking what had

been paid, what was owed, and what had been

transferred to collections” and that “confusing

provider bills and insurance company statements [ ]

lacked key information. Most didn’t know where to

seek help, and the burdens of illness made it harder

to resolve problems on their own.”).

Consumer debts may go into default due to

economic pressures of unaffordable debt levels.

Medical debt in particular may be sent to collection

due to billing mistakes and insurance disputes that

are difficult to resolve. Older people who have

diminished capacity are particularly vulnerable to

such situations and be unable to resolve them

without assistance. See Naomi Karp & Ryan Wilson,

Protecting Older Investors: The Challenge of

Diminished Capacity 11, AARP Pub. Pol’y Inst. (Nov.

2011), http://bit.ly/1KQXORe (describing financial

decision making capacity as “one of the first abilities

to decline as cognitive impairment encroaches, yet

older people, [and] their families. are frequently

unaware that these deficits are developing”).

Similarly, older people who are socially isolated may

be at greater risk of having debts in default. Bd. of

Governors of the Fed. Res. Sys., Report on Economic

16

Well-Being of U.S. Households in 2014 17 (May

2015), http://1.usa.gov/loAZNne (in survey

measuring economic well-being, “27 percent of those

experiencing hardships say they received financial

assistance from friends or family in the past year,

which illustrates the importance of social networks

in weathering economic setbacks’).

Few debtors facing collections are able to

defend themselves effectively from abusive collection

practices. They may also be unable to find or afford a

lawyer to assist them. See, e.g., Claudia Wilner, et

al., Debt Deception: How Debt Buyers Abuse The

System To Prey On Lower-Income New Yorkers,

Neighborhood Econ. Dev. Advocacy Project 6 (2010),

http://bit.ly/1Qqfo3T.

D. Debt collectors cause severe

distress by intentionally targeting

unsophisticated debtors and older

people and using abusive debt

collection practices in order to

exploit their vulnerabilities.

Collection attempts, especially abusive ones,

may confuse or threaten vulnerable debtors. In this

case, for example, the Sixth Circuit recognized that a

letter printed on attorney general letterhead is

imbued with abusive and coercive power, finding

that “[u]se of the letterhead is intended to induce

a higher rate of repayment by intimating that the

State of Ohio is in fact sending the letter, which may

lead the naive consumer to prioritize this debt above

all others for no good reason.” Gillie v. Law Office of

Eric A. Jones, LLC, 785 F.3d at 1108. Further, the

17

court found, “[t}here is nocompelling reason for

special counsel to use the OAG letterhead, other

than to misrepresent their authority and place

pressure on those individuals receiving the letters.”

Id. at 1105.

Unscrupulous debt collectors intentionally

target and abuse unsophisticated and older people in

the collection process “based on assumptions that

these debtors are easily confused about whether the

debt existed, that they fear a collector garnishing

their [S]Jocial [SJecurity income, and that they are

hesitant to engage in legal skirmishes.” Matthew W

Ludwig, Abuse, Harassment, and Deception: How the

FDCPA is Failing America’s Elderly Debtors, 1 Elder

L.J. 135, 152, 156 (2008) (citing Senate hearings on

the FDCPA and quoting testimony regarding

egregious abuses, including the story of an elderly

woman who was told that if she did not pay the

funeral expenses for her husband, the collector

would get a court order to dig up her husband’s body

and repossess the casket).

Many older people are vulnerable to debt

collection abuses because they misunderstand or fear

encounters with the legal system. Jd. at 152. Some

may believe, for example, that they will go to jail if

they do not pay a debt being pursued by a collector.

Consumers’ fears of going to court or being arrested

for not paying a debt—rational or not—are

constantly reinforced by debt collectors threats.5

5 See CFPB 2015 Annual Report at 14-15 (reporting that 12

percent of complaints about debt collection in 2014 involved the

company taking or threatening to take an illegal action. “Most

18

Such fears are further supported by widespread and

increasing media reports describing debtor’s prisons

and debtors spending days in jail after being

arrested on bench warrants or writs of body

attachment that debt collectors pursue frequently.6

In light of such fears, and as recognized by

Congress when it enacted the FDCPA, a letter from

an attorney or a court may cause considerable

of these complaints are about threats to arrest or jail

consumers if they do not pay (56%). Other complaints relate to

lawsuits including threats to sue on a debt that is too old (23%),

being sued without proper notification of the lawsuit (7%),

seizures or attempts to seize property (6%), collection or

attempts to collect exempt funds such as child support or

unemployment benefits (5%), or being sued in a place that is

different from where the consumer lives or where the consumer

signed the contract (2%)”).

6 See, e.g., Brad Reid, May You Be Imprisoned For Failing to

Pay a Debt?, Huffington Post Blog (Sept. 16, 2015 12:15 PM),

http://huff.to/ITxGHdz (outlining an “incomplete list” of

circumstances where someone might be imprisoned for

financial debt); Joseph Shapiro, Lawsuits Target ‘Debtors’

Prisons’ Across the Country, NPR Special Series (Oct. 26, 2015

2:49 PM), http://n.pr/IKIhqMm (outlining six lawsuits filed

against cities, police, and courts for their “debtors’ prisons.”); cf.

Rebecca Thiess & Ellen Taverna, Cleaning Up Debt Collection:

New rules are necessary to end abusive debt collection practices,

U.S. News (Mar. 24, 2014, 10:45 am. _ EDT),

http://bit.ly/1QydhwP (relaying examples of collection abuses

that fuel fear of courts, including, “an employed woman who

had simply forgotten about a $425 loan was arrested and spent

three nights in jail, until her mother finally borrowed $1,250 to

pay her bond”).

19

distress.’ Such debtors may pay a debt—even if they

believe they do not owe it, simply to alleviate the

stress of the collection attempt, fear of being

arrested and sent to jail, or to stop high volumes of

harassing and threatening phone calls. See Ludwig,

supra at 154 (describing story of an attorney acting

on behalf of a debt collector who threatened he would

cause a 68 year old woman to lose her home if she

did not pay her debt within a week. She was so

distraught that she quit her job so she could draw

down her small retirement account to repay the

alleged debt.).

Similarly, older people are highly susceptible

to threats that they may lose their home or Social

Security seized by a collector. See Ludwig, supra at

138 (discussing the vulnerability of older people to

such threats because “they typically have a great

deal of equity in homes that they have owned for

many years and because they likely operate on fixed

incomes”) (citations omitted). For example, one

collector recounted that he targets older people for

debt collection because

[t]hey hear someone saying their social

security benefits are being looked into,

7 The FDCPA prohibits “(t]he use or distribution of any

written communication which simulates or is falsely

represented to be a document authorized, issued, or approved

by any court, official, or agency of the United States or any

State, or which creates a false impression as to its source,

authorization, or approval” and “[t]he use of any business,

company, or organization name other than the true name of the

debt collector's business, company, or organization.” 15 U.S.C.

§§ 1692e (9), (14).

20

their home is being looked into [and]

when you've got all this thrown at you

and there's someone talking sly on the

phone, you're forced to pay

Id. at 156 (citations omitted).

The primary and often only source of income

for most older people is Social Security. See Wu,

supra, at 1. Federal iaw exempts Social Security

from attachment because it is designed to provide

sufficient income to lift older people out of poverty.®

See Wu, supra at 1. Collectors nevertheless threaten

to seize it, which will leave the debtor without any

income to pay rent, buy food, or obtain health care. If

debt collection threats force or mislead them into

paying debts using exempt income—particularly

debts they do not actually owe—it may leave them

with inadequate financial resources to meet their

basic needs.

Older consumers living alone are often targets

of abusive debt collection tactics. Being socially

isolated makes them particularly vulnerable,

because they may not have access to friends and

family who can he!p them financially, assist them

8 Social Security may not be garnished or attached, except in

very specific circumstances, including collection of state taxes,

child support, or alimony. 42 U.S.C. § 407 (‘The night of any

person to any future payment under this title. shall not be

transferable or assignable and none of the moneys paid or

payable or rights existing under this title shall be subject to

execution, levy, attachment, garnishment, or other legal

process, or to the operation of any bankruptcy or insolvency

law.”).

21

with negotiating an affordable payment plan, or take

action to defend against the collection of an invalid

or overstated debt. See Ludwig, supra at 155

(describing an eighty-nine year old who was being

“hounded for six months by a debt collector” for a

debt he did not owe, and it was not until his

caretaker and sons got involved that they were “able

to sort out the mistake after a number of letters and

angry telephone conversations.”).

People with unaffordable debt may be able to

discharge it in bankruptcy, although that is a result

that Congress hoped to discourage by enacting the

FDCPA.® 15 U.S.C. § 1692(a) (“There is abundant

evidence of the use of abusive, deceptive, and unfair

debt collection practices by many debt collectors.

Abusive debt collection practices contribute to the

number of personal bankruptcies, to marital

instability, to the loss of jobs, and to invasions of

individual privacy”). But many people dco not or

cannot file for bankruptcy. Debtors who are broke

but not bankrupt may continue to suffer severe

deprivation. Their experiences provide a window into

the injury caused by abusive debt collection methods

targeted at older, unsophisticated, or low-income

consumers. For example, “9.7% report having gone

without food while struggling before bankruptcy,

31.2% report being late on rent or mortgage, 31.2%

report going without required medication, and

21.2% report skipping doctors’ appointments.” John

A. E. Pottow, The Rise In Elder Bankruptcy Filings

And The Failure Of U.S. Bankruptcy Law, Law &

8 Student loan debt often is not dischargeable in bankruptcy.

however.

22

Economics Working Papers, Paper 17, 246 (2012),

http://bit.ly/24pjak2 (even greater percentages of

people who filed for bankruptcy suffered similarly;

47.1 percent reported going without required

medication and 30.6 percent reported skipping

doctors appointments).

II. THE FDCPA ESTABLISHED A MINIMUM

NATIONAL STANDARD OF CONDUCT

THAT PROTECTS DEBTORS AND DOES

NOT UNDULY LIMIT STATES FROM

COLLECTING CONSUMER DEBT USING

THIRD-PARTY DEBT COLLECTORS.

A. The FDCPA established a minimum

national standard of conduct to

protect vulnerable consumers from

the abusive practices of third-party

debt collectors.

Acknowledging that it is important for

consumers to pay their debts, Congress nevertheless

disapproved of collectors exploiting the financial,

educational, and circumstantial vulnerabilities of

debtors. Congressman Frank Annunizzo explained

that “[w]hile unscrupulous debt collectors comprise

only a small segment of the industry, the suffering

and anguish which they regularly inflict is

substantial.” S. Rep. No. 95-382, at 2.

Congress enacted the FDCPA specifically to

protect debtors from an industry that it viewed as

having little or no market incentive to treat them

properly. Congress noted that “[uJnlike creditors,

who generally are restrained by the desire to protect

their good will,” third-party debt collectors “are

23

likely to have no future contact with the consumer

and are often unconcerned with the consumer's

opinion of them.” Jd. Congress knew that collectors,

who have a strong “incentive to collect by any

means” could exploit the financial, educational, and

circumstantial vulnerabilities of debtors. Jd.

B. The practices prohibited by the

FDCPA should not be allowed by

any collector.

The Sixth Circuit narrowly interpreted the

FDCPA’s “state officer” exclusion from the definition

of “debt collector.” Gillie v. Law Office of Eric A.

Jones, LLC, 785 F.3d 1091, 1101-1102 (6th Cir.

2015), cert. granted sub nom Sheriff v. Gillie, 193 L.

Ed. 495 (U.S. Dec. 12, 2015) (No. 15-338). It held

that third-party debt collectors serving as

independent contractors for the state to collect

consumer debts are not excluded from the FDCPA’s

prohibitions. Jd. The holding correctly recognized

that the exception is narrow and not available to

immunize independent contractors. like the

Petitioners from liability.

Consumers need protection from abusive debt

collection practices of third-party debt collectors

hired by state governments. Regardless of who hires

them, third-party debt collectors of consumer debt

have the same inherent financial incentives to collect

by any means that Congress sought to counteract by

enacting the FDCPA.!°

10 Abuses also result from errors that outsourcing of

collections to third-party debt collectors introduces, such as

24

Moreover, the FDCPA’s prohibitions will not

interfere unduly with a state’s ability to collect

consumer debt. It merely requires third-party debt

collectors to use any of the wide variety of legal

means available to them to collect covered debts.!!

The FDCPAss explicit language and legislative

history clearly reflects “the view that ‘certain things

ought not to happen, period.” Jerman v. Carlisle,

McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573,

596 n.14 (2010) (quoting Senate Comm. on Banking,

Housing and Urban Aff., Markup Session: S. 1130—

Debt Collection Legislation 60 (July 26, 1977)

(statement of primary sponsor Senator Riegle)). But

collecting from the wrong person or in the wrong amount. See

CFPB 2015 Annual Report, supra, at 13 (showing 37% of the

complaints received by the CFPB are regarding continued

attempts to collect debt not owed); id. at 20 (discussing “[flaulty

training materials causing prohibited disclosures to third

parties’). Automation of the collections process also introduces

errors that result in abuses. See, e.g., Darren Waggoner,

Hospital Computer Glitch Wrongly Sends Accounts to

Collections, Collections&CreditRisk (Feb. 22, 2016),

http://bit.ly/1TwPtbD (reporting an estimated 6,200 hospital

accounts were inadvertently sent to a collection agency before

being submitted to insurance “because of a glitch in changing to

a new computer system”).

1! The FDPCA defines “debts” as “any obligation or alleged

obligation of a consumer to pay money arising out of a

transaction in which the money, property, insurance, or

services which are the subject of the transaction are primarily

for personal, family, or household purposes, whether or not

such obligation has been reduced to judgment.” 15 U.S.C. §

1692a(5). Thus, contrary to the assertions of the Petitioners’

amici, this case does not implicate the state’s collection of non-

consumer debts such as taxes, fines, or fees. See Staub v.

Harris, 626 F.2d 275, 278 (3d Cir. 1980).

25

exempting third party debt collectors from the reach

of the FDCPA opens vulnerable consumers to the

suffering and anguish that Congress sought to

protect them against.

Petitioners may argue that the facts of this

case do not demonstrate a deceptive or misleading

practice. But exempting third-party debt collectors

hired by a state to collect a consumer debt will

clearly open consumer debtors to the possibility of

such abuses, and will prevent consumers from

challenging conduct that the FDCPA declared should

be prohibited.

Petitioners’ amici may assert that such abuses

are not an issue when a third-party collector is

collecting on debts owed to the states. There is ample

evidence to the contrary, however. Third-party

collectors engaged to collect taxes, parking tickets,

fines, and court fees have engaged in widespread

shocking and reprehensible behavior toward state

residents. See, e.g., Blake Ellis & Melanie Hicken,

The secret world of government debt collection: A

CNNMoney Investigation, CNN Money (Feb. 17,

2015), http://cnnmon.ie/1Ti02kA (exposé of

outrageous state government debt collection abuses

that clearly would violate the FDCPA if they were

covered debts).

The Petitioners’ position requires this Court to

interpret the FDCPA in a manner that is directly

contrary to the broad remedial purposes for which

Congress enacted it. It should be rejected. See

Maracich v. Spears, 133 S. Ct. 2191, 2200 (2013)

(“An exception to a “general statement of policy” is

26

“usually read narrowly in order to preserve the

primary operation of the provision’) (quoting

Commissioner v. Clark, 489 U. S. 726, 739 (1989)).

CONCLUSION

For the foregoing reasons, the Sixth Circuit's

interpretation of the FDCPA should be affirmed. A

third-party debt collector hired on a contingency fee

basis to collect debt owed to a state is not included

within the FDCPA’s narrow exception for state

officers.

March 2, 2016 Respectfully submitted,

Julie Nepveu*

*Counsel of Record

William Alvarado Rivera

AARP Foundation Litigation

601 E Street, NW

Washington, DC 20049

(202) 434-2060

jnepveu@aarp.org

Counsel for Amicus Curiae

AARP