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Lawyer takes on colleague over collections practice

|Written By Michael McKiernan

A Markham, Ont., lawyer will face a disciplinary hearing in the new year for her conduct on behalf of collections agencies in a matter her counsel says should be seen as “a test case.”

Mark Silverthorn says he’s doing penance for 12 years of acting for collections agencies.

The Law Society of Upper Canada alleges Deanna Natale’s use of draft statements of claim attached to demand letters breaches the LSUC’s Rules of Professional Conduct. But her lawyer,

Bill Trudell, tells Law Times the lack of clear regulations in that area makes a disciplinary hearing an unsuitable venue for deciding whether Natale’s actions constitute misconduct.

A hearing was to start this week, but the LSUC granted an adjournment until Jan. 11 due to a clash in Trudell’s calendar.

“This is a new and evolving area of practice,” Trudell says. “I’m disappointed it’s being dealt with this way.

There’s better ways to give guidance to lawyers about what’s acceptable and what isn’t. This is being done under the umbrella of a discipline hearing, which is very unfair.”

Mark Silverthorn, a lawyer from Kitchener, Ont., has complained to the LSUC about Natale’s alleged practices. He says collections agencies hire law firms to draft statements of claim because regulations governing the industry prevent them from doing so themselves.

Natale herself espoused the effectiveness of the tactic in a blog posting earlier this year on her own web site. “It is very effective to send a draft statement of claim for our clients who are creditors,” she wrote.

“The letters are sent to people who owe money, and those people respond to the letter in an increased percentage when it is sent from Natale Law Offices.”

Silverthorn says Natale’s law firm has sent letters on behalf of Global Credit & Collection Inc., a third-party debt collector retained to recover money owed to entities such as banks, utilities, and communications companies. The statements of claim list the original creditor, who may or may not have retained the law firm, as the plaintiff.

But Silverthorn believes the practice is illegal under the Ontario Debt Collectors Act, which prevents “every person, whether principal or agent,” from sending imitation court documents where it’s “calculated to deceive” that they’re part of a real court process.

Besides the law society, he complained to Brian Pitkin, the Ontario registrar of collection agencies at the Ministry of Consumer Services.

In a letter to collections agencies in October 2008, Pitkin warned them to stop attaching draft statements of claim to demand letters, a practice he called “deceitful and misleading.”  

“The practice trades on the expectation that debtors will be unknowledgeable about court process and interpret the ‘draft’ statement of claim as a greater commitment to pursuing the matter than actually exists,” Pitkin wrote.

He went on to say that retaining a lawyer to send the drafts shouldn’t be seen as a way around the ban given his warning that “where a lawyer does something on behalf of a collection agency, it is no different, as far as I’m concerned, than the agency doing it itself.”

Silverthorn says Pitkin, who couldn’t be reached for comment before press time, has failed to follow through on his warning.

He suspects as many as 20 lawyers in Canada send out draft statements of claim on behalf of collections agencies. “I believe the law society has felt compelled to do this because the reputation of the legal profession is being denigrated by what’s going on,” he says.

“The law society has no jurisdiction over collection agencies, so they’re responding to complaints made against Natale.”

According to Silverthorn, the effectiveness of including draft statements of claim means collections agencies can’t afford to ignore the practice in an extremely competitive environment.

As a result, creditors regularly employ multiple collections agencies in a race to recoup their debts. “Collection agencies will essentially try and get away with whatever they can,” Silverthorn says.

“Because Global Credit has been taking advantage of the use of draft statements of claim, they have been just creaming the competition.”

In fact, Silverthorn spent 12 years working for collections agencies to help them recover millions of dollars. In the last four years, he has transformed himself into an advocate for consumers facing difficulties with agencies.

“I’m not exactly happy about that period in my life,” he says. “In order to do penance for that experience and to put the ledger straight, I’ve told myself I have to spend 12 years doing work on behalf of consumers so that I can sleep at night.”

Trudell, meanwhile, says that while some provinces have clear regulations dealing with draft statements of claim, the situation in Ontario is more ambiguous.

Given that civil litigators routinely send demand letters, he feels the law society needs to give lawyers guidance on the issue of draft court documents. “This is really a test case,” he says.

“It’s not one where you can fit the conduct into a pigeonhole. We are looking for guidance from the panel as to whether this is professional misconduct or not, and it’s too bad that it’s framed in relation to a complaint.”

Trudell notes his firm has visited and examined Natale’s practice and was impressed with what she does. “She runs an incredibly careful, high-quality operation. There are quality controls, checks and balances in her system.”

He believes draft statements of claim, if properly labelled, can help drive home the message to debtors that they could be facing a legal issue should they fail to pay back what they owe.

“The bottom line is that these are legitimate debts that people are refusing to pay,” Trudell says. “They are clearly marked draft, and I would suggest they give people some knowledge about what might happen.”

  • Allegations are not facts . . . of course!

    Western Reader
    "A debt is a debt until it is paid...." Whoa now! A debt is a debt only when, and not until, a court has declared it so. That's why a plaintiff can't seize property or garnishee wages until a judgment has been filed. Until then, it's all allegations, and tactics.

    But a layperson might not understand that, which is precisely why the practice is unethical and, for a lawyer bound by oath, unprofessional. It is truly disheartening to observe that many lawyers don't seem to even understand the issue.
  • Speakout

    Deanna Natale
    A debt is a debt until it is paid, however, if a Collection Agency or Lawyer involve to recovery, professionalism must always be adhered to at all time. No consumer should be subjected to nothing less than what is required by law
  • No Love for Deadbeat Debtors

    Irrelevant
    While collection agencies are known to use every trick in the book to collect on outstanding debts, the fact remains that the debts they pursue are owed by people who often obtain and use credit without any intention to repay. In this instance, it is hard for me to feel any sympathy for these people. Pay what you owe and shut up. Don't cry for me Argentina!
  • Draft claims serve justice!!!!

    Nameless lest I be piiloried f
    Draft statements of claim are an effective tool in most any litigation because defence counsel will be compelled to copy their client with the document, and so, often for the first time, the defendant can see what the plaintiff is concerned about. Ontario's civil rules and their unusual interpretation here, prevent lawyers from drafting actual claims with key pertinent facts (that would induce settlement discussions) included, even though this practise is permitted elsewhere and quickly leads to fair settlements in many cases. Many think the defence bar prefers the obfuscation route, but justice is served very, very wel with draft claims, as long as they are identified as draft claims.
  • ann Maybee
    Have they ever heard of Small Claims Court??
  • What \"debtors\"?

    Chris
    Collection agencies routinely take the position that money is owed to their clients (or to themselves). However, such "debts" are often allegations without a shred of legal proof that they exist. Only occasionally has a debt been proved in court prior to being sent to collection. This lawyer is using a bogus "statement of claim" to intimidate people, no other reason, and should be subject to professional sanctions for misusing her position as a member of the Bar.
  • Frank Shostack
    I see no foul in a lawyer sending a document that is clearly identified as the form of claim that is proposed to be issued if a debt is not paid. This is not a false pleading.

    Just because the client is a collection agency does not mean that its counsel cannot send such a document.
  • debt payer
    pay the debt you owe
  • Tammy B
    [quote name="debt payer"]pay the debt you owe[/quote]
    Shut UP, not everyone that a collection agency goes after owes the money but they don't care if the collection agency and lawyers are so sure they owe the money and have proof why file a draft statement of claim just file with the courts? Because they have no proof and they don't care and even when they do file an actual statement of claim its full of false statements and they only win by default since people don't file a statement of defence. They don't win because they are right they win because they are sneaky.
  • awww.. poor debtors.

    anonymouse
    Collection agencies are like the wild west, and a lawyer who would provide less than care and due diligence is getting sucked in by the notion of easy money. Shame on both. Having said that, the consumers who we are talking about here are deadbeats and sometimes agressive tactics are necessary to collect what is rightfully that of the creditor.
  • Consumer

    ratnan
    Consumer is at the mercy of the COllection Agency in the fisrt instance, having a lawyer using a fake document makes it more severe, in that, once such a "DRAFT" is received, it will definitely caused further injury to the consumer, I speak for myself, I owed a debt and received one of the Fake, legal "DRAFT", this debt I had not paid on in for over 3 yrs, after I got the fake doc I researched and found out more information about this lawyer and her practice. The LSUC has every right to take the required steps to put an end to members who will only cause disgrace to the legal profession. My debt is statued barred yet, I am sent a Fake "DRAFT". COnsumers are only fooled for so long.
  • what does

    ligitergit
    got to know what, statued barred means???? as i have fallen into this cess pool of debt, a few examples would be great thanks,,,
  • Tammy B
    n Ontario, the statute of limitations is two years as long as you don't make a payment or admit that you owe it they can't sue you for the debt and chances are by the time it got to this point the account has changed hands several times so even if they did sue you won't have the proof they need to win. Just make sure if they even do sue you that you file a statement of defence its very important if you don't they will win by default that's how they scammers win most of their cases.
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