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.”
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.”
