FDCPA

Reversing the lower court’s judgment order, the U.S. Court of Appeals for the Third Circuit recently ruled in a putative class action suit under the federal Fair Debt Collection Practices Act that language in a debt collection letter contradicted and overshadowed the FDCPA validation notice, pointing among other things to the statements in the letter to “please call us” “if you feel you do not owe” the debt, the font, typeface and other characteristics.

Defendant debt collector (“Debt Collector”) sent plaintiff debtor (“Debtor”) a letter in an attempt to collect a debt which Debtor supposedly owed for medical services. The letter stated in part: “if you feel you do not owe [the debt], please call us toll free at . . . or write us at the above address. . . SEE REVERSE SIDE FOR IMPORTANT INFORMATION.” The phrase “please call” was in bold face, and the front side of the letter supposedly contained a confusing admixture of font sizes, typeface, contact phone numbers, and mailing and website addresses.

On the reverse side of the letter was the language stating in part: “unless you notify this office within 30 days after receiving this notice that you dispute the validity of this or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice that you dispute the validity of this debt . . . , this office will . . . [verify the debt]. . . . If you request this office in writing within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor . . . .”

Debtor filed a putative class action complaint under section 1692(e)(10) and section 1692g of the federal Fair Debt Collection Practices Act (“FDCPA”), alleging that Debt Collector’s letter was a false or deceptive means of collecting on the debts in question because the least sophisticated debtor could reasonably, but incorrectly, believe that he could effectively dispute the debt by calling the phone number listed in the letter.

Debt collector moved for judgment on the pleadings, which the lower court granted. Debtor appealed. The Third Circuit vacated the lower court’s order granting the judgment on the pleadings.

As you may recall, the federal Fair Debt Collection Practices Act requires that a debt collector provide to a consumer: (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that the debt will be assumed valid unless the consumer disputes the debt in writing within 30 days after receipt of the notice; (4) a statement that if the consumer does so notify the debt collector in writing that the debt is disputed, the debt collector will verify the debt and send such verification to the consumer; and (5) a statement that, upon the consumer’s written request within the 30-day period, the debt collector will provide the name and address of the original creditor. 15 U.S.C. § 1692g(a).

In addition, section 1692g(b) of the FDCPA provides in part that if the consumer disputes the debt in writing, the debt collector must cease collection of the debt “until the debt collector obtains verification of the debt . . . or the name and address of the original creditor, and a copy of such verification . . . or name and address of the original creditor, is mailed to the consumer by the debt collector. . . .” That section further provides that “[a]ny collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.” 15 U.S.C. § 1692g(b).

Moreover, Section 1692e specifically prohibits “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. § 1692e.

Addressing Debtor’s claim that the validation notice was inadequate to apprise “the least sophisticated consumer” of his rights under the FDCPA, the Third Circuit observed that “more is required than the mere inclusion of the statutory debt validation notice in the debt collection letter – the required notice must also be conveyed effectively to the debtor.” See, e.g., Wilson v. Quadramed Corp., 225 F.3d 350 (3rd Cir. 2000); Graziano v. Harrison, 950 F.2d 107 (3rd Cor. 1991)(statutory notice must effectively explain a debtor’s rights).

In so doing, the Third Circuit examined the Debt Collector’s collection letter in terms of both its form and substance to determine whether the validation notice was “‘overshadowed’ or ‘contradicted’ by accompanying messages from the debt collector” that would lead the least sophisticated consumer to derive different meanings from the letter. See Graziano, 950 F.2d at 111, 354.

In reaching its conclusion that Debt Collector’s letter was substantively deceptive, the Third Circuit took issue with the lower court’s assessment that the “please call” language, when read in the context of the whole letter, would not be confusing to the least sophisticated debtor.  

Third Circuit reversed the lower court’s order granting judgment in Debt Collector’s favor and remanded for further proceedings.

7th Cir Reverses DWP of Putative FDCPA Class Action Claims

Kasalo-Harris& Harris

The U.S. Court of Appeals for the Seventh Circuit recently reversed a lower court's decision to dismiss a putative class action lawsuit against a debt collector for want of prosecution, because the mistakes made by the plaintiff's attorney were not sufficient to justify the dismissal. A copy of the opinion is attached.


A consumer sued a debt collection law firm, Harris & Harris, Ltd. ("Harris") for alleged violations of the federal Fair Debt Collection Practices Act ("FDCPA"). Both parties agreed that Harris violated the FDCPA with respect to the consumer, and that the consumer was entitled to modest statutory damages. However, the consumer's attorney also included in his complaint two putative class counts, which alleged that the envelopes and payment reminders used by Harris to collect debts violated the FDCPA on a classwide basis.

The lower court "expressed doubt that it would ever certify a class" in this matter, but nevertheless continued the matter several times to permit the consumer's attorney to expand on and amend the putative class claims.

On several occasions, the consumer's attorney failed to meet the lower court's deadlines, and arrived for a hearing after the court had already considered his case. Due to the consumer's attorney's failure to appear and repeated failure to meet other deadlines, the lower court dismissed the case for want of prosecution.

As you may recall, Federal Rule of Civil Procedure 41(b) provides that "[i]f a plaintiff fails to prosecute or to comply with.a court order, a defendant may move to dismiss the action or any claim against it." In addition, Federal Rule of Civil Procedure 23 provides that a court "must determine by order whether to certify the action as a class action" at an "early practicable time."

The Seventh Circuit held that the lower's court decision to dismiss the action for want of prosecution was an abuse of discretion. In reaching that conclusion, the Court first noted that dismissal for want of prosecution is an "extraordinarily harsh sanction." Gabriele v. Hamlin, 514 F.3d 734, 736 (7th Cir. 2008). In addition, dismissal for want of prosecution should be imposed based on a consideration of, among several other factors, whether the mistakes made are the responsibility of the plaintiff or the plaintiff's lawyer, and the prejudice to the defendant as a result of those mistakes. Aurora Lamp & Lighting Inc. v. International Trading Corp, 325 F.3d 752, 755 (7th Cir. 2003).

Here, the Court indicated that the attorney's fees Harris had to incur due to the repeated errors of the consumer's counsel were not sufficient prejudice, and noted that all of the mistakes made were attributable to the consumer's attorney, rather than to the consumer herself.

In addition, the Court noted that despite the questionable nature of the class action claims, the borrower's individual allegation against Harris appeared to have merit. It also observed that several less severe mechanisms were available to dismiss the class action claims: the lower court could have used Federal Rule of Civil Procedure 41(b) to dismiss only the class action claims, allowing the individual claim to survive, or it could have declined to certify the action as a class action under Federal Rule of Civil Procedure 23.

The Court placed emphasis on the fact that the borrower's attorney did not receive any warning from the lower court that he was on "thin ice."

Therefore, "[g]iven the nature of [the borrower's attorney's] mistakes, the court's ongoing approach to the case, and the lack of any explicit warning," the Court reversed and remanded the lower court's decision to dismiss the action for want of prosecution.

11th Cir Affirms FDCPA Ruling in Favor of Debt Collector in Telephone Message Case

In an unpublished opinion, the U.S. Court of Appeals for the Eleventh Circuit recently held that a debt collector’s telephone messages did not violate the federal Fair Debt Collection Practices Act (“FDCPA”),


15 U.S.C. § 1692, where the message identified the name of the caller, which included the term “Collection Bureau,” and specifically referenced the debtor’s personal file number.

A copy of the opinion is available at:
http://www.ca11.uscourts.gov/unpub/ops/201110560.pdf

Plaintiff-debtor (“Debtor”) brought suit against defendant-debt collector, Gulf Coast Collection Bureau, Inc. (“Gulf Coast”), alleging violations of the FDCPA and the Florida Consumer Collections Practices Act (“FCCPA”).

The Debtor’s allegations arose from a series of identical or nearly identical telephone messages from Gulf Coast which stated:

“This message is intended for Eric H. Beeders (Debtor). If you are not Eric H. Beeders please hang up or disconnect. If you are Eric H. Beeders please continue to listen to this message. By continuing to listen to this message you acknowledge that you are Eric H. Beeders. Please return this call to Roy Dillard from Gulf Coast Collection Bureau. Please call 877-827-4820 and ask for file number G31852.”

The lower court granted Gulf Coast’s motion for directed verdict following a bench trial. On appeal, the Debtor argued that the telephone message failed to comply with the FDCPA and FCCPA “because it did not adequately satisfy the disclosure requirement in that it did not identify the nature of the calling company’s business, the fact that the caller was a debt collector, and the fact that the call was being made with respect to the collection of a debt.”

The Eleventh Circuit affirmed, reasoning that “taking this message as a whole, even an unsophisticated consumer would not be misled as to the purpose of this call, as the message identified the name of the caller, which includes the term ‘Collection Bureau,’ and specifically referenced a personal file number.” Accordingly, the Court found “no reversible error in the district court’s conclusion that Gulf Coast satisfied the disclosure requirements of the FDCPA.”

The Court also noted that, having found against the Debtor on his FDCPA claim, the Court “need not address Debtor’s arguments that the failure to comply with these requirements constitute a per se violation of the FCCPA.” Therefore, the Court also affirmed the lower court’s grant of summary judgment as to Debtor’s FCCPA claim.

5th Cir Says Collecting on Time-Barred Debts "May" Violate FDCPA, But Not In This Case

In a case involving collection activities on an allegedly time-barred cell phone debt, the U.S. Court of Appeals for the Fifth Circuit recently held that: (1) the Federal Communications Act statute of limitations of two years did not apply in this case, as there was no indication of federal preemption of state statutes of limitation on collecting on cell phone bills; and (2) the relevant state statute of limitations of four years applied, and the defendant’s were therefore not “threatening to sue on time-barred debts.”

A copy of the opinion is available online at:

http://www.ca5.uscourts.gov/opinions/pub/09/09-50975-CV0.wpd.pdf

The consumer brought suit against two debt collectors concerning letters he perceived as threatening suit on an approximately three (3) year old cellular phone bill. The consumer alleged that these collecting on these cell phones bills was time-barred under the Federal Communications Act (“FCA”).

The relevant language of the FCA, 47 U.S.C. §415(a), states: “All actions at law by carriers for recovery of their lawful charges . . . shall be begun, within two years from the time the cause of action accrues, and not after.”

The district court certified as a class all persons with Texas addresses who had received similar letters to Castro’s during a specified time period on debts that had gone delinquent more than two years before the letters were sent. However, the district court then granted the defendants’ motion to dismiss, and denied the consumer’s motion for partial summary judgment. The consumer appealed.

One appeal, the Fifth Circuit noted that “threatening to sue on time-barred debt may well constitute a violation of the FDCPA.” Thus, the Court determined that “in order to proceed “the plaintiffs needed to demonstrate that their debts were “time-barred.”

The Court then contrasted the 4-year statute of limitations in §16.004(a)(30) of the Texas Civil Practice & Remedies Code with the 2-year limitations period under the FCA, 47 U.S.C. §415(a).

The Fifth Circuit framed the choice between these two statutes of limitations as “a question of preemption.” Due to the fact that Congress had amended the FCA to allow states to control “many aspects of regulating commercial mobile services” including the traditional state regulation of contracts and consumer protection, the Court held that “Congress did not intend to preempt “the historic police powers of the states,” absent a showing that this was “the clear and manifest purpose of Congress.”

Because the plaintiffs did not contend that express or field preemption was applicable in this matter, the Court focused on the possibility of conflict preemption.

The Court noted that when the FCA was enacted in 1934 carriers were required “to file their rates, also called ‘tariffs’ with the FCC.”

Although many telecommunications carriers have since been released from the requirement to file tariffs, the Court noted that “Congress did not change the language of §415(a).”

The plaintiffs urged the Court to accept their definition of “lawful charges” as applying to non-tariffed as well as tariffed charges.

However, Court held that given the history of the regulation it was “at least equally reasonable to read ‘lawful charges’ in §415(a) as a term of art meaning only tariffed charges.” Due to this ambiguity in the meaning of “lawful charges,” the Court would not “interpret the term in such a way that conflict preemption would apply.”

Because conflict preemption did not apply to displace the 4-year state statute of limitations period, the cell phone debts at issue were not time-barred, and the consumer had no claim. Thus, the Fifth Circuit affirmed the lower court’s judgment

2nd Cir Says FDCPA "Judicial District" May Not Mean "County," and Liability Possible Even for Consensual Dismissal of Lawsuit

The United States Court of Appeals for the Second Circuit recently held that: (1) the term “judicial district” in the FDCPA’s venue provision, as applied to state-court debt collection actions, must be defined in accordance with the judicial system of the state in which the debt collection action is brought; and (2) even the consensual dismissal of an debt collection action filed in the incorrect venue may give rise to FDCPA liability. A copy of the opinion is attached.


Debt collector Cohen & Slamowitz LLP (“C&S”) brought a debt collection action against the consumer in Syracuse City Court. Although the consumer resided in the same county as the City of Syracuse, the consumer obtained the dismissal of that action pursuant to Section 213 of New York’s Uniform City Court Act (“Section 213”) on the basis that he did not reside in the City of Syracuse or a town contiguous thereto.

The consumer filed suit in federal court against C&S, alleging that C&S violated the FDCPA’s venue provisions by suing him in a judicial district in which he did not reside. The district court granted C&S’s motion to dismiss because, among other reasons, that court interpreted “judicial district” under the FDCPA to mean “county.” The consumer appealed and the Second Circuit vacated and remanded the case.

As you may recall, the FDCPA’s venue provision requires that debt collection actions be brought “only in the judicial district or similar legal entity . . . in which [the] consumer resides at the commencement of the action.” 15 U.S.C. § 1692i(a)(2)(B).

Relying on the definition of “judicial district” “at the time the FDCPA was enacted,” and the Congressional intent behind the FDCPA, the Second Circuit concluded “that the term ‘judicial district,’ as applied to state-court debt collection actions, must be defined in accordance with the judicial system of the state in which the debt collection action is brought.”

In this case, the city court “of which C&S availed itself is governed by laws that limit the territorial extent of those courts based on a defendant’s contacts with the forum” and, accordingly, “those laws delimit the ‘judicial district’ by which compliance with the FDCPA’s venue provisions must be measured.”

Therefore, the “FDCPA’s term ‘judicial district,’ as applied to a case where a debt collector sues a consumer in one of New York State’s city courts, extends no farther than the boundaries of the city containing that court and the towns within the same county that are contiguous by land thereto. And, because the proper ‘judicial district’ in this case did not include the town where [the consumer] resided, the district court erred in dismissing [the consumer’s] complaint.”

The Court rejected C&S’s arguments that “judicial district” should encompass the entire county of the consumer’s residence even when a consumer is sued in a city court. First, C&S argued “that the dismissal of its lawsuit, on consent, does not give rise to a violation of the FDCPA’s venue provisions because Section 213 is addressed to the issue of jurisdiction, which C&S contends is irrelevant to the FDCPA’s venue analysis.”

However, the Court held that where, as here, “a state law outlines the required nexus between the residence or activities of the consumer and the location of the court, such a law sets forth the appropriate ‘judicial district’ for purposes of the FDCPA with respect to debt collection actions brought in that court, regardless of whether that provision is styled as jurisdictional or otherwise.”

The Court also rejected C&S’s argument that the “dismissal here should not give rise to a FDCPA violation because Section 213 provides that actions dismissed thereunder may be refiled in the appropriate court.” The Court reasoned that “it is irrelevant to the FDCPA whether state law sets forth a procedure for refiling actions that are dismissed based on defective venue.” In addition, the ability of the debt collector to refile the suit in fact contributes to the threat of ‘forum abuse’ that inspired Congress to enact 15 U.S.C. § 1692i.”

Finally, the Court rejected the lower court’s reasoning for dismissing the consumer’s complaint. First, the district court stated that dismissal was warranted because it “had difficulty concluding” that C&S’s act of bringing suit in Syracuse City Court was “intended to be unfair, harassing, and deceptive.” However, “this is an affirmative defense” and “[t]o recover damages under the FDCPA, a consumer does not need to show intentional conduct on the part of the debt collector.”

The Court also rejected the lower court’s interpretation of “judicial district” to mean “county.” Distinguishing the district cases relied upon by the lower court, the Court stated that the standard it had adopted “enables debt collectors to predict with accuracy and ease whether suing a consumer in a given forum would violate the FDCPA’s venue provisions.” In addition, the Court noted “that the conclusion we reach today is consistent with that of the only of our sister Circuits that has devoted extended consideration to the meaning of this statutory phrase.” See Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996).

7th Cir Says FDCPA Debt Collector May Contact Debtor's Attorney After Payment Refusal, Communications-Stop Demand

The United States Court of Appeals for the Seventh Circuit recently held that the FDCPA does not prevent a debt collector from communicating with a debtor’s attorney after the debtor refuses payment and requests that the debt collector cease communications with the debtor.

After receiving demands from a debt collector for payment of a debt, a debtor retained a lawyer, who sent the debt collector a letter stating that the debtor refused to pay and lacked assets that the creditor could seize. The letter concluded: “we request that you cease all further collection activities and direct all future communications to our office.”

The debt collector refrained from calling or writing to the debtor, but did call the lawyer with a request for payment. The debtor then filed a lawsuit asserting violation of 15 U.S.C. §1692c(c) of the federal Fair Debt Collection Practices Act (“FDCPA”). The debtor alleged that by contacting the attorney the debt collector violated the FDCPA’s prohibition on contacting a debtor after he refuses to pay a debt. The district court found in favor of the debt collector, holding that the debtor’s lawyer was not a “consumer” as defined in the FDCPA and therefore that communications with him were not prohibited.

As you may recall, in relevant portion, §1692c(c) provides that where “a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer” then “the debt collector shall not communicate further with the consumer” except under certain limited circumstances. Section 1692c(d) defines the word “consumer” for the purpose of §1692c. It provides that “consumer” includes “consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.”

The debtor argued that whether or not a debtor’s lawyer was “the consumer,” the lawyer was the debtor’s agent, and therefore that communications to the lawyer should be treated as communications to the debtor. The debtor noted that 15 U.S.C. §1692a(2) defines “communication” as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” The debtor then reasoned that anything a debt collector says to a debtor’s lawyer is an indirect communication to the debtor. The debtor therefore argued that once a debtor invokes his rights under §1692c(c), any communication to either the debtor or his lawyer is forbidden, unless it comes within one of the exceptions of the FDCPA. The Court noted that at least one district judge had accepted the argument made by debtor. However, the Court also noted that no appellate court had addressed the issue.

In rejecting the debtor’s argument, the Seventh Circuit held that subsections (a) and (b) of §1692c provided guidance as to whether a debtor’s attorney was intended to be included in the definition of “consumer.” Subsections (a) and (b) provide as follows in relevant portion:



"(a) Communication with the consumer generally

"Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt—

* * *

"(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or

* * *

"(b) Communication with third parties

"Except as provided in section 1692b of this title, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector."



The Court stated that the debtor’s “argument makes hash of [subsections (a) and (b)], because if the word ‘consumer’ is replaced by ‘lawyer’ (whether because a lawyer is a ‘consumer’ or because a communication to a lawyer is an indirect communication to a consumer) both subsections become gibberish.” The Court further found that “[t]he problem is not simply that the words ‘consumer’ and ‘attorney’ must mean different things in this subsection,” but also that “the point of subsection (a)(2) is to tell the debt collector that it is OK to communicate with the debtor’s attorney even when it is forbidden to communicate with the debtor.”

The Seventh Circuit therefore ruled that to read §1692a(2) as prohibiting communications with a debtor’s attorney would be implausible. It noted that such a reading would prevent debt collectors from engaging in settlement negotiations with an attorney to avoid litigation. The Court questioned: “Why would Congress have provided that hiring a lawyer makes it impossible for the debtor and debt collector to communicate through counsel?”

Ultimately, the Court held Congress did not intend such a result. The Court reasoned that the debtor’s reading of the FDCPA “causes serious problems for the structure and operation of subsections (a)(2) and (b), and is not supported by subsection (d)—which. . . does not include the debtor’s lawyer in the definition of ‘consumer.’”

Therefore, the Court concluded that “§1692c as a whole permits debt collectors to communicate freely with consumers’ lawyers.”

Your rights under the Fair Debt Collection Practices Act:

Credit Reports

What’s in Your Report

Credit Inquiries

How Mistakes Are Made

Missing Accounts

Fixing An Error

Investigating

Fair Credit Reporting Act

Equal Credit Opportunity Act

Fair Credit Billing Act

Fair Debt Collection Practices

Average Credit Statistics

ID Theft

Contacts and Resources

GlossaryDebt & debt collectors – know your rightsYou are responsible for your debts. If you fall behind in paying your creditors or an error is made on your account, you may be contacted by a "debt collector." A debt collector is any person, other than the creditor, who regularly collects debts owed to others. This includes lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.



The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money owed for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts.



Your rights under the Fair Debt Collection Practices Act:



Debt collectors may contact you only between 8 a.m. and 9 p.m.

Debt collectors may not contact you at work if they know your employer disapproves.

Debt collectors may not harass, oppress, or abuse you.

Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.

Debt collectors must identify themselves to you on the phone.

Debt collectors must stop contacting you if you ask them to in writing.