The brief in the case solidifies the bureau’s intentions for validation notices and itemization in its proposed debt collection rule, which is due to be finalized this year. Editor’s note: This article is available for members only.
10/28/2020 15:00
The Consumer Financial Protection Bureau has filed an amicus brief in the U.S. Court of Appeals for the 3rd Circuit in support of a district court’s decision that a debt collector did not violate the Fair Debt Collection Practices Act by itemizing the plaintiff’s debt in a letter.
According to the CFPB’s brief, the primary question in the case, Hopkins v. Collecto, comes down to this: “Does a debt collector violate the FDCPA by accurately stating that the debt it is seeking to collect includes $0.00 in interest and collection fees, including when interest and collection fees are not currently accruing?” This “question presented” tracks closely with the issue in a recently decided case on the same issue, Degroot v. Client Services Inc., where the CFPB took a nearly identical amicus position, posing the question in that case this way: “Does a debt collector violate the FDCPA by accurately itemizing the interest and fees that are included in a debt it is seeking to collect, including when the interest and fees are $0.00?”
The CFPB’s brief in Hopkins v. Collecto Inc. extensively notes that the bureau’s interest in the case stems from the pending FDCPA rule for debt collectors and proposals on itemization and validation letters. The proposed rule included language that would requiring itemization of debts in certain debt collection notices and addresses several key issues on which ACA has long sought clarity, including safe harbor procedures for the use of voicemail messages and the ability to use modern forms of communication, such as text messaging and email. “The bureau therefore has a substantial interest in the interpretation and application of the FDCPA to debt collection notices that itemize a consumer’s debt,” it states in the brief.
The bureau’s brief further notes that one reason for Congress’ creation of the CFPB under the Dodd-Frank Wall Street Reform and Consumer Protection Act and authority to enforce compliance with the FDCPA “was to address issues in the validation process.”
Under the proposed rule, due to be released by the CFPB at any time this year, validation notices would need to disclose the amount of the consumer’s debt at two different times: the time when the validation notice is provided to the consumer and the time of a prior “itemization date,” among other requirements.
The proposed rule also provides more clarity on the requirements for a validation notice and includes a model form, ACA International previously reported.
ACA has been advocating for clarity surrounding some of these issues at the CFPB because of the frivolous litigation around the country resulting from conflicting rulings. In ACA’s comments on the proposed rule for Regulation F and in “quick fixes” suggested to the CFPB, ACA argued that a model validation notice should include suggested balance due on the account language. Specifically, ACA suggested that a dynamic balance disclosure should be added when the account balance is dynamic, not static.
While this was not included in the CFPB’s proposed rule, ACA appreciates that the Bureau is in part addressing the lack of clarity in this area by weighing in with an amicus brief in cases of importance to the debt collection industry
The facts of the Hopkins v. Collecto Inc. case, according to the brief, are as follows:
- The plaintiff, Randy Hopkins, alleged violations of two sections of the FDCPA: 1692e and 1692f. Section 1692e prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” including by making a “false representation of …the character, amount, or legal status of any debt” or by using “any false representation or deceptive means to collect or attempt to collect any debt.” Section 1692f prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt,” including by “collect[ing] … any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”
- Additionally, Section 1692g generally requires a debt collector to send the consumer a written notice within five days after the collector’s initial communication with the consumer about the debt. Among other things, this notice must disclose “the amount of the debt” and alert the consumer to his right to dispute the debt. This validation notice requirement was designed to ‘‘eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.’’
- In lieu of answering Hopkins’s complaint, Collecto and co-defendant USAM moved to dismiss it for failure to state a claim. In dismissing Hopkins’ claim, the district court identified the “central issue” as “whether Defendants’ inclusion of language … stating that Plaintiff owed $0.00 in interest and $0.00 for fees or collection costs for a static debt violated the FDCPA.” Hopkins appealed.
- The debt collector, Collecto Inc. d/b/a EOS CCA, sent a letter to Hopkins stating that he allegedly incurred and then defaulted on a debt initially owed to Verizon, then to US Asset Management (USAM) Inc.
- The letter stated that Hopkins owed a total of $1,088.34 on the debt and offered to “resolve this debt in full” if a reduced payment of $761.84 was received from Hopkins by Oct. 23, 2018.
- The letter that Collecto sent Hopkins included this table itemizing the debt:
- Hopkins’s complaint alleges that because the letter itemized interest and collection fees, he understood it to imply—in his view, misleadingly or unfairly—that interest and fees could begin to accrue in the future and thereby increase the amount of his debt over time.
In concluding its brief, the CFPB said that “the district court rightly rejected Hopkins’s itemization claim because that claim’s premise—that accurately itemizing $0.00 in past interest and fees implies the possibility of future interest and fees—is wrong. Hopkins has not identified any misleading or deceptive language with the October 3 letter, but only a question that the letter did not expressly answer. Incorporating Hopkins’s error into the law of this circuit would perversely incentivize debt collectors to provide less information to consumers, to those consumers’ ultimate detriment. This court should affirm the district court’s judgment.”
The bureau noted that disclosing a consumer’s debt includes $0.00 in interest or collection fees does not violate the FDCPA. “A contrary holding would be inconsistent with numerous decisions interpreting the FDCPA, conflict with guidance from federal and state regulators, and risk discouraging collectors from providing consumers with accurate and useful information about their debts,” the CFPB states.
ACA International filed its own amicus brief in Degroot v. Client Servs. Inc., decided earlier this month, in which the U.S. Court of Appeals for the 7th Circuit found that the use of an itemized breakdown accompanied by zero balances would not confuse or mislead an unsophisticated consumer. ACA members can read more on the Degroot case here.