A summary of recent top cases from ACA. Editor’s note: This content is available for members only.
8/28/2020 9:00
Each week, ACA International’s Compliance Analysts Betsy Clarke, Laura Dadd and Andrew Pavlik compile relevant case summaries for ACA members. Here is a recap of the cases this week. Members may also submit cases for consideration to our compliance team at [email protected].
Collection Letter Did Not Overshadow the Validation Period
In this case, a consumer’s daughter reportedly received treatment at a hospital and the consumer later received a letter from a debt collector attempting to collect a debt on the hospital’s behalf. The letter stated in part, “This debt may be covered entirely or in part by your insurance carrier (e.g., Blue Cross/Blue Shield, Medicare/Medicaid, your union or other)—provided you are qualified. If you feel that you may qualify, please complete the back portion of this letter and return it in the enclosed return envelope. If you do not qualify, please enclose your payment.” The letter also stated that the consumer must notify the debt collector in writing, within 30 days, if he chose to dispute the debt.
The back of the letter included a paragraph titled assignment and release authorization, which stated:
“I hereby assign any and all benefits to which I may be entitled, to the creditor indicated, on the reverse side of this page, and authorize said benefits to be paid directly to said creditor or to its agency or representative who will be acting on their behalf. I understand further that I am financially responsible to said creditor for all charges not covered by this assignment.”
The consumer did not sign or return the release authorization.
Third Circuit Finds Mistaken Address in Court Filing Did Not Violate the FDCPA
A consumer briefly attended a university and accrued $10,596.35 in unpaid tuition and fees. The university hired a law firm and obtained a default judgment against the consumer. He responded by suing the school and its law firm for alleged violations of the Fair Debt Collection Practices Act and state law. The district court granted summary judgment to both defendants, and the consumer appealed the to the U.S. Court of Appeals for the 3rd Circuit, contesting the judgment in favor of the law firm under the FDCPA.
The consumer’s claims were based on the allegation that law firm violated the FDCPA by relying on an incorrect residential address from the university’s database that prevented him from finding out about the lawsuit against him. At the outset, the 3rd Circuit observed the consumer provided no evidence that the law firm was aware that the address was inaccurate. Furthermore, the court observed that even if the law firm had intentionally provided the wrong address to the court, the consumer would have to look beyond the FDCPA for a remedy. Under 3rd Circuit precedent, “‘a false statement is only actionable under the FDCPA if it has the potential to affect the decision-making process of the least sophisticated debtor; in other words, it must be material when viewed through the least sophisticated debtor's eyes.’” The court reasoned that because the incorrect address prevented the consumer from receiving notice of the suit, it could not have affected his decision-making and therefore was not actionable under the FDCPA.
Maryland District Court Enforces Arbitration Clause and Dismisses FDCPA Suit
The consumer executing a loan with a bank signed a note containing an arbitration clause that stated the parties’ disputes must be resolved pursuant to the Federal Arbitration Act (“FAA,”) 9 U.S.C. § 1 et seq. (2018), which requires courts to enforce covered arbitration agreements according to their terms.
The parties’ note contained the following different provisions regarding dispute resolution:
- All disputes, claims, or controversies arising from or relating to this note or the relationships which result from this note and/or any guaranty of this note, or the validity of this arbitration clause or the entire agreement, shall, at the election of either party, be resolved by binding arbitration…
- The parties agree and understand that they choose arbitration instead of litigation to resolve disputes…
- THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL…
- The parties agree and understand that all disputes arising under case law, statutory law, and all other laws including, but not limited to, all contract, tort, and property disputes, will be subject to binding arbitration in accord with this note.
The consumer defaulted on the note, and a debt collector retained by the bank to collect the unpaid balance sent the consumer a collection letter. Seeking to represent a class, the consumer sued the debt collector alleging the letter violated the Fair Debt Collection Practices Act because the letter failed to clearly state the balance due. The debt collector moved to dismiss the complaint, arguing the consumer was bound by the note’s arbitration clause.
Court Finds Validation Notice Did Not Mislead Consumer
In a putative class action, a consumer alleged a collection letter she received was misleading in number of ways. The court described the letter as follows:
The top right corner of the letter listed the debt collector’s address in Pennsylvania as well as its telephone number. In the top left corner, underneath the word “from,” the letter listed a P.O. Box address in Charlotte, North Carolina.
The body of the letter began by asking if the recipient was “[i]interested in saving $799.92” and explained that a particular bank “has authorized [the debt collector] to accept a reduced amount to resolve [the consumer’s] account.”
The letter then listed the alleged balance the consumer owed, and offered four options to pay the “reduced amount”: (1) pay the reduced amount of $266.57 in one payment; (2) pay a down payment of $53.31, and the remaining balance of $213.26 30 days after the first payment is received; (3) have an opportunity to split reduced amount into three payments of $88.86 each, and the consumer should “[c]all [Defendant’s] office for details”; or (4) the consumer can “[c]ontact one of [Defendant's] agents who have been specially trained to listen to [the consumer’s] circumstances and guide [her] through the process,” as “there may be other payment options available. . .”
The fourth option also included a phone number for the consumer to call that was the same as the one listed under the debt collector’s address in the top right corner of the letter. The fourth option in the letter also invited the consumer to visit the debt collector’s website.
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