A summary of recent top cases from ACA. Editor’s note: This content is available for members only.
10/15/2020 12:30
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 co[email protected].
Seventh Circuit Finds Itemization Listing Zero Interest Does Not Violate the FDCPA
In this case, the consumer incurred a credit card debt that was subsequently charged off and sent to a debt collector. The first debt collector sent the consumer a letter which stated in pertinent part, “The amount of your debt is $425.86. Please keep in mind, interest and fees are no longer being added to your account. This means every dollar you pay goes towards paying off your balance.”
Based on the information in this letter, the consumer understood the creditor had charged off his account and that it would no longer accrue interest, late charges, or fees for any reason.
After a certain amount of time, the creditor sent the debt to another debt collector. This debt collector sent the consumer a letter which stated, in bold, capital letters: “NEW INFORMATION ON YOUR ACCOUNT.” The letter went on to state that the creditor, “placed the above account with [its] organization for collections” and provided a summary of the consumer’s current balance: “Balance Due at Charge-Off: $425.86, Interest: $0.00, Other Charges: $0.00 Payments Made: $0.00, Current Balance: $425.86.” The letter concluded by informing the consumer that “no interest will be added to your account balance through the course of [the debt collector’s] collection efforts concerning your account.”
After receiving this letter, the consumer filed suit against the debt collector claiming that letter misleadingly implied that the creditor would begin to add interest to the previously charged-off debts if the consumer failed to resolve his debts with the debt collector in violation of the FDCPA. The consumer specifically alleged that he was “confused by the discrepancy between the [first] letter’s statement that ‘interest and fees are no longer being added to your account’ and the 3/11/19 letter’s implication that [the creditor] would begin to add interest and possibly fees to the debt once [the debt collector] stopped its collection efforts on an unspecified date.”
The district court found that the letter was not misleading and noted that, “even if [the debt collector’s] letter did imply that fees and interest would begin to accrue at a later date if the debt remained outstanding, the statement was not false or misleading given that Wisconsin law provided for the assessment of fees and interest on “static” debts in certain circumstances.” The consumer appealed the district court’s decision.
On appeal, the case was reviewed by the United States Court of Appeals for the 7th Circuit. The Consumer Financial Protection Bureau and ACA International each filed an amicus brief in the case urging the court to find that the consumer’s reading of the letter was bizarre and idiosyncratic.
Collection Letter that Includes Consumer’s Credit Card Account Number Along with Name of Creditor is a Winning Practice
A consumer with a credit card from Chase Bank failed to make payments when due and the bank placed the account with Client Services, Inc. for collection. The debt collector sent a letter to the consumer informing him the communication was an attempt to collect a debt and included the following information beneath the debt collector’s logo:
RE: CHASE BANK USA, N.A.
ACCOUNT NUMBER: xxxxxxxxxxxx2201
BALANCE DUE: $4,785.04
REFERENCE NUMBER: [Redacted]
After the consumer filed a putative class action lawsuit, the consumer and debt collector filed cross motions for summary judgment. The consumer alleged the debt collector violated the Fair Debt Collection Practices Act, 15 U.S.C. Sections 1692e and 1692g (“FDCPA”) by failing to adequately identify his creditor in the collection letter, and the debt collector contended its collection letter did clearly identify the consumer’s creditor, and thus did not violate the FDCPA.
A debt collector is obligated to identify “the name of the creditor to whom the debt is owed,” under Section 1692g(a)(2) of the FDCPA, and “may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt,” under Section 1692e.
Collection Notice Mentioning Oral and Written Disputes Did Not Violate the FDCPA
A consumer filed a putative class action suit against a debt collector alleging she received a collection notice that failed to clearly provide the validation notice required under the Fair Debt Collection Practices Act. The front side of the letter explained that the consumer could dispute her debt either orally or in writing, and the reverse side of the letter provided a validation notice explaining the different consequences of written versus oral disputes. The front of the letter stated, in pertinent part:
“Although we have requested that you make payment, or provide proof of payment if payment has been made, you still have a right to obtain more information about this debt or dispute this debt, either orally by calling your Account Representative at 516-240-6612, or by writing to Network Recovery Services Inc. at the address listed on the top of this letter. YOUR RIGHTS ARE DESCRIBED ON THE REVERSE SIDE OF THIS NOTICE.”
The reverse side of the letter stated:
“If you do not dispute the validity of the debt, or any portion thereof, either orally or in writing, within 30 days after you receive this notice we will assume this to be a valid debt owed by you.
If you notify us in writing within 30 days after you receive this notice that the debt, or any portion thereof, is disputed, we will obtain verification of this debt or a copy of a judgment and mail a copy of such verification or judgment to you.
In the event the name and address of the current creditor is different from the original creditor, and you, within 30 days after you receive this notice, request in writing the name and address of the original creditor, we will supply this information to you.”
The consumer claimed the letter contained an “inherent contradiction” that both misstated her right to dispute the debt, in violation of Section 1692g(a), and provided a “false, deceptive, or misleading representation,” in violation of Section 1692e. Specifically, the consumer alleged the sentence “[Y]ou still have a right to obtain more information about this debt or dispute this debt, either orally … or by writing,” lacked the requisite “specificity” required by the statute. The consumer also asserted that the letter was contradictory because the front of the letter stated, “disputes may be made orally or in writing,” in contrast with the reverse side, which stated that only some disputes can be made orally while others must be in writing.
Defendant Law Firm Could Not Short Circuit Consumer’s Bid for Discovery Needed to Prove its FDCPA Claim
A consumer complained about disrepair and unsuitable conditions at his rental apartment but continued to pay his rent. When he gave written notice of his intent to move out, the landlord sent the consumer an eviction notice. Several months later, a collection agency sent the consumer a letter demanding payments related to the property and a law firm filed suit against the consumer. In response the consumer filed suit in federal court, alleging the debt collector and the law firm violated the Fair Debt Collection Practices Act and the Ohio Consumer Sales Practices Act by demanding payments the consumer did not owe, included charges and penalties not authorized under the lease, added charges the original creditor admitted were not accurate, and made misleading statements regarding the identity of the creditor.
The law firm moved for summary judgment asserting (1) it was not a “debt collector” under the FDCPA, and (2) if it was, it did not violate federal or state law. The consumer objected to the law firm’s motion as premature, claiming it had not had sufficient time to conduct discovery on fact issues including the firm’s status as a debt collector, how it calculated the amounts it sought to recover, and its bona fide error defense. The consumer supported his motion with an affidavit detailing specific information he needed to obtain through discovery to respond to the law firm’s motion for summary judgment, including the following:
- Information concerning billing software and data used to determine the number of eviction cases and debt collection cases the law firm handled yearly.
- Information reviewed by the firm to create its list of 280 debt collection cases it filed over four years.
- Information related to the firm’s response that it was not a debt collector subject to the FDCPA, given the filing of 280 debt collection cases.
- Confirmation that the firm relied solely on an incomplete revised final statement when it filed the motion for summary judgment.
- Information reflecting the type of work that made up the firm’s practice, to rebut the firm’s argument that “only a small percentage of its work involves debt collections.”
- Information related to the law firm’s bona fide error defense.
- Deposition of a representative of the law firm.
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