From Collector: No Good Option

When it comes to validation notices sent into the Third Circuit, debt collectors are faced with the unenviable task for choosing between two potentially perilous options.

8/13/2019 1:00 PM

Collector MagazineNewsIndustry Advancement Program
From Collector: No Good Option

A troubling trend has developed within the U.S. Third Circuit regarding the language of the initial validation notice required under the Fair Debt Collection Practices Act. (The Third Circuit includes Pennsylvania, New Jersey and Delaware.)

The issue centers on whether the statute permits consumers to dispute a debt orally or whether all disputes must be “in writing,” report Compliance Analyst Andrew Pavlik and ACA International’s former Vice President and Senior Counsel Karen Scheibe Eliason in the August issue of Collector magazine.

In order to understand this complex and confusing issue, it’s helpful to first review the text provided by the statute for a validation notice. Section 809(a) [15 U.S.C. Section 1692g(a)] of the FDCPA requires the following three statements to be included in an initial validation notice:

  • A statement that unless the consumer, within 30 days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
  • A statement that if the consumer notifies the debt collector in writing within the 30-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
  • A statement that, upon the consumer’s written request within the 30-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. (Emphasis added.)

Note that Section 809(a)(3) does not include a requirement that a dispute be “in writing” regarding the validity of the debt, whereas Sections 809(a)(4) and 809(a)(5) both require the consumer to notify the debt collector “in writing” in order to trigger a debt collector’s duty to send verification of the debt and/or the name and address of the original creditor.

A majority of courts, including several U.S. Courts of Appeals, have interpreted Section 809(a)(3) as allowing a consumer to dispute the validity of the debt orally or in writing, while Sections 809(a)(4) and 809(a) (5) require a consumer to send a written dispute to the debt collector. However, not all courts agree with the majority opinion on Section 809.

In the article, Pavlik and Scheibe Eliason review relevant case law within the Third Circuit.

For example, in contrast to the well-reasoned consensus of most courts noted above, the U.S. Court of Appeals for the Third Circuit held in Graziano v. Harrison that “given the entire structure of [Section 809], subsection (a)(3) must be read to require that a dispute, to be effective, must be in writing.”

While many courts outside the Third Circuit have rejected this flawed interpretation of Section 809, district courts within the Third Circuit are bound by this precedent, resulting in some ill-founded court decisions.

To help, ACA is acting on the industry’s behalf and working tirelessly to try to ensure that court cases involving this critical issue within the Third Circuit result in judicial decisions that are governed by common sense, are clear and consistent, and do not unfairly impede legitimate industry business and activity.

ACA has supported several “Third Circuit statutory dispute notice cases” through the Industry Advancement Program by providing its members with Industry Advancement Funds to help defray the costs of litigation: Cadillo v. Stoneleigh Recovery Associates, LLC; Poplin v. Chase Receivables, Inc.; and Riccio v. Sentry Credit, Inc.

Members who wish to learn more about the case law on this issue can review recent court decisions in the August issue of Collector magazine. ACA will continue to provide information and support for members dealing with this frustrating issue.

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