New York Court Allows Another Amount of Debt Lawsuit to Go Forward
Troutman Sanders LLP reports on Second Circuit consumer claims under the FDCPA and approaches to litigation.
8/13/2019 9:00 AM
The Second Circuit Court remains a hotbed for consumer claims under the Fair Debt Collection Practices Act related to disclosures of interest and fees in collection letters. Plaintiffs bombard New York courts with these claims, forcing courts to meticulously review every possible disclosure of amounts due. While most of these claims ultimately fail on summary judgment, some of them survive early motions to dismiss, according to a blog post by ACA International member Troutman Sanders LLP attorneys Maryia Y. Jones, Austin Dunn, Andrew Buxbaum, Alan D. Wingfield, Ethan G. Ostroff and David N. Anthony.
In a recent case, Crystal Ortiz sued Advanced Call Center Technologies, LLC (“ACCT”), alleging the statement “Synchrony Bank may continue to add interest and fees as provided in your agreement” is misleading. In search of a claim that might survive, Ortiz argued that this short and plain sentence violated the FDCPA in five different ways. First, she posited that the letter did not explain the basis for any interest or fees but ultimately conceded that her claim was foreclosed by the Second Circuit’s decision in Kolbasyuk v.Capital Management Services, LP, 918 F.3d 236 (2d Cir. 2019). Second, Ortiz argued that if interest and fees were accruing, then the word “may” was misleading because it left open the possibility that they would not accrue. As with her first claim, on ACCT’s motion to dismiss she conceded that this claim was foreclosed by yet another Second Circuit decision, Avila v. Riexenger & Associates, 817 F.3d 72 (2d Cir. 2016).
In her third claim, Ortiz argued that, if interest and fees were not accruing, then the word “may” is deceptive because it implied that they would accrue. Here, the Court agreed with Ortiz and distinguished Avila, where the fees and interest were in fact accruing. Ortiz’s fourth claim “shift[ed] the focus from ‘may’ to ‘and’.” In particular, she asserted that the use of a conjunction implied that both interest and fees may increase, but it was not clear if only one or the other would increase. Again, the Court agreed because the Complaint did not allege what the underlying debt agreement stated and whether either has been added or will be added. As to her fifth and final claim, Ortiz complained that the letter was misleading because it informed her that ACCT would “stop [its] collection activity” if “the Amount Currently Due is paid.” The letter listed this amount as $580 but it also listed the “Account Balance [of] $7,747.00,” thus making it clear that the amount currently due was a periodic payment and the account balance was the full outstanding debt. Nonetheless, the Court found the statement misleading because collection activity is “not a self-evident concept” and the Court could not rule out a possibility that the least sophisticated consumer would interpret it as an offer to resolve the entire debt for $580.
Interestingly, with respect to the third and fourth claims, the Court was careful to emphasize that the remaining claims would likely be resolved on summary judgment if ACCT submitted evidence the debt collection agreement authorized it to accrue both interest and fees. However, with respect to the fifth claim, the Court made no such remark, thus leaving the possibility that this claim may survive summary judgment.
This decision demonstrates why the wave of the “amount of debt” claims does not subside as plaintiffs require the courts to test both new and old theories. The best approach to litigation involves a compliance protocol with regular reviews of collection letters against evolving case law and vigorous defense of meritless claims. Troutman Sanders will continue to monitor these cases.
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