Safe Harbor Language Did Not Violate the FDCPA


The court upheld a debt collector’s use of safe harbor language approved by the Second Circuit Court of Appeals.

12/20/2018 10:00

Recently, the U.S. District Court for the Eastern District of New York ruled in favor of a debt collector when a consumer sued, alleging the debt collector’s letter violated the FDCPA by falsely stating that the amount owed may increase. The statement in question was safe harbor language previously approved by the U.S. Court of Appeals for the Second Circuit. The court in the instant case determined that the statement in the notice correctly stated that the debt may increase over time.

In Avila v. Reliant Capital Solutions, LLC, No. 2:18-cv-2718 (ADS)(ARL), 2018 WL ——- (E.D.N.Y. Nov. 14, 2018), a debt collector sent a collection letter to a consumer regarding an outstanding student loan debt of $33,151.18. The notice listed a principal balance of $24,191.55, with interest of $2,470.17, and fees and costs of $6,489.46. The letter also stated that the consumer had not accrued any penalty charges, and included the disclaimer listed below:

As of the date of this letter, you owe $33,151.18. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call (877) 404-8853.

The consumer sued, alleging the debt collector’s letter violated 15 U.S.C. § 1692e and 1692g(a)(1) of the FDCPA by falsely stating that the amount owed may increase due to interest, late charges, and other charges. Specifically, the consumer claimed that the language the debt collector used regarding “interest, late charges, and other charges” was false, deceptive, or misleading, because while the consumer’s debt was accruing interest, there were no “late charges” or “other fees” accruing.  

The debt collector moved to dismiss the consumer’s FDCPA claim, arguing that the language complained of in the letter had already been expressly approved by the U.S. Court of Appeals for the Second Circuit in Avila v. Riexinger & Assocs., LLC, 817 F.3d 72 (2d Cir. 2016), a case where the consumer in the instant case was also the plaintiff. The court observed that the debt collector used the identical language of the safe harbor formula outlined in Avila, and the parties both agreed that interest continued to accrue on the student loan debt. Thus, the only issue in dispute was whether “late charges” and “other fees” were accumulating and whether the safe harbor in Avila was applicable.

Siding with the debt collector, the court found that language approved in Avila did not require a debt collector to state whether each of the additional charges, “interest,” “late charges,” and “other fees,” were individually increasing. Rather, the safe harbor correctly stated that any of the additional charges may increase over time. The court reasoned that in order for the safe harbor language to be accurate, it was only necessary for one of the three components to change. Because interest was accumulating on the consumer’s debt, the letter did not need to specify which of the components would fluctuate.  

Going further, the court asserted that even if the letter was technically false, it still would not violate the FDCPA unless it misled a hypothetical “least sophisticated consumer,” and the Second Circuit’s ruling in Avila foreclosed that potential argument. The court stated, “[t]o hold otherwise would upset the reliance interests of the many debt collectors who, taking the Second Circuit at its word, drafted collection letters based on that guidance.” Accordingly, the court ruled that the language used in the letter would receive safe the harbor treatment and, therefore, the consumer’s claims were dismissed.

The consumer in this case has since filed a Notice of Appeal to the Second Circuit. ACA will continue to monitor the case for any new developments.

Echols Web

ACA International attorney member Chad Echols of The Echols Firm LLC offered the following analysis of the district court’s decision: 

This case set up well for a motion to dismiss for two primary reasons; (1) the legal position that the industry should be able to rely upon precedential guidance from the courts when conducting collection activity, and (2) the optics of Ms. Avila previously asking the court for, and obtaining, this specific safe harbor verbiage and then coming back to allege she was harmed by the safe harbor language she sought. The reliance language from the Judge is extremely important to the collection industry. While collection agencies may choose to boutique collection letters in various ways, the industry should be able to use language prescribed by precedential courts within that court’s jurisdiction without penalty. We look forward to advocating that the Second Circuit Court of Appeals solidify its prior position and uphold the safe harbor language for those accounts that may increase over time.

Chad Echols may be reached at:

The Echols Law Firm LLC

115 Oakland Ave.

Suite 102

Rock Hill, S.C. 29730

(803) 329-8971

[email protected]

ACA International Members Attorney Program members interested in contributing their insights on a case for the Daily Decision Deep Dive may contact ACA International’s Communications Department at [email protected].

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