Second Circuit Rules in Favor of ACA Member in a Case Supported by the Industry Advancement Fund


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FDCPA does not require collection notice to affirmatively state that static amount due will not increase through the addition of interest and fees.

10/31/2018 17:00

The Second Circuit Court of Appeals handed the accounts receivable management industry a win yesterday when it ruled in Derosa v. CAC Financial Corp., No. 17-3189, 2018 WL ——- (2d Cir. Oct. 30, 2018) that ACA International member CAC Financial Corp. did not violate the Fair Debt Collection Practices Act when it sent a collection letter that did not state that interest and fees were no longer accruing on the balance. Citing Taylor v. Financial Recovery Services, Inc., 888 F.3d 212 (2d Cir. 2018) (another case supported through ACA’s Industry Advancement Fund), the appellate court affirmed the district court’s decision that not informing the consumer that interest and fees are no longer accruing does not, in and of itself, constitute a violation of the FDCPA. ACA supported its member’s initiative to obtain an important FDCPA decision positively impacting ACA’s members and the credit and collection industry.

As ACA previously reported, the U.S. District Court for the Eastern District of New York found that the collection notice sent in Derosa was not misleading or deceptive but, rather, straightforward. In doing so, the district court reasoned that since the collection notice accurately stated the static amount due as the balance, the collection agency need not advise the consumer of the fact that the balance will not change. The district court further explained that “[w]hile a clear statement that the balance owed would fully satisfy the debt might have saved this defendant from litigation, the absence of such language does not, in and of itself, constitute a violation of the FDCPA.” 

The consumer appealed the district court’s decision and provided additional evidence that the debt collector’s letter could be confusing and misleading. The first piece of evidence was a personal declaration stating her account previously had, “accrued interest on any balances carried, and late fees on any late or missed payments.” The second piece of evidence was a credit card agreement, which the consumer alleged showed that the balance would continue to accrue interest even in default.

The Second Circuit did not find the consumer’s new evidence compelling. The court stated, “The fact that the account accrued interest and fees when being administered by the original creditor is not indicative of how the account would function when transferred to a debt collection agency… It is thus speculative to claim that the underlying account would continue to accrue interest and fees when the account had been transferred or assigned to another party for collection…We have considered [the consumer’s] remaining arguments and find them to be without merit.”

Since the State of New York and the Bureau of Consumer Financial Protection worked in cooperation together to change New York laws on requirements for debt collection letters without providing safe harbor language, there have been thousands of lawsuits from consumer attorneys against ACA members on a wide range of new theories of law. One such issue is the theory that agencies that send collection letters for clients who do not charge interest, must make some sort of affirmative statement that no interest is charged, and that the simple word “Balance” is insufficient. Given that consumer law firms have filed over 1,000 lawsuits against agency members on this issue alone in both individual and class action litigation claims, ACA committed Industry Advancement Funds to help its member defeat the consumer’s claims in the Derosa case and obtain industry-favorable case law defining how much information a debt collector is required to provide in order to clearly state a consumer’s account balance.

ACA is encouraged by the Derosa decision and confident that judges, regulators and industry participants will look to it as positive persuasive authority for interpreting how to treat static balances collected by third-party debt collectors. ACA is also pleased that the Derosa decision continues to raise the number of industry-favorable decisions, or wins, the association has helped to achieve for its members through the Industry Advancement Fund. This case represents the 42nd win for the Industry Advancement Fund.

ACA International’s efforts to proactively support the accounts receivable management industry are part of the association’s Industry Advancement Fund, and are made possible by funding through ACA’s Industry Advancement Fund. If you missed any of the articles previously published in ACA Daily that provided more detailed information about Industry Advancement Fund supported cases, like the Derosa case, you can always see the archived articles on the Industry Advancement Fund website. Watch for updates when decisions are issued in these cases and learn more about new cases supported by the Industry Advancement Fund in the future by reading ACA Daily and logging onto the Industry Advancement Fund website throughout the year.

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