Seventh Circuit Emailed Validation Notice Case Forces Tip-Off between ACA International and the BCFP

ACA International and the BCFP filed separate amicus briefs with the Seventh Circuit Court of Appeals regarding the debt collection industry’s ability to communicate with consumers by electronic means.

4/30/2018 6:00 AM

Industry Advancement ProgramNews
Seventh Circuit Emailed Validation Notice Case Forces Tip-Off between ACA International and the BCFP

More than four years have passed since the Bureau of Consumer Financial Protection issued an Advanced Notice of Proposed Rulemaking in November 2013 to consider a variety of rules governing debt collection, including electronic delivery of validation notices.  Just weeks ago, the BCFP acknowledged in its semi annual report to Congress that it is still working toward a release of a proposed rule concerning debt collection, but it provided no new insights into its timeframe for doing so.  And so without well-crafted, reasonable and workable debt collection rules from the BCFP clarifying the Fair Debt Collection Practices Act so that professional debt collectors can fulfill their vital role in the economy without the fear of opportunistic litigation, participants in the accounts receivable management industry have turned to the courts for guidance. 

Most recently, the debt collection industry and government alike have turned their attention to the Seventh Circuit Court of Appeals to weigh in on the issue of whether and in what circumstances a debt collector may use email to communicate with consumers to satisfy the written-notice requirements of § 1692g(a).  In Lavallee v. Med-1 Solutions, LLC, 7th Cir., No. 17-3244, appeal docketed 10/27/17, a consumer is accusing an ACA International member collection agency of failing to comply with the FDCPA’s requirement that a debt collector “send the consumer a written notice containing” statutorily required information about the debt, even though the agency transmitted a proper validation notice to the consumer by secure email attachment.  Both ACA and the BCFP filed “friend of the court” briefs with the Seventh Circuit to share their respective viewpoints – with ACA asking the appellate court to provide guidance to the debt collection industry, establishing that email can be “written notice” within § 1692g(a)’s meaning, and the Bureau urging the appellate court to address the applicability of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) to circumstances in which a debt collector wants to use email to comply with the FDCPA’s requirements to send written validation notices. 

In the Lavallee case, the agency sought to collect medical debts from the consumer after she failed to respond to the validation notices it previously transmitted to her.  The agency claimed the validation notices were sent via email, using a secure process that required the recipient to click on a link to download the actual validation notice(s).  The consumer claimed she did not receive the emails and, therefore, she claimed the agency failed to provide her with a timely validation notice containing the mandatory disclosures required under the FDCPA.  The agency’s records confirmed that although the emails may have been received, the consumer did not open the packages (click on the links) in those emails.  The agency argued that it was irrelevant that the consumer failed to open the documents because it had met its obligation by sending the initial emails that contained the validation notices.

The district court judge in the Southern District of Indiana who considered the issue in Lavallee granted the consumer’s motion for summary judgment, concluding that the agency did not “send” the validation notice for purposes of § 1692g because the agency “knew, or easily could have determined at the time” that the consumer “never accessed, or attempted to access the ‘Secured Package’ containing the validation notice, and the email itself did not contain the validation notice.”  The district court explained:  “Indeed, it is the presumption of receipt that makes the sending of notice by the debt collector sufficient without the collector proving actual receipt.  But if notice is not sent in a manner in which receipt should be presumed as a matter of logic and common experience, then it cannot be considered to have been ‘sent.’”   

The district court also found that documents transmitted as a web-based email attachment cannot be deemed as reliable as U.S. Mail, stating “[i]ndeed, in the court’s estimation, such attachments are more likely not to be opened and delivered than to be opened.”  The district court also opined that the average user is less likely to open an email from an unknown sender, since security agencies warn suspicious email attachments are a common tool for attackers, and there is no evidence the consumer should have recognized the agency as a trusted sender.

Now, the Seventh Circuit Court of Appeals will have its work cut out for it after receiving amicus briefs from both ACA and the BCFP raising a host of different considerations related to the use of electronic delivery of validation notices, particularly since the Bureau has been for years considering rules governing the same.    

While it remains to be seen what the future will hold for the BCFP’s debt collection rulemaking, ACA recognizes that the courts in the judicial system can provide another avenue for gaining FDCPA clarity to rein in FDCPA litigation abuse. Therefore, given that communication technologies have changed dramatically since the FDCPA was first adopted in 1977 and more and more debt collectors use (or want to use) email in their collection operations, ACA submitted its “friend of the court” brief to the Seventh Circuit seeking to establish that secure email is a legitimate means of providing the notifications required by § 1692g, or at least to obtain guidance for the accounts receivable management industry as to how secure email may be engineered to comply with the Act.  In doing so, ACA asked the Seventh Circuit to reverse the district court’s decision and “establish that email can be ‘written notice’ within 15 U.S.C. § 1692g(a)’s meaning, and that the statute applies to email in the same way that it applies to postal email.”  ACA argued that without such a ruling or without clear answers on how a debt collector can comply with the requirement that it “send the consumer a written notice” using email, debt collectors will be “less likely to use email for their initial communication with a consumer, which will drive up the cost of collection – a cost that will ultimately be borne by the consuming public.” 

As for the Bureau’s part, the BCFP urged the Seventh Circuit in its amicus brief to consider the application of § 101(c) of the E-SIGN Act to statutes like the FDCPA, including written-notice requirements set forth in federal law.  The BCFP argued that the collection agency could not use email to comply with the FDCPA’s written validation notice requirement if it did not satisfy the requirements of the E-SIGN Act, including making certain disclosures to a consumer about the use of electronic records and obtaining the consumer’s prior consent to such use.  Although neither the collection agency nor the consumer raised the E-SIGN Act as an issue before the district court or in their respective appellate briefing, the BCFP noted in its amicus brief that the record in the case “suggest[s] that [the collection agency] did not comply with the E-SIGN Act itself.”  The BCFP also noted that the evidence in the case does not reflect whether or not the creditor to whom the consumer owed the debt “complied with the requirements of the E-SIGN Act, and the Bureau takes no position whether, and under what circumstances, a debt collector may invoke an original creditor’s compliance with the E-SIGN Act to justify use of an electronic record to satisfy § 1692g(a).”  Finally, the BCFP acknowledged in its amicus brief that “the five-day window within which a debt collector must provide written validation notices may not afford debt collectors sufficient time to make compliance with the E-SIGN Act a viable option,” but such short time frame “does not justify ignoring” it “absent a regulatory exemption.”  And to the extent there are “[a]ny policy concerns related to the application of the E-SIGN Act to validation notices,” the BCFP stated that the appellate court should leave such concerns to the Bureau to address as part of its “next step in the rulemaking – issuance of a notice of proposed rulemaking – [which] is currently being considered.”

ACA’s efforts to proactively support the industry are part of ACA’s Industry Advancement Program and are made possible by funding through ACA’s Industry Advancement Fund.  Stay tuned for further developments.  ACA International will continue to provide more information to its members as the Lavallee case progresses and when any decisions concerning the case are made by the Seventh Circuit Court of Appeals.   

If you missed any of the articles previously published in ACA Daily that provided more detailed information about Industry Advancement Program supported cases, like the Lavallee case, you can always see the archived articles on the Industry Advancement Program website. Watch for updates when decisions are issued in these cases and learn more about new cases supported by the Industry Advancement Program in the future by reading ACA Daily and logging onto the Industry Advancement Program website throughout the year.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse. Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training website to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.

Subscribe to ACA Daily NEWSROOM