Wednesday, July 25, 2012

FYI: 5th Cir Rules in Favor of Debt Collector in Alleged FDCPA Overshadowing Case

The U.S. Court of Appeals for the Fifth Circuit recently held that a debt collector did not violate section 1692g(a) of the federal Fair Debt Collection Practices Act ("FDCPA") by sending a letter with language requesting the debtor "timely validate" the amount the debt collector claimed was due, and threatening to report the debtor's account to credit reporting agencies if the debtor did not do so.
A copy of the opinion is available at:
A debtor sued a debt collector, alleging that a letter from the debt collector violated the FDCPA, because it supposedly contained language that contradicted and overshadowed the statutorily mandated debt validation or "1692g" notice. The letter stated:  "failure to timely validate the referenced amount due will cause us to report your account to the credit reporting agencies" followed by blank space and the notice requirement of Section 1692g(a).
The collection agency moved for summary judgment, arguing that the statutory notice in its letter was not contradicted or overshadowed by the quoted passage in the letter. The district court granted the collection agency's motion for summary judgment and the debtor appealed.  The Fifth Circuit affirmed.
As you may recall, Section 1692(g)(a) of the FDCPA requires debt collectors to provide written notice of the following information to consumers within five days of the initial communication regarding a debt: (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that unless the consumer "disputes the validity of the debt" within 30 days, the debt collector will assume the debt is valid; (4) a statement that if the consumer notifies the collector that the consumer is disputing the debt in writing within the 30 day period, the debt collector will obtain verification of the debt from the creditor and mail a copy of the verification to the consumer; and (5) a statement that, upon the consumer's written request, the debt collector will give the consumer the name and address of the original creditor, if different from the current creditor.  In addition, the notice must be set forth in a form, and within a context, that does not distort or alter its meaning through inconsistent or overshadowing statements.
The Fifth Circuit rejected the debtor's argument that the request to "timely validate" the debt equated to an immediate demand for payment. The Court reasoned that, generally for a demand for payment to contradict the requirements of § 1692g, the debt collector must make a demand in a concrete period shorter than the 30 day statutory contest period, or a demand for immediate payment without explaining the demand in the context of the 30 day contest period. The Court found that an unsophisticated debtor would not construe the language requesting the debtor "timely validate" the debt as a demand for payment of the debt.
The Fifth Circuit also held that the threat of reporting the debtor to credit reporting agencies falls in the category of letters that encourage debtors to pay their debts by informing them of the possible negative consequences of failing to pay. The Court found this language does not contradict or overshadow the required 1692g notice language.
In addition, the Court held the location of the notice was significant. The notice was on same page as the language contested by the debtor, was in bold typeface, which the contested language was not, was of the same size and font as the rest of the letter, and was located immediately above a payment slip for the debtor to fill out, tear off and send to the debt collector, which provided visual confirmation that payment was not the only option.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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