Sunday, July 20, 2014

FYI: 11th Cir Rules Statement in 1692g Notice That "Creditor" Would Assume Debt Valid Absent Dispute Did Not Violate FDCPA

The U.S. Court of Appeals for the Eleventh Circuit recently held that a letter to a borrower stating that the “creditor” would assume the validity of a debt (if not disputed within thirty days) – rather than the “debt collector” -- was not misleading, did not violate the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). 


According to the Court, even if borrowers would be deterred from disputing the debt by the language of the letter, they would have been so deterred if the statutory language were used.


A copy of the opinion is available at:


Borrower received a letter (the “Letter”) from her lender’s law firm (“Law Firm”), which indicated that it was a communication for the purpose of collecting a debt.  The Letter stated that Law Firm represented the interests of the lender and that Borrower could dispute the validity of the debt within thirty days of receipt of receipt of the Letter.


Although the Letter included several indications that a lawsuit was forthcoming, it was not accompanied by the service of any papers initiating a lawsuit.  Nor did it provide any information pertaining to a legal matter, other than referring to the creditor and Borrower as plaintiff and defendant, respectively, in the subject line.  Also, the Letter stated, “[e]ven though you are required to file a response to the lawsuit prior to the thirty (30) days, your validation rights, as set forth in this notice, shall not expire for thirty (30) days.”  Nevertheless, a foreclosure action was filed three days later.


Borrower brought a class action suit under 15 U.S.C. § 1692e, which prohibits debt collectors from using false or deceptive means to collect a debt.  Borrower claimed that the Letter was inconsistent with those disclosure required for an “initial communication” under 15 U.S.C. § 1692g(a)(3).  Specifically, the Letter stated that failure to dispute within thirty days would result in the debt being assumed valid by the creditor, whereas the FDCPA requires a statement that the debt collector – not the creditor – will assume the debt’s validity in the case of a failure to dispute within thirty days.


However, the district court dismissed the action, determining that the Letter was not an “initial communication” as defined by the FDCPA because it concerned a foreclosure action and fell into the exception for formal pleadings in a civil action.  Alternatively, the district court determined that, even if the Letter were an initial communication, the technical violation of the statute would not mislead Borrower regarding the nature of her rights.  The present appeal followed.


As you may recall, the FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e.  Also, the FDCPA requires a debt collector to send the debtor certain required information with or within 5 days of the initial communications.  However, the FDCPA expressly excludes from the category of “initial communication” any communication “in the form of a formal pleading in a civil action.”  15 U.S.C. § 1692g(d).


Along with the amount of the debt, the name of the creditor to whom the debt is owed, and information about disputing the debt, see 15 U.S.C. § 1692g(a), the debt collector must  provide “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”  15 U.S.C. § 1692g(a)(3).


Considering the “initial communication” issue first, the Eleventh Circuit held that the Letter was an attempt to collect a debt, and that the exception for “formal pleadings” does not apply.  Turning the language of the FDCPA, the Court noted that, although the FDCPA provides no definition of an “initial communication,” it does define “communication” broadly.  See 15 U.S.C. § 1692a(2) (“[T]he conveying of information regarding a debt directly or indirectly to any person through any medium.”).  Moreover, the Court observed that “[t]he fact that the letter and documents relate to the enforcement of a security interest does not prevent them from also relating to the collection of a debt within the meaning of § 1692e.”  Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1218 (11th Cir. 2012).


Analyzing the language of the Letter, the Court was persuaded that the Letter was not a formal pleading.  Among other facts cited as supporting the Court’s position was that the Letter stated it was for the purpose of collecting a debt, referring to such collection efforts; stated the amount of the debt and indicated that it must be paid in certified funds; was on the Law Firm’s letterhead, not any court’s; and gave the name of the creditor where it discussed payments.  Further, the only references to a lawsuit were “fleeting.”


However, as to whether the Letter violated the FDCPA, the Eleventh Circuit held that “substitut[ing] ‘creditor’ for ‘debt collector’ when informing the consumer of who would assume that the debt was valid if the debt was not contested within thirty days” did not violate 15 U.S.C. § 1692e. 


Notably, the Court assumed, without deciding, that using such language might deter the “least sophisticated consumer. . . from pursuing his or her rights to dispute the debt. . . if he or she failed to dispute the debt within the thirty-day period.”  See Slip. Op. at p. 8-9; Iyamu v. Clarfield, Okon, Salomone, & Pincus, P.L., 950 F. Supp. 2d 1271, 1274 (S.D. Fla. 2013).  Nevertheless, “because the debt collector is obviously the agent of the creditor, the same implication arises from the notice required by § 1692g(a)(3) as from [Law Firm’s] erroneous statement.  In other words, the least sophisticated consumer would think that if the debt collector was entitled to assume that the debt is valid, the creditor would have the same right.”  Slip. Op. at p. 9.  Thus, as the same implication arose under either the language of the FDCPA or the language of the Letter, the Letter itself did not mislead Borrower.


Accordingly, the Eleventh Circuit affirmed the dismissal of Borrower’s class action lawsuit.






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
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