Thursday, September 4, 2014

FYI: 6th Cir Increases Amount of Info and Documents Required for "Verification" of Debt Under FDCPA

The U.S. Court of Appeals for the Sixth Circuit recently reversed an award of summary judgment in favor of a debt collector, where the debtor disputed whether the law firm adequately verified the disputed debt, as required by the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”).


In so ruling, the Court broadened the requirements for a debt collector’s response to a debtor’s request for verification of the debt under §1692g(b), by requiring the collector to provide the debtor with notice of how and when the debt was originally incurred, or other sufficient notice from which the consumer could sufficiently dispute the payment obligation.


A copy of the opinion is available at:


In October 2008, the defendant law firm debt collector (“Firm”) sent the debtor a notice of delinquency on behalf of the condominium association (“Association”) for failure to make payment on condominium assessments.  The debtor, who used the condominium as a rental property, timely notified the Firm that he disputed the amount of the demand.   The Firm responded by sending a second notice in December 2008, which provided a copy of the debtor’s account ledger, and indicated that a lien would be filed against the property should the debtor fail to make payment within ten days. 

The debtor again disputed the debt.  The debtor’s timely response to the second notice requested the date, bylaw citation and detailed description of every assessment charge against his property, and copies of the relevant bylaws.


Pursuant to the debtor’s request, in January 2009, the Firm sent the debtor a third letter, providing a ledger dating back to an August 2006 charge assessed by the previous management company in the amount of $50.  The letter demanded a total of $1,063 for additional assessments, fines, late charges and legal fees, and provided the relevant sections of the condominium bylaws.  The debtor’s responsive letter acknowledged the debtor owed the amount of $25, but again challenged the initial $50 carryover balance while concurrently indicating that he would make payment if the charge was substantiated. 


In May 2009, a final letter was sent from the Firm to the debtor again itemizing the outstanding charges which now totaled $1,704, and a Notice of Lien it planned to file on behalf of the Association.  The lien was subsequently filed and recorded.


The debtor brought suit against the Firm under § 1692e and § 1692g(b) of the FDCPA, and under state law, claiming that the Firm used false, deceptive or misleading representations in the collection of the debt, and continued collection activity while failing to verify the disputed debt.  The District Court granted summary judgment to the Firm, finding that they properly verified the debt as requested by the debtor and required by the FDCPA, and its collection efforts were not deceptive or misleading in violation of the FDCPA or MCPA.  This appeal followed.


As you may recall, Section 1692g(b) of the FDCPA provides, in pertinent part, that  “[i]f the consumer notifies the debt collector in writing” within thirty days of receiving “communication . . . in connection with the collection of any debt… the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt . . .”  The statute, however, does not specify what the process or substance of “verification” requires.


Considering the issue of verification, the Sixth Circuit analyzed other Circuit’s rulings interpreting the verification requirements under §1692g(b).  The Fourth Circuit in Chaudrhry v. Gallerizo, held that the verification requirements were met where the debt collector forwarded a detailed copy of the creditor’s computerized summary of the debtor’s loan transactions.  Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999).  Courts in the Ninth and Third Circuits similarly held that providing an itemized accounting of the debt met the verification requirements.  See Clark v. Capital Credit & Collection Servs., 460 F.3d 1162, 1173 (9th Cir. 2006) and Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991). 


The Court then turned to the Eighth Circuit’s interpretation of verification in Dunham v. Portfolio Recovery Assocs.  In Dunham, the Eighth Circuit held that information providing the last four digits of the debtor’s social security number that did not match that of the requesting consumer was sufficient ‘verification’ to put the consumer on notice that he was not the actual debtor.   Dunham v. Portfolio Recovery Assocs., LLC, 663 F.3d 997, 1003 (8th Cir. 2011).   Notably, the Eighth Circuit in Dunham remarked that under different facts, a debt collector must do more to meet the verification requirements, but declined to set a high threshold, citing Chaudry’s baseline standard and Clark’s adoption of the same.  


The Sixth Circuit interpreted its sister Circuit Courts to suggest that the “baseline” for verification is to enable the consumer to “sufficiently dispute the payment obligation.”  Although the cases are fact-dependent, the prior Circuit Courts’ opinions determined that an itemized accounting detailing transactions that have led to the debt is often best means to meet this baseline requirement.


Here, although the Firm attempted to send an itemized accounting of the debt, it failed to respond with an explanation such as a date or description of the nature of the carryover portion of the debt that was at dispute.  Thus, the debtor was left with a choice to pay an amount he did not believe he owed or face the encumbrance of his property.


The Sixth Circuit determined that this minimal verification was not be sufficient under the FDCPA.  The Court held that verification under §1692g(b) of the FDCPA “must be interpreted to provide sufficient notice of how and when the debt was originally incurred or other sufficient notice form which the consumer could sufficiently dispute the payment obligation.”  According to the Sixth Circuit, although the provided information does not have to be extensive, “[i]t should provide the date and nature of the transaction that led to the debt.”


By failing to properly validate the debt before resuming collection activity, the Court held that the Firm violated §1692g(b). 


Accordingly, the Sixth Circuit reversed the lower court’s grant of summary judgment in favor of the Firm, and granted summary judgment to the debtor.






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


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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