Thursday, December 15, 2011

FYI: 8th Cir Holds FDCPA "Consumer" Includes Non-Debtor Subjected to Collection, But Debt Collector Sufficiently Verified the Debt

The U.S. Court of Appeals for the Eighth Circuit recently held that: (1)
a "consumer" under the FDCPA includes a non-debtor targeted by
debt-collection efforts; and (2) the debt collector did not violate the
FDCPA where it sufficiently verified the payment obligation that the
consumer allegedly owed. A copy of the opinion is attached.

The plaintiff (Plaintiff) received a form notification letter from a debt
buyer (Defendant) requesting payment of a debt. The plaintiff sent a
letter to Defendant disputing the liability, and demanding validation of
the payment obligation.

Defendant then sent a form validation letter ("D4 letter"), which provided
the Plaintiff additional information related to the payment obligation,
including the debtor's name, address, last four digits of the debtor's
social security number, date of the payment obligation, date Defendant
purchased the obligation, and current outstanding balance. The D4 letter
also attached an affidavit from one of its employees.

Upon receiving the D4 letter, the Plaintiff recognized that while the
debtor's name was the same as his, the last four digits of the social
security number did not match his own. The Plaintiff therefore knew
Defendant had erroneously contacted him, and he never responded to the

Instead, nearly a year later he commenced a putative class action lawsuit
alleging Defendant's D4 letter violated §1692g of the FDCPA "because it
failed to include information that Defendant verified with the original
creditor." The parties filed cross-motions for summary judgment.

The district court ruled in favor of Defendant, concluding that the
Plaintiff was not a "consumer" under §1692g. As you will recall, the
FDCPA defines "consumer" as "any natural person obligated or allegedly
obligated to pay any debt." The district court found that the Plaintiff
was not a consumer because he was not obligated to pay the debt owed by
another individual. The court also denied the Plaintiff's motion for
class certification, ruling that he was "not a proper representative of
the class where he himself lacks standing to pursue the claim." The
matter was then appealed.

The first issue on appeal was whether the Plaintiff was a "consumer" under
the FDCPA. The Eighth Circuit noted that "resolution of whether the plain
language of §1692a(3)'s 'consumer' definition encompasses [the Plaintiff],
someone mistakenly contacted by a debt collector, turns on the proper
reading of the phrase 'allegedly obligated to pay.'"

The Eighth Circuit noted that the district court read the FDCPA in such a
way that it would "not provide a remedy to non-debtors mistakenly targeted
by debt-collection efforts." The Eighth Circuit held that a reading of
"consumer" that did not include a person contacted by mistake, "would read
the phrase 'allegedly obligated' to only apply to those who actually owe
or owed the specific debt at issue, despite whether a debt collector
asserted a person owes the specific debt." The court held that "a
mistaken allegation is an allegation nonetheless," and therefore it read
"§1692a(3) to include individuals who are mistakenly dunned by debt

Despite ruling that the Plaintiff was a "consumer," the Eighth Circuit
nonetheless affirmed the lower court's judgment "because we find that
[Defendant' sufficiently verified [its] debt." The court noted that
"verification is only intended to eliminate the . . . problem of debt
collectors dunning the wrong person or attempting to collect debts which
the consumer has already paid." The court held that Defendant's D4 letter
sufficiently notified the Plaintiff he was not the same individual who
owed the debt.

The Plaintiff argued that Defendant was further required to "obtain
verification, . . . meaning that it must acquire additional information
about the debtor from the original creditor and send that additional
information to [the Plaintiff]." The Eighth Circuit disagreed. It held
that under different facts "perhaps the debt collector must do more than
what [Defendant] did here," but that in this instance "[Defendant] sent
[the Plaintiff] enough information to put him on notice that [Defendant]
dunned the wrong person."

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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