FYI: 2nd Cir Holds FDCPA Does Not Require Itemization of "Amount of the Debt"

The U.S. Court of Appeals for the Second Circuit held that a debt collection letter that informs the consumer of the total, present quantity of his or her debt satisfies section 1692g of the federal Fair Debt Collection Practices Act ("FDCPA") notwithstanding its failure to inform the consumer of the debt's constituent components or the precise rates by which it might later increase.

 

The Court further held that such a letter does not violate section 1692e of the FDCPA for failure to inform the consumer that his or her balance might increase due to interest or fees when the letter contains the "safe harbor" language previously ratified by the Second Circuit.

 

Accordingly, the Second Circuit affirmed the trial court's dismissal of the complaint.

 

A copy of the opinion is available at:  Link to Opinion

 

The borrower ('Borrower") owed a debt to the bank ("Bank"), which it hired the collector ("Collector") to collect. 

 

The Collector sent the Borrower a letter dated stating the present amount of the debt, as well as the identity of the original and current creditor, the Bank.  The letter further contained the Collector's address and contact information, including a website at which the Borrower could submit his payment.

 

The letter noted that it was a "communication . . . from a debt collector," and contained the following language:

 

"As of the date of this letter, you owe $5918.69.  Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater.  Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection.  For more information, write the undersigned or call 1-877-335-6949."

 

After receiving the letter, the Borrower filed a putative class action alleging that it violated sections 1692e and 1692g of the FDCPA.

 

Specifically, the complaint alleged that the letter violated those provisions because it failed to inform him, among other things, "what portion of the amount listed is principal," "what 'other charges' might apply," "if there is 'interest,'" "when such interest will be applied," and "what the interest rate is." 

 

The Borrower also alleged that the letter conveyed the mistaken impression "that the debt could be satisfied by remitting the listed amount as of the date of the letter, at any time after receipt of the letter."

 

The trial court dismissed the complaint, finding that the letter did not violate the FDCPA.  In reaching its conclusion, the trial court noted that the letter "stated the amount plaintiff owed as of its date," and "stated the amount owed may increase due to interest and fees."

 

The Borrower appealed.

 

On appeal, the Court first noted that in the Second District "the question of whether a communication complies with the FDCPA is determined from the perspective of the 'least sophisticated consumer.'"

 

The Court next addressed each of the Borrower's claims. 

 

As you may recall, section 1692g of the FDCPA provides as follows in relevant part: "Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall . . . send the consumer a written notice containing – (1) the amount of the debt[.]"

 

Although the Collector's letter advised the Borrower that he owed $5,918.69, he claimed it did not include the required "amount of the debt" because it failed to inform him of what portion of the amount listed was principal, what other charges might apply, if there was interest, when such interest would be applied, and what the interest rate is. 

 

The Second Circuit rejected the Borrower's argument, explaining that "[t]he text of Section 1692g clearly forecloses [the Borrower's] argument," because it only required the Collector to inform the Borrower of the "amount of the debt."

 

Moreover, "[t]he word 'amount' signifies a total, present quantity," and "debt" is defined in the FDCPA as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction."

 

Thus, "amount of the debt" signifies the total, present quantity that the consumer is obligated to pay.

  

The Court determined that "this is exactly the figure that [the Collector] provided: the total, present quantity of money that [the Borrower] was obligated to pay [the Bank] as of the date of [the Collector's] letter."

 

Next, the Second Circuit addressed the section 1692e claim.  As you will recall, that section provides that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." 

 

Section 1692e also provides a non-exhaustive list of sixteen potential violations of its terms, but the Borrower did not rely on any of them, and instead alleged that the Collector violated section 1692e because "[t]he least sophisticated consumer could reasonably believe that the debt could be satisfied by remitting the listed amount as of the date of the later, at any time after receipt of the letter." 

 

The Second Circuit again rejected the Borrower's argument, noting that the Collector "did disclose – quite explicitly – that [the Borrower's] balance might increase."

 

Thus, "[n]ot even the least sophisticated consumer could conclude that his debt 'could be satisfied by remitting the listed amount . . . at any time after receipt of the letter,' in the face of an explicit warning to the contrary."

 

Further, the Second Circuit observed that the language from the Collector's letter "identically tracks the 'safe harbor' language adopted by the Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000)," which language was imported by the Second District in Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016). 

 

The Court explained that although the safe harbor language does not immunize debt collectors from all liability under section 1692e, it does immunize a debt collector from a section 1692e claim predicated upon an alleged "fail[ure] to disclose that the consumer's balance may increase due to interest and fees."

 

Accordingly, the Second Circuit affirmed the trial court's dismissal of the Borrower's complaint.

 

 

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: SD Fla Denies FDCPA Class Certification Due to Individual Issues of "Actual Damages"

The U.S. District Court for the Southern District of Florida recently denied a consumer's motion for class certification in a putative class action against a debt collector.

 

In so ruling, the Court concluded that the plaintiff consumer's proposed class — which included members who did not make payments to the debt collector, while also seeking actual damages as to proposed members who did make payments — presented individual issues concerning causation as to actual payments made in response to the collection letters at issue, and thus, failed to overcome the predominance requirement under Fed. R. Civ. P. 23(b)(3). 

 

A copy of the opinion is available at:  Link to Opinion

 

A plaintiff consumer ("Consumer") stopped making payments towards his personal credit card (the "Account") in 2010.  On May 16, 2017, the defendant debt collector ("Collector") sent Plaintiff a letter (the "Collection Letter"), allegedly with knowledge that the debt owed on the Account (the "Debt") was outside Florida's five-year statute of limitations for initiating an action on a debt.  Fla. Stat. 95.11(2)(b).

 

The Collection Letter identified the balance purportedly due to the Collector, and presented Consumer with two offers: the first to "pay the full balance" of the Debt in a single or multiple payments for the Debt to be considered "paid in full," or alternatively, to "choose a saving plan" to make a reduced, lump sum payment of the Debt, or six or twelve "consecutive month[ly] payments" at a purported saving in exchange for the Debt to be considered "settled in full." 

 

The Letter included a disclosure stating that "[t]he law limits how long you can be sued on a debt," and that it would not sue the Consumer because of the age of the Debt.  However, the letter did not state that Collector was prohibited by law from suing the Consumer, nor that partial payment would renew the statute of limitations.

 

The Consumer filed suit in federal court alleging that the Collection Letter: (i) violated subsection 1692e of the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. ("FDCPA") by making false, deceptive or misleading representations in connection with the collection of a debt; (ii) violated subsection 1692f of the FDCPA by using unfair or unconscionable means to collect, or attempt to collect, a debt, and; (iii) violated subsection 559.72(9) Florida Consumer Collection Practices Act, Fla. Stat. 559.55 et seq. ("FCCPA") by asserting the existence of a legal right it knew did not exist.

 

The Debt Collector's motion to dismiss the Consumer's Complaint was denied, with the Court concluding that the Collection Letter language could give the least sophisticated consumer the misleading impression that the debt was legally enforceable. 

 

After surviving Debt Collector's motion to dismiss, the Consumer subsequently filed his Motion for Class Certification and Appointment of Class Representative and Class Counsel (the "Motion"). 

 

The Motion sought to certify classes which included all persons located in Florida who, within one year (for the proposed FDCPA class) and within two years (for the proposed FCCPA class) Collector sent a letter based on the Collection Letter template regarding a debt from the original credit card creditor where the charge off date preceded the date of the letter by more than five years. 

 

Because the Debt Collector changed templates for its letter on a quarterly basis, Consumer contended the proposed class members received letters between April 1, 2017 and June 30, 2017, and whether the member received a letter – May 10, 2017 or later or May 9, 2017 or earlier — would control whether the class member is entitled to pro-rata recovery of statutory damages of $500,000 under the FDCPA, and the FCCPA, or no statutory damages at all.

 

As you may recall, Fed. R. Civ. P. 23(a) provides that one or more members of a class may sue as a representative on behalf of all class members if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.  Fed. R. Civ. P. 23(a). 

 

A proposed class must also satisfy one of three additional requirements of Rule 23(b).  The Consumer claimed that class treatment was appropriate here under the predominance inquiry because "the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).

 

In response to the Motion, the Debt Collector did not object to the proposed class definition, nor contest satisfaction of requirements of numerosity (R. 23(a)(1)) and commonality (R. 23(a)(2)). 

 

Instead, the Debt Collector objected to the Consumer's request for certification of an FDCPA and FCCPA class on the basis that: (i) Consumer's request for actual damages defeated class certification, as typicality under Rule 23(a)(3) and predominance under Rule 23(b)(3) were not shown; and (ii) Consumer failed to satisfy Rule 23(a)(4)'s adequacy requirement. The Court therefore focused its analysis on these objections.  

 

In challenging the typicality requirement of Rule 23(a)(3), the Debt Collector argued that the damage component of the case required examination of individualized issues, because each class member would be burdened with proving that the Collection Letter template proximately caused it to tender payment to Debt Collector. 

 

The Court rejected the Debt Collector's notion that individualized damage and causation inquiries defeats typicality, because typicality "does not require identical claims or defenses" and "[a] factual variation will not render a class representative's claim atypical unless the factual position of the representative markedly differs from that of other members of the class." Kornberg v. Carnival Cruise Lines, Inc., 741 F.2d 1332, 1337 (11th Cir. 1984).  Accordingly, the Court concluded that the proposed class satisfied the typicality requirements under Rule 23(a)(3).

 

Next, the Court analyzed whether the proposed class met the predominance inquiry under Rule 23(b)(3).  To determine whether predominance is satisfied, a court is tasked with identifying and classifying the parties claims and defenses as common questions or individual questions by predicting how the parties will prove them at trial.  See Brown v. Electrolux Home Prods. Inc., 817 F.3d 1225,1234 (11th Cir. 2016). 

 

Here, the Court noted Debt Collector's assertion that causation of payments made in response to the Collection Letter template would need to be established by each member seeking actual damages at trial, and that the Consumer's own recognition of representations made on the Debt Collector's website and telephone communications would also involve individual questions of causation as to actual payments.  Id. At 1234.

 

The Eleventh Circuit instructs courts to use the following rule of thumb in assessing predominance: "If common issues truly predominate over individualized issues in a lawsuit, then the addition or subtraction of any of the plaintiffs to or from the class should not have a substantial effect on the substance or quantity of evidence offered. If, on the other hand, the addition of more plaintiffs leaves the quantum of evidence introduced by the plaintiffs as a whole relatively undisturbed, then common issues are likely to predominate."  Id. at 1235.

 

Here, the Court concluded that the proposed class, which includes members seeking only statutory damages and members seeking actual damages would not "achieve economies of time, effort, and expense" or promote "uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results."  Amchem. Prods., Inc. v. Windsor, 521 U.S. 591, 615 (1997). 

 

Although "individual damage calculations generally do not defeat a finding that common issues predominate" and a class action may be maintained despite the need to provide individual damages (Brown at 1239), the Court found that the claims of the proposed class members who sought recovery of actual damages presented individual issues, both as to the nature and content of Debt Collector's communications with each member, and liability to the extent Debt Collector is entitled to address questions of causation as to each member. 

 

Seemingly acknowledging the challenge posed by certifying a class seeking statutory damages and others seeking actual damages, the Consumer proposed that the Court allow trial to proceed as to liability and statutory damages first, and to then decertify the action and allow class members to individually seek recovery of actual damages.  However, because this argument was raised for the first time by the Consumer in his Reply brief to the Motion, it was rejected by the Court.  See Herring v. Sec'y Dep. Of Corr., 397, F.3d 1338, 1342 (11th Cir. 2005).  Accordingly, the Court concluded that the Consumer failed to establish predominance under Rule 23(b)(3).

 

Lastly, the Court addressed the Debt Collector's challenges to the Consumer's ability to adequately represent the proposed class because he was not a member of his proposed class (as he did not sustain actual damages), and generally lacked an understanding of his claims. 

 

Conceding that that the Consumer's deposition testimony evidenced that his minimal knowledge of his claims, the Court held this was not fatal to his representation of the proposed class, as "it is not necessary for named class representatives to be knowledgeable, intelligent or have a firm understanding of the legal or factual basis on which the cases rests in order to maintain a class action," Muzuco v. Re$ubmitIt, LLC, 297 F.R.D. 504, 517 (S.D. Fla. 2013).  Therefore, Debt Collector's attacks to certification based upon the Consumer's failure to satisfy the Rule 23(a)(4) adequacy requirement were rejected.

 

However, because the class definition proposed by the Consumer in his Motion failed to satisfy the predominance requirement under Rule 23(b)(3), the requested relief for class certification and appointment of class representative and class counsel was denied.

 

 

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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