Debt Collector Beware!

Debt collector beware

The collection of consumer debts is governed in part by a federal law known as the Fair Debt Collection Practices Act (15 U.S.C. §1692 et seq.) (the “FDCPA”).

As demonstrated in a recent decision by the Richmond Division of the U.S. District Court for the Eastern District of Virginia, failure to adhere carefully to the FDCPA’s requirements can cause a debt collector to run afoul of the statute and give consumer debtors an opportunity to seek damages against the debt collector. In DeCapri v. Law Offices of Shapiro Brown & Ali, LLP (Civil Action No. 3:14cv201-HEH), a consumer filed a lawsuit seeking monetary damages against a debt collection law firm located in Virginia Beach, Virginia alleging multiple violations of the FDCPA arising from a collection letter sent by the law firm. As reported in the September 29, 2014 edition of the Virginia Lawyers Weekly, Judge Henry E. Hudson denied the law firm’s motion to dismiss the complaint finding that the complaint stated plausible claims for violations of the FDCPA.

The notice must state that unless the consumer disputes the validity of the debt within thirty (30) days after receipt of the notice the debt may be assumed to be valid by the debt collector.

The FDCPA was enacted by Congress with the purpose of eliminating abusive debt collection practices by debt collectors and applies only to consumer debts. Amongst the statute’s protections for consumers is a requirement that debt collectors provide a written validation of debt notice to consumers. This written notice to the consumer must set forth certain statements regarding the consumer’s rights to dispute the debt and to seek verification of the debt. The notice must state that unless the consumer disputes the validity of the debt within thirty (30) days after receipt of the notice the debt may be assumed to be valid by the debt collector. 15 U.S.C. §1692g(a)(3). The notice must also state that if the consumer notifies the debt collector in writing within that 30-day period that the debt is disputed, the debt collector will obtain verification of the debt and mail it to the consumer, and that until such verification is obtained and mailed, the debt collector must cease its collection efforts against the consumer. 15 U.S.C. §1692g(a)(4). The consumer loses these rights if the proper written notice is not given.

In the DeCapri case, the court found that the §1692g(a)(3) notice in the collection letter in question did not include the words “by the debt collector” and simply said that unless the debt was disputed within thirty (30) days the debt would be assumed valid. The omission of the words “by the debt collector” made it unclear to the consumer about the entity making the assumption of the validity of the debt and for what purpose. Judge Hudson ruled that this omission stated a claim for violation of the FDCPA. It was further noted that the collection letter could also mislead the consumer to believe that if the debt was not disputed within the 30-day period, the right to dispute the debt at all was forfeited. Dispute of the debt under the FDCPA is optional, but may be done at anytime. Judge Hudson also found that the complaint stated a claim for violation of 15 U.S.C. §1692g(a)(4) because the collection letter did not make it clear that the consumer’s rights to obtain verification of the debt and temporarily cease collection efforts could only be triggered by written notice, not simply by oral notice, of the consumer to the debt collector. The consumer’s case against the law firm for damages under the FDCPA survived the law firm’s motion to dismiss and is still pending.

Failure by debt collectors to provide the required notices could expose them to claims for damages under the FDCPA.

Debt collectors and consumers alike should pay careful attention to collection letters sent and received. Failure by debt collectors to provide the required notices could expose them to claims for damages under the FDCPA. Consumers should likewise be aware of their rights and obligations under the FDCPA or risk waiving the protections the statute affords.