Collectors Should Review Validation Language in Their Collection Letter for FDCPA Compliance

Debt collectors should be aware of a recent development in the law based upon which they should review the validation language in their collection letters to ensure that it complies with the requirements of the Fair Debt Collection Practices Act.  In the May 29, 2013 Hooks v. Forman, Holt, Eliades & Ravin, LLC decision (--- F.3d ----, 2013 WL 2321409) the 2nd Circuit Court of Appeals found that the collector’s validation language violated the FDCPA because consumers are not required to place their disputes in writing.  (The 2nd Circuit covers New York, Vermont and Connecticut.) The validation language from the collection letter in Hooks read in relevant part as follows:

“UNLESS YOU NOTIFY US IN WRITING WITHIN THIRTY (30) DAYS AFTER RECEIPT OF THIS LETTER THAT THE DEBT, OR ANY PART OF IT, IS DISPUTED, WE WILL ASSUME THAT THE DEBT IS VALID.”

Hooks sued the collection agency alleging a violation of § 809 of the Fair Debt Collection Practices Act (FDCPA), arguing that the collection agency’s notice requiring that the consumer’s dispute be sent in writing failed to properly comply with § 809(a)(3). The district court granted the collection agency’s motion to dismiss the claim on the basis that a notice requiring disputes be placed in writing does not violate the FDCPA. The 2nd Circuit Court of Appeals reversed the district court finding that the language in § 809(a)(3) does not impose a writing requirement.  In so ruling the 2nd Circuit, facing a question of first impression, analyzed the 3rd and 9th Circuit’s conflicting holdings and sided with the reasoning of the 9th Circuit.   (The 9th Circuit covers Alaska, Washington, Oregon, California, Arizona, Montana, Idaho, Nevada, Hawaii, Guam, and the Northern Mariana Islands.)

As a result of the Hooks decision collectors should review the validation language in their collection letters to make sure that it does not state that disputes must be in writing.  To avoid the problem faced by the collector in Hooks, validation language should reads as follows:

Unless you, within thirty days after receipt of this notice, dispute the validity of this debt, or any portion thereof, we will assume this debt is valid. If you notify us in writing within the thirty-day period that the debt, or any portion thereof, is disputed, we will obtain verification of the debt or a copy of a judgment against you and a copy of such verification or judgment will be mailed to you by us. Upon your written request within the thirty-day period, we will provide you with the name and address of the original creditor, if different from the current creditor.

The question then becomes what should a collector do if it receives an oral dispute from a debtor?  Will the collector need to provide the debtor with verification of the debt or provide the debtor with the name and address of the original credit if different from the current creditor?  Not according to § 809(a)(4) and (5), which impose the requirements for this language in the validation notices. Specifically, § 809(a)(4) and (5) require the debtor to seek verification and the name of the original credit in writing.  This is a distinct difference from § 809(a)(3), which does not impose a writing requirement.  If the collector receives an oral dispute of a debt it should, however, should mark the debt in its files as “disputed” and not credit report the debt unless it also reports the debt as “disputed”.

A more conservative approach would be to treat any oral dispute as a written dispute, in which case collectors should automatically provide the debtor with verification of the debt.  This approach would be consistent with the recent Wisconsin federal district court decision Gruber v. Creditors’ Protection Services, Inc., NO.12-C-1243, 2013 WL 2072976 (E.D. Wis. May 14, 2013).  In that case the court reasoned that “dispute” within the FDCPA is synonymous with “request to verify the existence of a debt,” and a debt collector cannot ignore its verification duties anytime a consumer requests verification but fails to also state the debt is “disputed.”

Feel free to contact Joe Messer at (312) 334-3440 or jmesser@messerstrickler.com if you have any questions regarding this matter.