District Court Judge Expresses “Judicial Displeasure” with Language in Validation Notice, Finds Plausible Claim for § 1692g(a)(2) Violation, but not § 1692g(a)(1)

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The U.S. District Court for the District of New Jersey recently expressed “judicial displeasure” with the language in a collection letter when it granted in part and denied in part a debt collector’s motion to dismiss a putative FDCPA class action for failure to state a claim. Hopkins v. Advanced Call Ctr. Techs., LLC, No. Civ. No. 20-06733 (KM)(ESK), 2021 WL 1291736, 2021 U.S. Dist. LEXIS 67732, at *18 (D.N.J. Apr. 7, 2021).  The plaintiff received a collection letter from the defendant Advanced Call Center Technologies, LLC (“ACCT”), seeking to collect a credit card debt owed to Synchrony Bank for a JCPenney store card. Id. at *1–2.

The letter disclosed that the “total account balance” was $347.48, and that the “amount now due” was $175.00. Id. at *1. It further advised:

“If the Amount Now Due is paid to Synchrony Bank and your account is brought up to date, we will stop our collection activity. All payments should be made directly to Synchrony Bank using the enclosed envelope. Do not send payments to this office.”

 Id. at *2. Finally, it contained a detachable payment slip instructing the plaintiff to mail his payment to “Synchrony Bank/JCPenney Credit Services.” Id.

The plaintiff alleged that the letter was “confusing” as it purportedly failed to contain the amount of the debt owed and the name of the creditor to whom the debt was owed in violation of 15 U.S.C. § 1692g(a)(1) and (2), respectively. Id. at *2. The plaintiff also claimed that the letter’s purported failure to identify the creditor was both a false, deceptive, or misleading representation and an unfair or unconscionable means to attempt to collect a debt, and thus violated § 1692e and § 1692f, respectively. Id. at *15–16. The plaintiff sought to represent a class of similarly situated consumers, and also sought relief against two officers of ACCT personally. Id. at *1.

ACCT moved to dismiss all four claims, as well as the claim against the officers personally, for failure to state a claim pursuant to Rule 12(b)(6). Id. Judge McNulty began with the first § 1692g(a)(1) claim, that the letter allegedly failed to inform the plaintiff of the amount of the debt. Id. at *4. In rejecting the plaintiff’s argument that the “amount now due” was ambiguous, the Court reasoned that “[t]he phrase ‘Now Due,’ even to an unsophisticated consumer, simply means that the debt collector is willing to accept less than the total balance of the debt to bring the account to a current status.” Id. at *4–5 (quoting Reynolds v. Encore Receivable Management, Civ. No. 17-2207, 2018 U.S. Dist. LEXIS 83902, at*14 (D.N.J. May 18, 2018)). The Court reinforced its conclusion that the amount due now was not ambiguous because the letter contained an explanation of the action ACCT would take if the “amount due now” was paid to Synchrony (the account would be current and it would stop collection activity). Id. at *5. While Judge McNulty felt “constrained by the case law to grant the motion to dismiss” as to the § 1692g(a)(1) claim, he nevertheless could not “close this discussion . . . without expressing some judicial displeasure at the creditor’s seeming reluctance to just come out and say what it means . . . .” Id. at *6. The Court suggested that the following language would have made the letter more straightforward:

“The total balance is $347.48. If you pay $175 now, we’ll stop collection activities, but you will still owe us the remaining balance of $172.48. ($347.48 minus $175 equals $172.48.) We’ll bill you for that remaining balance later.”

Id. at *6. The Court expressed further frustration at what it perceived was debt collectors’ “insistence on going right up to the line,” which it saw as producing “seemingly endless litigation, flyspecking the precise wording of collection letters, in cases which have come to take up a disproportionate share of the federal docket.” Id.

The Court then turned to the plaintiff’s § 1692g(a)(2) claim, which is based on the statutory requirement that a validation notice contain “the name of the creditor to whom the debt is owed.” 15 U.S.C. § 1692g(a)(2). The Court declined to dismiss this claim because “the [l]etter mentions ACCT, JCPenney, JCPenney Credit Services, and Synchrony Bank, but does not specify which entity is owed the money.” Id. at *7. As the Court explained:

“[W]hen the Letter gets to payment, it says that the amount due must be paid to Synchrony Bank. But who is Synchrony Bank and what do they have to do with my JCPenney card? Finally, the detachable payment slip is addressed to ‘Synchrony Bank/JCPenney Credit Services’ with one PO Box number. Are Synchrony and JCPenney Credit Services the same thing? Related? A joint venture? Just PO Box buddies? The Letter does not say, which means that a consumer cannot discern who owns the debt.” 

Id. at *8-9. The Court similarly declined to dismiss the § 1692e and § 1692f claims, reasoning that the failure to identify the creditor to whom the debt was owed could also constitute a violation of one or both of those statutes, and that it was too early in the case to rule out the apparently plausible claims. Id. at 15–16. Finally, the Court held that the complaint plausibly alleged that the two officers named individually as defendants had exercised control over the actions of ACCT and thus could be held liable, relying on Police v. Nat’l Tax Funding, L.P., 255 F.3d 379, 405 n.29 (3d Cir. 2000) for the proposition that general partners of a partnership can be liable for the partnership’s FDCPA violations, and noting that other courts in the Third Circuit had expanded the notion to other entities beyond general partnerships. Id. at *16–17.

While it may be true, as observed by Judge McNulty, that there are a disproportionate number of FDCPA cases occupying the federal docket, it is not clear that this deluge of litigation is solely attributable to debt collectors “going right up to the line.” Id. at 6. In fact, it bears observing that the language suggested by the Court as the appropriate language for ACCT to “say what it means” and avoid any confusion under § 1692g(a)(1) might have actually created a separate violation of the FDCPA under § 1692g(a)(2). Specifically, using the pronoun “we” in lieu of the identity of the debt collector or the original creditor raises ambiguity about who will “stop collection activities” and to whom the “remaining balance” would still be owed. Perhaps ironically, this same ambiguity was sharply at issue in the Court’s analysis of the plaintiff’s § 1692g(a)(2) claim, which it declined to dismiss. Under the Court’s preferred verbiage, the language would be ambiguous because the letter was sent by ACCT, but instructed the plaintiff to remit payment to Synchrony Bank (thus under these facts, if the plaintiff made the payment, ACCT would have stopped collection activities, but the remaining balance would have been owed to Synchrony Bank, not to ACCT). One thing appears likely, however: As long as consumers can maintain federal lawsuits with a prospective recovery of $1,000 in statutory damages plus attorneys’ fees simply because they were “confused” by a collection letter, the “seemingly endless litigation” over the FDCPA is not likely to abate in the foreseeable future, particularly where, as here “flyspecking the precise wording of collection letters” reveals the practical difficulties in drafting collection letter language that both adequately informs the consumer of his or her rights without running afoul of the FDCPA.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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