In its 2016 decision in Avila v. Riexinger & Associates, LLC, the Second Circuit Court of Appeals held that an attempt to collect a debt that states the current balance owed but does not disclose whether interest and fees are accruing is misleading in violation of the Fair Debt Collection Practices Act (“FDCPA”) Section 1692e. This decision created a cottage industry of lawsuits seeking to pounce on this seemingly technical violation in many businesses’ collection notices.
Recently, however, the Second Circuit has recognized exceptions to the Avila decision, most recently in its opinion in Cortez v. Forster & Garbus, LLP.
In Cortez, the Second Circuit reiterated that there are two safe harbors from liability under Section 1692e for failing to make an interest disclosure in an attempt to collect a debt that describes the balance due. Specifically, a debt collector will not be liable if the notice either (1) accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or (2) clearly states that the holder of the debt will accept payment in the amount set forth in the letter in full satisfaction of the debt if payment is made by the specified date.
The Second Circuit rejected claims by the plaintiff that under the least sophisticated consumer standard, an offer to settle the debt for a fixed sum could be misleading if it does not disclose that the debt may increase over time if settlement is not achieved. The Second Circuit held with respect to this argument:
“[T]he FDCPA merely requires that a collection notice, by its terms, not be susceptible of a reasonable but inaccurate interpretation. Therefore, a settlement offer need not enumerate the consequences of failing to meet its deadline or rejecting it outright so long as it clearly and accurately informs a debtor that payment of a specified sum by a specified date will satisfy the debt.”
While it is questionable whether settlement offers should even be governed by the FDCPA, the Cortez decision provides a much-needed common-sense follow-on to the Avila decision and should help limit some of the lawsuits that have proliferated in its wake.