FDCPA Update: Fourth Circuit Allows for Oral Consumer Disputes under Section 1692g(a), Creating a Larger Split of Authority Within the United States Courts of Appeal
On January 31, 2014, the United States Court of Appeals for the Fourth Circuit decided a matter of first impression for the court: whether section 1692g(a)(3) of the Fair Debt Collection Practices Act (FDCPA), allows a consumer to dispute the validity of a debt orally, or whether the provision imposes a writing requirement. In ruling in favor of the plaintiff, the Fourth Circuit added to the current split among the circuits as to whether oral disputes were sufficient to invoke the protections of the provision.
The Decision in Clark v. Absolute Collection Services Inc.
In a putative class action, Clark v. Absolute Collection Servs, Inc., the appellate court rejected the writing requirement and held that oral disputes were permitted under section 1682g(a)(3). Under Section 1692g(a)(3), a debt notice must include “a statement that unless the consumer, within 30 days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”
The named plaintiffs, a husband and wife, alleged that Absolute Collection Services, Inc. (“ACS”), sent them collection notices that violated section 1692g(a)(2) by stating that they only could dispute the validity of their debts in writing. The plaintiffs had incurred two debts at a health care facility in Raleigh, NC, but were unable to pay. The debts were then referred to ACS, a third-party collector, which sent separate collection notices to the Clarks stating that “ALL PORTIONS OF THIS CLAIM SHALL BE ASSUMED VALID UNLESS DISPUTED IN WRITING WITHIN THIRTY (30) DAYS . . . .” The Clarks filed suit on the grounds that the letter (1) violated their right to challenge the debt orally under FDCPA section 1692g(a)(3); and (2) amounted to the use of a “false representation or deceptive means to collect or attempt to collect a debt” in violation of FDCPA section 1692e(10).
ACS moved to dismiss the lawsuit based on what it claimed was an “inherent writing requirement” in section 1692g(a)(3). The district court granted the motion. On appeal, the Fourth Circuit reversed, holding in a per curiam opinion that no such writing requirement was present.
The Fourth Circuit court reasoned that because sections 1692g(a)(4), 1692g(a)(5), and 1692g(b) explicitly require written communication – where as section 1692g(a)(3) does not – Congress meant to exclude such a requirement from the provision. Moreover, the court stated that section 1692g(a)(3) triggers statutory protection for consumers independent of those later sections, such that it should be properly read as autonomous. Indeed, the court concluded that “[r]elying on the writing requirements in sections 1692g(a)(4), 1692g(a)(5), and 1692g(b) to give effect to section 1692g(a)(3) would violate these principles [of statutory construction], leaving section 1692g(a)(3) with no independent meaning.”
With Clark, the Fourth Circuit joined the Second and Ninth Circuits in holding that section 1692g(a)(3) permits oral disputes. See Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282 (2d Cir. 2013); Camacho v Bridgeport Fin. Inc., 430 F.3d 1078 (9th Cir. 2005). The Third Circuit, on the other hand, has held that the section must be read to include a writing requirement. See Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991).
Implications of the Clark Decision on Debt Collection Practices
The Clark decision marks a growing trend towards pro-consumer rulings in the FDCPA space – a development buttressed by the rise of the Consumer Financial Protection Bureau and enhanced regulatory oversight from other agencies of debt collectors.
Companies under the FDCPA’s purview, especially those operating in states in the Fourth, Second, and Ninth Circuits, should consult their collection letters and practices to ensure their compliance with these permissible oral disputes from consumers. Additionally, for debt collection practices within circuits where the issue is currently unresolved, debt collections should consider following the approach of the Fourth Circuit in order to prevent future lawsuits on the issue, including class actions.
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