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From Banking and Finance Law Daily, July 27, 2018

Debt dispute notice does not preclude fair debt collection claim

By Andrew A. Turner, J.D.

A consumer could sue a debt collector under the Fair Debt Collection Practices Act for seeking payment on an already settled debt even though the debt collector had advised her of the right to dispute the debt and the consumer did not exercise that right, according to the U.S. Court of Appeals for the Second Circuit. The debt dispute notice did not preclude claims for misrepresenting the debt or misleading even the least sophisticated consumer (Vangorden v. Second Round, Limited Partnership, July 27, 2018, Reena, J.).

The consumer contended that she received a debt collection letter requesting payment of a debt that had been settled five years earlier. She alleged that the debt collection violated the FDCPA by falsely representing the character, amount, and legal status of the debt. She also asserted in her complaint that the debt communication could be intimidating under the least sophisticated consumer standard.

Notice not an immunity from suit. The debt collector responded that there can be no FDCPA liability for an initial debt misrepresentation that is accompanied by a notice of the right to dispute. Rejecting this argument, the court said the statutory framework is focused on minimizing misconduct by debt collectors, not enforcement actions by consumers.

The FDCPA does not make consumer exhaustion of dispute procedures a condition precedent to a claim based on a false representation. Rather, the statutory language affords debt collectors an affirmative defense if their actions were bona fide and not intentional.

Least sophisticated consumer standard. The debt collector also asserted that the FDCPA claims failed because even the least sophisticated consumer could not be misled by the collection letter. The court disagreed, noting that a misleading and unfair letter could cause a confused and fearful consumer to question whether she had indeed satisfied the debt and make payment anew.

Intent. Because the FDCPA is a strict liability statute, a consumer is not required to plead mens rea to state plausible FDCPA claims. Rather, a debt collector’s intent is relevant as an element of the affirmative defense.

The case in No. 17-2186-cv.

Attorneys: David N. McDevitt (Thompson Consumer Law Group, PLLC) for Yvette Vangorden. Shannon Miller (Maurice Wutscher, LLP) for Second Round, Ltd. Partnership.

Companies: Second Round, Ltd. Partnership

MainStory: TopStory ConnecticutNews DebtCollection NewYorkNews VermontNews

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