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From Banking and Finance Law Daily, March 13, 2019

Collector’s letter sufficiently stated debt amount; FDCPA claims rejected

By Thomas G. Wolfe, J.D.

In upholding the lower court’s dismissal of the consumer’s proposed class-action claims under the FDCPA against a debt collector for allegedly failing to fully disclose the amount of the pertinent debt, the federal appellate court in New York City determined that the collector’s dunning letter complied with the FDCPA.

Although a debt collection letter may have failed to inform the consumer of the debt’s constituent components or the precise rates by which it might later increase, the letter still satisfied the federal Fair Debt Collection Practices Act provision requiring notice of the debt (15 U.S.C. § 1692g) because the letter informed the consumer of "the total, present quantity" of his debt, a three-judge panel of the U.S. Court of Appeals for the Second Circuit has ruled. In affirming the dismissal of the consumer’s proposed class-action claims under the FDCPA, the judicial panel further held that the collection letter did not violate the FDCPA’s prohibition against false, deceptive, or misleading representations (15 U.S.C. § 1692e) because the letter not only indicated that the consumer’s balance might increase, it also contained "safe harbor" language previously ratified by the Second Circuit (Kolbasyuk v. Capital Management Services, LP, March 12, 2019, Livingston, D.).

The consumer, Yuri Kolbasyuk, owed a debt to a bank, and the bank hired Capital Management Services, LP (CMS) to collect it. Accordingly, in July 2017, CMS sent the consumer a dunning letter, which indicated that it was a "communication … from a debt collector." The letter also contained the following language: "As of the date of this letter, you owe $5,918.69. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For more information, write the undersigned or call [phone number]."

Consumer’s complaint. After receiving CMS’s collection letter, the consumer filed a putative class action in federal district court alleging that the letter violated the FDCPA. The consumer maintained that the letter violated sections 1692e and 1692g of the FDCPA because it failed to inform him, among other things: (i) what portion of the amount listed was principal; (ii) what "other charges" might be applicable; (iii) whether "interest" was present and when it would be applied; and (iv) the applicable interest rate. In addition, the consumer contended that the collection letter conveyed the mistaken impression that "the debt could be satisfied by remitting the listed amount as of the date of the letter, at any time after receipt of the letter."

In April 2018, the federal trial court ruled that CMS had complied with the FDCPA provisions, and dismissed the consumer’s complaint. The consumer appealed to the Second Circuit.

Court’s review of FDCPA §1692g. Under section 1692g of the FDCPA, "[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall … send the consumer a written notice containing—(1) the amount of the debt."

In examining the FDCPA section and applying the "least sophisticated consumer" standard, the Second Circuit panel determined that the FDCPA obligation to inform a consumer about the "amount of the debt" required CMS to inform the consumer of "the total, present quantity of money that the consumer is obligated to pay." CMS’s collection letter did just that, the court concluded. "Nothing in Section 1692g required CMS to inform Kolbasyuk of the constituent components of that debt or the precise rates by which it might later increase," the court stated. Distinguishing the facts of the case from those addressed in other opinions within the circuit, the judicial panel held that "a debt collection letter that informs the consumer of the total, present quantity of his or her debt satisfies Section 1692g, notwithstanding its failure to inform the consumer of the debt’s constituent components or the precise rates by which it might later increase."

Court’s review of FDCPA §1692e. Under section 1692e of the FDCPA, a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of a debt. As observed by the court, the consumer did not invoke any of the 16 potential violations (non-exhaustive) listed in section 1692e; rather, the consumer contended that "the least sophisticated consumer could reasonably believe that the debt could be satisfied by remitting the listed amount as of the date of the letter, at any time after receipt of the letter."

From the Second Circuit panel’s perspective, the consumer sought to "capitalize on Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016), in which we held that a debt collector’s failure to disclose that a consumer’s balance might increase due to interest and fees violated Section 1692e." However, in distinguishing the Avila decision, the panel underscored that "Kolbasyuk overlooks a major difference between his case and Avila’s. Here, CMS did disclose—quite explicitly—that Kolbasyuk’s balance might increase." Consequently, the court determined that not even "the least sophisticated consumer" would conclude that his or her debt could be satisfied by remitting the listed amount in CMS’s letter "at any time after receipt of the letter … in the face of an explicit warning to the contrary."

Moreover, the panel pointed out that CMS’s dunning letter substantially tracked the "safe harbor" language that was imported (from a Seventh Circuit decision) by the Second Circuit in its Avila decision. Ultimately, the panel determined that any supposed failure by CMS to "provide the additional detailed disclosures that Kolbasyuk seeks does not transform CMS’s otherwise-straightforward letter into a ‘false, deceptive, or misleading’ one."

The case is No. 18-1260-cv.

Attorneys: Levi Huebner (Levi Huebner & Associates, P.C.) for Yuri Kolbasyuk. Kirsten H. Smith (Sessions, Fishman, Nathan & Israel, LLC) for Capital Management Services, LP.

Companies: Capital Management Services, LP

MainStory: TopStory ConnecticutNews DebtCollection NewYorkNews VermontNews

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