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From Banking and Finance Law Daily, April 8, 2016

Ambiguous creditor identification violated consumer debt collection protection act

By Richard A. Roth, J.D.

A debt collector whose dunning letters did not clearly identify the current creditor violated the Fair Debt Collection Practices Act as a matter of law, the U.S. Court of Appeals for the Seventh Circuit has decided. Complaining consumers needed neither to provide extrinsic evidence that the ambiguity was confusing nor to show that the violation was material, the court added (Janetos v. Fulton Friedman & Gullace, LLP, April 7, 2016, Hamilton, D.).

The FDCPA requires debt collectors to disclose certain information to consumers at the beginning of the collection process, either as part of the initial communication or within five days afterwards. Included in the required disclosures is “the name of the creditor to whom the debt is owed” (15 U.S.C. §1692g(a)(2)).

Demand letters sent to consumers by the law firm Fulton Friedman & Gullace, LLP, said that Asset Acceptance, LLC, was the assignee of the various original creditors and that the debts had been “transferred” to Fulton Friedman. According to claims in the class action, the letters failed to satisfy the identification requirements because this was ambiguous in a way that made it impossible for consumers to determine who actually owned the debts now.

Identity of creditor. Compliance with the requirement that the current creditor be identified “demands more than simply including that information in some unintelligible form,” the court began. The creditor’s identity has to be stated clearly enough for a consumer to understand. Simply including Asset Acceptance’s name was not enough; rather, the company had to be named clearly as the owner of the debt under collection.

Describing Asset Acceptance as the assignee of a debt that had been transferred to Fulton Friedman did not make things any more clear, the court continued. Since “transferred” has more than one meaning, it was unclear whether Fulton Friedman claimed that it owned the debt or claimed that is represented Asset Acceptance. Nothing in the letter made clear that Asset Acceptance owned the debt and that Fulton Friedman was representing Asset Acceptance for collection purposes.

Evidence of confusion. The consumers who were representing the class did not need to provide surveys or other evidence that the letters were confusing, the court then said. They had offered evidence that they were confused, and that was enough.

Evidence of the effect an FDCPA violation would have on unsophisticated consumers is required when the violation had the potential to be misleading. It is not needed when the violation is apparent from the language of the letters, the court said. Fulton Friedman’s failure to name the debt owner clearly, combined with the consumer’s statements that they were confused, was enough.

Materiality. A misrepresentation has to be material to violate the FDCPA, the court then said, but there is no materiality requirement for a failure to provide required disclosures. Congress specified that consumers were to be told who currently owned a debt, and a failure to provide that information could not be excused “on the theory that the disclosure Congress required is not important enough” to be deemed material.

After all, if a consumer could not be sure who owned the debt, he could not be sure to whom his check should be written, the court observed. The possibility of fraud also existed.

Vicarious liability. Asset Acceptance, which itself is a debt collector, was liable for Fulton Friedman’s FDCPA violation, the court added. While a creditor that is not a debt collector is not liable for its collector’s violations, the rule is different when the creditor is a debt collector.

It is not unfair to expect a debt collector that is required to comply with the FDCPA also to be sure that its agents comply, according to the court. “A debt collector should not be able to avoid liability for unlawful debt collection practices simply by contracting with another company to do what the law does not allow it to do itself.”

The case is No. 15-1859.

Attorneys: Daniel A. Edelman (Edelman Combs Latturner & Goodwin, LLC) for Mary T. Janetos. Garrett L. Boehm, Jr. (Johnson & Bell, Ltd.) for Fulton Friedman & Gullace, LLP. Robert Matthew Horwitz (Dykema Gossett PLLC) for Asset Acceptance, LLC.

Companies: Asset Acceptance, LLC; Fulton Friedman & Gullace, LLP

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