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From Banking and Finance Law Daily, February 16, 2018

FDCPA does not require safe harbor language in debt letter

By Nicole D. Prysby, J.D.

Although the letter from a debt collector to a consumer did not contain the safe harbor language suggested by the Seventh Circuit, the debt collector was not in violation of the Fair Debt Collection Practices Act, held a federal district court in Illinois. Debt letters are not required to contain the specific language suggested by the Seventh Circuit, said the court, as long as they contain the information required by the FDCPA, they will be in compliance with the statute. The court also determined that the debt letter met the unsophisticated consumer standard; such a consumer would have understood the letter to mean that the loan balance in the letter was the balance as of the date of the letter and that interest on the debt would continue to accrue (Chatman v. Alltran Education, Inc., Feb. 7, 2018, St. Eve, A.).

Alleged FDCPA violation. The consumer incurred a student loan debt from a university. She eventually defaulted on her payments and the debt collector was assigned the loan. The debt collector sent the consumer a letter, which included the total amount owed and stated that the total balance due was correct as of the date of the letter and until paid in full, interest may continue to accrue. The consumer alleged that the debt letter failed to properly inform her of the amount of the debt, in violation of the FDCPA. Specifically, that the letter did not: inform her of how she could determine the balance of the debt; tell her that if she paid the amount stated in the letter an adjustment might be necessary; and notify her that it would inform her before depositing a payment in the event the balance adjusted. The debt collector argued that it had used the language required, and the additional disclosures stated by the consumer were not required under the FDCPA.

Safe harbor language. The consumer cited a Seventh Circuit case that set forth safe harbor language that debt collectors may use to comply with the FDCPA requirement that a debt collector must provide a consumer a written notice containing the amount of the debt. But the court noted that the Seventh Circuit held that its suggested language was not the only possible language and that debt collectors were not required to use it. The relevant question is whether the communication complies with the statute, not with suggested language from the courts. As long as a debt letter meets the bare minimum of the statute, it will be in compliance. In this case, the letter stated that the amount owed was as of the date of the letter. Therefore, to the extent that the consumer’s case was based on the fact that the letter did not include the specific safe harbor language provided by the Seventh Circuit, the consumer’s argument failed.

Unsophisticated consumer standard. The court also found that the letter met the unsophisticated consumer standard. Such a consumer, reading the debt letter, would read the amount owed and the date of the letter, and understand the amount was correct as of the date of the letter. In addition, the statement that until paid in full, interest may continue to accrue would not confuse an unsophisticated consumer. Even an unsophisticated consumer may be assumed to have rudimentary knowledge about how interest works and how it would apply to a debt. Also, the debt letter referenced the loan documentation and provided contact information for the debt collector. An unsophisticated consumer would understand that she could check her loan documents for further information or how to contact the debt collector for more information.

The case is No. 1:17-cv-05370.

Attorneys: Celetha Chatman (Community Lawyers Group, Ltd.) for Jasmine Chatman. Brandon Allen Carnes (Rock Fusco & Connelly, LLC) for Alltran Education, Inc.

Companies: Alltran Education, Inc.

MainStory: TopStory DebtCollection

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