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Financial Services Law Insights and Observations


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  • District Court: Collection can resume after debt is verified


    On March 24, the U.S. District Court for the Southern District of Illinois granted defendants’ motion for summary judgment in an action concerning whether the defendants failed to adequately validate plaintiff’s debt. Plaintiff incurred a debt that was charged off and sold to one of the defendants for collection. The defendant creditor used the second defendant to manage collection of the account. An independent third party hired by the defendant creditor to collect on the debt sent an email containing a FDCPA-required validation notice to the plaintiff, who responded by sending a written validation request to the third party. In response, the second defendant sent two letters to the plaintiff, validating the debt and including the name of the original creditor, the current creditor, the last four digits of the account number, and the amount owed. The plaintiff submitted additional validation requests to the second defendant. The account was eventually placed with a different third-party collection agency, which sent a verification letter containing the same information to the plaintiff. The plaintiff sent a validation request to the new collection agency, as well as an additional request to the second defendant, and received responses to these validation requests as well.

    The plaintiff sued, premising her FDCPA claims on the argument that the defendants acted deceptively when they attempted to collect on a debt by placing the account with the second collection agency while the debt was being actively disputed. The court disagreed, stating that after the defendants “provided verification of the debt, they were free to resume collection efforts.” The court explained that the plaintiff “cannot forestall collection efforts by disputing the debt into perpetuity,” and added that nothing in the FDCPA prevents the use of more than one collection agency to collect on a debt. The court also said the fact that the initial validation response was sent after the 30-day statutory validation period expired and contained a second validation notice, did not adversely impact the plaintiff nor “create actionable confusion,” particularly because “the second validation notice was sent after Plaintiff exercised her statutory right to dispute the debt.”

    Courts Debt Collection Consumer Finance FDCPA Validation Notice

  • CFPB releases Spanish-language model validation notice for debt collectors

    Agency Rule-Making & Guidance

    Recently, the CFPB issued a Spanish-language translation of its Model Validation Notice. Debt collectors are permitted to send a consumer a completely and accurately translated validation notice if the consumer was either provided an English-language version in the same communication or in a prior communication. Debt collectors that meet these requirements and use the translated notice qualify for the Debt Collection Rule’s safe harbor that any translation be complete and accurate. The Bureau noted that the translated validation notice omits the disclosure informing consumers of their right to request the validation notice in Spanish, “because no translation of those disclosures is necessary,” but debt collectors who choose to include the optional Spanish-language disclosures in a Spanish-language validation notice are still eligible for the safe harbor.

    Agency Rule-Making & Guidance CFPB Consumer Finance Debt Collection Regulation F Validation Notice Limited English Proficiency

  • 7th Circuit holds consumers can be expected to read second page of two-page collection letter, affirms dismissal of FDCPA action


    On December 7, the U.S. Court of Appeals for the 7th Circuit affirmed the dismissal of a consumer’s class action against a debt collection company for allegedly violating the FDCPA by indicating “additional important information” was on the back of the first page when the required validation notice was actually on the front of the second page. According to the opinion, the consumer alleged the debt collection notice “misleads the unsophisticated consumer by telling him that important information is on the back, but instead providing the validation notice on the front of the second page, thereby ‘overshadowing’ the consumer’s rights” under the FDCPA. The debt collector moved to dismiss the action for failure to state a claim and the district court granted the dismissal and declined to allow the consumer leave to amend the complaint.

    On appeal, the 7th Circuit determined that the location of the validation notice—which “is clear, prominent, and readily readable”—did not overshadow the consumer’s FDCPA rights or misrepresent the importance of the notice, notwithstanding the language on the first page indicating the important information would be on the back of the first page, not on the top of the second page. The 7th Circuit explained, “The FDCPA does not say a debt collector must put the validation notice on the first page of a letter. Nor does the FDCPA say the first page of a debt-collection letter must point to the validation notice if it is not on the first page. Nor does the FDCPA say a debt collector must tell a consumer the validation notice is important. Nor does the FDCPA say a debt collector may not tell a consumer that other information is important.” The appellate court rejected the consumer’s unsophisticated consumer argument, concluding that "[e]ven an unsophisticated consumer—maybe especially one—can be expected to read page two of a two-page collection letter." Moreover, the appellate court upheld the denial of the consumer’s request to amend her complaint, noting that no proposed amendment would push the plaintiff’s “original claim into the realm of plausibility.”

    Courts Seventh Circuit Appellate FDCPA Validation Notice Debt Collection

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