4.4 Violations of the Fdcpa

• Library: Debt Collection for Virginia Lawyers: A Systematic Approach (Virginia CLE) (2018 Ed.)

4.4 VIOLATIONS OF THE FDCPA

Violations of the FDCPA fall into four major categories: (i) "communications"; (ii) "harassment or abuse"; (iii) "false or misleading representations"; and (iv) "unfair practices." Each is discussed in detail below.

4.401 Communications.

A. Definition. The term "communication" is very broadly defined by the FDCPA, which states that "'communication' means the conveying of information regarding a debt directly or indirectly to any person through any medium." ⁸² Direct written and verbal communications are clearly included in

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the definition. Other possible forms of "communication" may be included as well. For example, there is a split in the courts as to whether the FDCPA applies to communications with a debtor's attorney, with the Fourth Circuit holding that communications to lawyers are subject to sections 1692d through 1692f, which forbid harassing, deceptive, and unfair practices. ⁸³

B. Disclosures Required in All Communications. The FDCPA requires certain disclosures in all communications with the consumer. ⁸⁴ As discussed above, the term "communications" may include both verbal and written communication. Since the 1996 amendments to the FDCPA, the FDCPA prohibits

the failure to disclose clearly in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action. ⁸⁵

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The statute requires that debt collectors provide the so-called "mini-Miranda" warning of 15 U.S.C. § 1692e(11) (that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose) only in the initial written communication and, if the initial communication is oral, in that oral communication. Subsequent communications, whether written or oral, must disclose that they are from a debt collector. While formal legal pleadings are exempt, the exemption may not apply to "communications" accompanying them, such as cover letters. ⁸⁶

C. Additional Notice Required During or After the "Initial Communication." In addition to the notice required by 15 U.S.C. § 1692e(11), the FDCPA requires that

within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer ⁸⁷ a written notice ⁸⁸ containing—

a. the amount of the debt; ⁸⁹

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b. the name of the creditor to whom the debt is owed; ⁹⁰

c. a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; ⁹¹

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d. a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification ⁹² or judgment will be mailed to the consumer by the debt collector; ⁹³ and

e. a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of

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the original creditor, if different from the current creditor. ⁹⁴

Because there is no requirement under Virginia law that defendants receive actual notice, there is no guarantee that the first communication sent would be the first communication the debtor received. Therefore, the better practice is to include the validation notice in all communications.

D. Disclosure Required in "Subsequent Communications." Since the 1996 amendment, the FDCPA requires that subsequent communications contain the disclosure "that the communication is from a debt collector." ⁹⁵ The 2006 amendments excluding litigation and notices related to compliance with the Gramm-Leach-Bliley Act, the Internal Revenue Code, or security breach and data security laws and regulations, apply only to "initial communications." Presumably, the disclosure "that the communication is from a debt collector" must still be given in conjunction with "subsequent communications" in these contexts.

E. Applicability of FACTA. On December 4, 2003, Congress enacted the Fair and Accurate Credit Transaction Act of 2003 (FACTA). Section 615 of FACTA requires debt collectors who receive notice that any information relating to a debt may be the result of identity theft to notify the third party on whose behalf it is collecting the debt of the allegedly fraudulent nature of the debt. The collector also must, at the consumer's request, provide the consumer with all information to which the consumer would otherwise be entitled if the consumer were not a victim of identity theft but wished to dispute the debt.

F. Thirty-Day Verification Period as Moratorium.

1. In General. There has been considerable debate, litigation, and in 2006, legislation about whether the 30-day verification period requires a moratorium on collection activity to permit the consumer to request verification of the debt. The only substantive rights afforded to the debtor by section 1692g are that, upon the consumer's written request within the 30-day period, the debt collector must (i) obtain verification of the debt or a copy of a judgment against the consumer and mail a copy of the verification or judgment to the consumer and (ii) provide the consumer with the name and address of the original creditor, if different from the current creditor. The

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plain language of the statute, therefore, does not impose a moratorium on action. Further, a "formal pleading made in connection with a legal action" is now exempt from the "initial communication" and "subsequent communication" validation notice requirements, ⁹⁶ and "formal pleading in a civil action" is excluded from the definition of "initial communication." ⁹⁷ The 2006 amendments to the FDCPA included an amendment to 15 U.S.C. § 1692g to specifically reserve a "right to collect within the first 30 days."

2. FTC Staff Opinion. The FTC staff has stated that

[a]n attorney debt collector may take legal action within 30 days of sending the required validation notice, regardless of whether the consumer disputes the debt; if the consumer disputes the debt, the attorney may still take legal action but must cease other collection efforts (e.g., letters or calls to the consumer) until verification is obtained and mailed to the consumer. ⁹⁸

3. Case Law. Some courts, however, have held that all collection activity must cease during the 30-day period. ⁹⁹ In Bartlett v. Heibl, ¹⁰⁰ however, the Seventh Circuit held that "[t]he debt collector is perfectly free to sue within thirty days; he just must cease his efforts at collection during the interval between being asked for verification of the debt and mailing the verification to the debtor." ¹⁰¹ The Sixth Circuit has implicitly held that the 30-day period is no moratorium. ¹⁰²

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4. "Overshadowing." A number of federal circuit courts, including the Fourth Circuit, have adopted the theory that the validation notice of 15 U.S.C. § 1692g(a) may not be "overshadowed" or contradicted by conflicting deadlines that might confuse the "least sophisticated" or "unsophisticated" consumer. ¹⁰³ As the concept is usually applied, for example, a debt collector who tells a debtor that he has 30 days to dispute the debt but demands payment within 10 days has violated section 1692g. Interestingly, Congress has incorporated "overshadowing" language into its 2006 amendment to section 1692b without introducing a statutory definition of the phrase.

In Heibl, the court dealt with the "overshadowing" issue by including language in the so-called "safe harbor" letter informing the debtor that "the law does not require me to wait until the end of the 30-day period before suing you to collect this debt." ¹⁰⁴

The Sixth Circuit's opinion in Federal Home Loan Mortgage Corp. v. Lamar ¹⁰⁵ discussed briefly the issue of "overshadowing" or "contradicting" text where a lawsuit was filed and served with a 20-day answer period, while the first substantive text in the complaint after the caption contained the 30-day verification notice required by the FDCPA. The court found "no merit" to the debtor's overshadowing-contradicting argument where the language, though not separated by a heading, was the same font and size as the rest of the complaint.

5. The 2006 Amendments. The 2006 amendments added the following two sentences to the end of section 1692g(b):

Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address

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of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor.

There is still some risk in not treating the 30-day period as a moratorium against collection efforts, notwithstanding the case law and even the most recent statutory amendments. That risk may be reduced by carefully crafting the validation notice and any accompanying demands to eliminate contradictory deadlines or other information that might be inconsistent with the debtors' rather limited rights...