The federal Fair
Debt Collection Practices Act remains one of the hottest areas of litigation involving
financial services as consumers and the debt collection industry grapple in the
courts. Three recent cases illustrate how the courts continue to refine and
define the law.
3rd Cir.: Stale debt settlement offer could be FDCPA
misrepresentation. A debt collector's letter offering to settle a debt after
the statute of limitations had passed could have constituted a
misrepresentation in violation of the FDCPA. The least sophisticated consumer
could be misled into thinking that settling the debt referred to the debt
collector's legal ability to enforce the debt. The use of “settlement” and
“settlement offer” could imply to the least sophisticated consumer the
possibility of litigation to enforce the debt (Tatis v. Allied Interstate,LLC, Feb. 12, 2018, Vazquez, J.).
6th Cir.: Consumers had no standing under FDCPA for a mere
procedural violation. Although a letter from the attorney for a mortgage
servicing company to loan consumers was technically in violation of the FDCPA,
it caused the consumers no injury and they therefore had no Article III
standing to bring a FDCPA claim, held the Sixth Circuit Court of Appeals. The
letter at issue actually benefitted the consumers, in that it explained that
their debt was discharged and they were able to rely on the letter later, when
the mortgage servicing company incorrectly tried to collect on the settled
debt. Therefore, even though the letter lacked required disclosures under the
FDCPA, the lack of disclosures caused no harm to the consumers and their claims
under the FDCPA and comparable state law were dismissed for lack of standing (Hagy v. Demers & Adams, Feb. 16,
2018, Sutton, J.).
N.D. Ill.: FDCPA does not require safe harbor language in
debt letter. 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 FDCPA, 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. AlltranEducation, Inc., Feb. 7, 2018, St. Eve, A.).
More cases are sure to come in 2018 requiring courts to
resolve claims that debt collectors used misrepresentations or deceptive
practices to collect debts, while industry members defend language used in
collection letters.
For more information about litigation under the Fair Debt Collection Practices Act, subscribe to the Banking and Finance Law Daily.
