By Thomas G. Wolfe, J.D.
In a December 2018 opinion, a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit ruled that a debt collector’s placement of its “validation notice” in a collection letter to a consumer did not overshadow the consumer’s rights under the federal Fair Debt Collection Practices Act (FDCPA), nor did the letter misrepresent the importance of the validation notice required by the FDCPA. The consumer had claimed that the collection letter to her violated the FDCPA because the letter stated that “additional important information” was on the back of the first sheet of the letter, but the consumer-rights validation notice appeared on the top of the second sheet of the letter. In affirming the dismissal of the consumer’s proposed class-action lawsuit (O’Boyle v. Real Time Resolutions, Inc.), the Seventh Circuit panel determined that, from the standpoint of an “unsophisticated consumer,” the collector did not provide the validation notice in a manner that could be construed as false, deceptive, misleading, or confusing in violation of the FDCPA.
Further, the federal appellate court upheld the lower court’s denial of the consumer’s request to amend her complaint, determining that the consumer’s proposed amendments would not transform her original claim “into the realm of plausibility” and would cause “undue delay and unfair prejudice” to the debt collector.
Collection letter. In April 2017, Real Time Resolutions, Inc. (RTR), a debt collector, sent its first letter to the consumer to collect an alleged credit-card debt from her. In the middle of the front sheet of the first page, the letter communicated that this “is an attempt to collect a debt, and any information obtained will be used for that purpose.” Farther down on the front sheet, a box directed the consumer to view the reverse side of the first sheet, stating “Please see the back of this page for additional important information regarding this account.”
The back side of the first sheet of the letter provided information about particular consumer-rights notices in 10 states, including the consumer’s home state of Wisconsin, and prominently indicated that the applicable listing “is not a complete list of rights consumers may have under state and federal law.” Then, on the top front of the second sheet (page 2) of the collection letter, the FDCPA-required validation notice appeared: “Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days of receiving this notice, this office will obtain verification of the debt or obtain a copy of a judgment if applicable and mail you a copy of such verification or judgment. If you make a written request to this office within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.”
According to the Seventh Circuit’s opinion, the text of RTR’s validation notice “is clear, prominent, and readily readable. The font is normal in shape and size—essentially the same font as most of the letter.” Still, as pointed out by the court, while the front of the first page directs the reader to the back of that page for “additional important information,” that additional important information does not include the validation notice, which appears instead on the front top of the second page.
Complaint. In her proposed class action against RTR, the consumer alleged that the debt collector’s letter would mislead “the unsophisticated consumer” by telling the reader that important information was on the back of the first page, but instead providing the FDCPA-required validation notice on the front of the second page. According to the complaint, the letter from RTR violated the FDCPA (15 U.S.C. §§ 1692e and 1692g) by: “overshadowing” the consumer’s FDCPA rights; (ii) failing to communicate her FDCPA rights effectively; (iii) misdirecting a consumer’s attention away from the validation notice; and (iv) causing the misdirection to falsely and misleadingly represent that the validation notice was unimportant.
After the federal trial court declined to certify the proposed class, dismissed the FDCPA claims, and refused the consumer’s request to amend her complaint, the consumer appealed to the Seventh Circuit.
FDCPA provisions. Under section 1692e of the FDCPA, a debt collector is prohibited from using any “false, deceptive, or misleading representation or means in connection with the collection of any debt.” Meanwhile, section 1692g of the FDCPA requires debt collectors to notify consumers of their validation rights and sets forth the rules pertaining to that notification.
Court’s ruling. After noting these applicable FDCPA provisions, the Seventh Circuit asserted, “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.”
In applying the pertinent “unsophisticated consumer” standard in the case, the court noted that an “unsophisticated consumer can be expected to read page two of a two-page collection letter.” In the court’s view, the scanning of the material on the reverse side of page one of the letter was a temporary “speed bump, not a road barrier,” to the validation notice at the top of page two; moreover, the validation notice itself was a “continuation of the letter.” The Seventh Circuit agreed with the lower court that “a consumer who reads the front and back of the first page of a short letter and then completely disregards the second page has not read the letter with care.”
Underscoring that RTR’s validation notice still occupied “a prominent place” in the letter even though it did not appear on the reverse side of page one, the court determined that the collector did not imply that the validation notice was unimportant by referencing other important information on the reverse side. Indeed, the reverse side of the first page discussed the consumer’s rights under Wisconsin law, which was pertinent to the consumer, and communicated that it was not a complete list of all rights consumers might have under federal law. Contrary to the consumer's FDCPA claims, “not even a significant fraction of the population would be misled” by RTR’s collection letter, the court concluded.
For more information about court opinions impacting the financial services industry, subscribe to the Banking and Finance Law Daily.
