The rise in litigation over technical violations of the Fair Debt Collection Practices Act (FDCPA) has created a need for those covered by the statute to carefully construct all communications with debtors to avoid statutory penalties. Of particular concern are areas where the FDCPA is unclear and the courts have not come to a consistent interpretation as the statute creates strict liability for all violations. One such ambiguity is the wording of the notice of debt, required with the initial written communication, regarding the debtor’s right to dispute the debt. The widening split between the circuits is evident in the recent Second Circuit case Hooks v. Forman, Holt, Eliades & Ravin, LLC, which is the latest circuit decision interpreting the notice of debt’s wording.
Section 1692g of the FDCPA requires debt collectors to send a written “notice of debt” with the amount of the debt, the name of the creditor, and three statements listing rights the consumer has and the action the consumer must take to invoke them. At issue in Hooks, is the required 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.” The FDCPA requirement does not indicate what format the dispute should take, but the next two statements require the consumer to notify the debt collector in writing that the debt is disputed or that they request information on the original creditor. Further, under the heading “disputed debts”, the statute lists requirements for debt collectors receiving written disputes from the notice section at issue but makes no mention of any other format of dispute. Courts and practitioners have been split on whether the statute indicates all disputes must be in writing or if the format the dispute may take depends on the right the debtor wishes to invoke.
The Ninth Circuit and now the Second have found that Congress intended to leave out the writing requirement to dispute the validity of debts while requiring a writing to receive verification and invoke other rights. Such a two-tiered system of dispute would allow consumers to activate one set of rights by orally disputing a debt, and a second larger set by disputing in writing. In Hooks, the Second Circuit admits that such an outcome is more complex but not unreasonable. The Court claims that the two-tiered system of disputes is favorable for the least sophisticated debtors, who may find it more difficult for various reasons to dispute in writing than orally, and indicates that the rights conferred without a written dispute are more beneficial to them. The Court left out that the suspension of debt collection efforts until the debt is verified, one of the most beneficial rights for such debtors, requires that the dispute be in writing and failed to address that many of the rights available are not included in the notice and are found only in the statute text, of which such a debtor is likely unfamiliar. This system makes it more difficult for the least sophisticated debtor to properly exercise their rights as the decision of how to dispute a debt has effects on their rights of which they are likely unaware.
The Third Circuit, however, found the only reasonable reading of the statute is to require all disputes of the debt to be in writing. The Court ruled in Graziano v. Harrison that any other reading of the statute would be “incoherent” and “create a situation in which, upon the debtor’s non-written dispute, the debt collector would be without any statutory ground for assuming the debt was valid, but nevertheless would not be required to verify the debt or to advise the debtor of the identity of the original creditor and would be permitted to continue debt collection efforts.” The Court indicated it is more beneficial for the least sophisticated consumer to always dispute the debt in writing to ensure that all available protections are activated within the time requirements and to provide documentation for the dispute. The Circuit’s interpretation of the statute requires that the notice and all communication with the debtor clearly indicate that the debtor cannot dispute the debt orally. Debt collectors’ letters in that circuit have been found to violate the FDCPA by simply including a contact phone number in the body of a collection letter even though the notice on the letter indicated that all disputes must be in writing. Such a letter was found to be potentially confusing to the least sophisticated debtor as they might assume they could call the number to dispute the debt even when the notice indicated they could not.
The ambiguity in the wording of the FDCPA has created numerous issues for those covered by the statute. While three circuits have now established the proper format of disputes in their jurisdictions, with differing outcomes, all other circuits have yet to decide such a case leaving the proper interpretation uncertain. The required notice wording in the Second Circuit now results in a FDCPA violation in the Third due to the strict liability imposed by the statute. Most practitioners have tracked the official language of the statute in their notices, but this runs the risk of the circuit siding with the Third Circuit and requiring written notice for all disputes. While notices must be worded so that a less than reasonable debtor would not be “left uncertain as to her rights,” practitioners and the courts are obviously uncertain as to the proper interpretation of those rights in the FDCPA.