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Dreher Tomkies LLP
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NINTH CIRCUIT HOLDS DEBTORS CAN WAIVE CEASE COMMUNICATION DIRECTIVE AND ADOPTS CHAUDHRY STANDARD WITH RESPECT TO DEBT VERIFICATION REQUIREMENTS

On August 24th, 2006, the United States Court of Appeals for the Ninth Circuit held that (i) a debtor could waive rights created by the federal Fair Debt Collection Practices Act’s cease communication directive, (ii) debt collectors properly verified a debt by obtaining information from the creditor about the debt’s nature and balance and providing the debtor with documentary evidence in the form of an itemized statement and (iii) liability for falsely representing the character, amount or legal status of a debt could be predicated on conduct that was not knowing or intentional. Clark v. Capital Credit & Collection Servs., Inc. 2006 WL 2441705, *5-11 (9th Cir. Aug. 24, 2006).

In that case, the debtor disputed and requested verification of an alleged medical debt. In response to the verification request, a debt collector provided the debtor with a copy of an itemized statement of the debtor’s account that was provided by the creditor. The debtor then requested “proper” verification and requested that the debt collector not call the debtor at home or work. The account was then turned over to an attorney for the collection agency who contacted the debtor and received a similar dispute and request for proper verification after the attorney sent a second copy of the itemized statement that the agency had previously sent. Thereafter, the debtor called the attorney to request information about the alleged debt, which call was returned by a collector from the agency.

The debtor and her husband sued the agency and its attorney alleging violations of the federal FDCPA and the Oregon Unfair Debt Collection Practices Act. The plaintiffs claimed that the agency violated the cease communication directive in Section 1692c(c) of the FDCPA by calling the debtor after receiving a cease communication request. In ruling on motions for summary judgment, the court of appeals indicated that, although Section 1692c(c) does not exempt return calls, (i) the return telephone call is not inherently abusive, harassing, deceptive or unfair, (ii) prohibiting collectors from returning calls would force honest debt collectors seeking a peaceful resolution of the debt to file suit in order to resolve the debt and (iii) a debtor may waive the rights created by a cease communication directive. For these reasons, the court of appeals found that the collectors did not violate Section 1692c(c) of the FDCPA.

The plaintiffs also claimed that the agency and its lawyer failed to properly verify the alleged debt by providing a mere itemization of allegedly questionable accuracy, thus violating Section 1692g of the FDCPA. The court of appeals followed the standard articulated by the Fourth Circuit in Chaudhry v. Gallerizzo, 174 F.3d 394 (4th Cir. 1999), which provides that at a minimum, verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed. According to the court of appeals, the collectors satisfied this standard by obtaining information from the creditor about the nature and balance of the outstanding debt and providing the debtor with documentary evidence in the form of an itemized statement of the debt. Thus, the court of appeals found that the collectors did not violate Section 1692g of the FDCPA.

Finally, the plaintiffs claimed that the collectors violated Section 1692e(2)(a) of the FDCPA, which prohibits the false representation of the character, amount or legal status of any debt, because the collectors knew that the alleged debt was invalid and misstated. The court indicated that a debt collector need not act knowingly nor intentionally in order to violate Section 1692e(2)(a) because to require a violation of Section 1692e to be knowing or intentional would render the FDCPA’s bona fide error defense superfluous as the defense applies only if a debt collector’s actions are unintentional. The court found that the collectors may have violated Section 1692e because evidence was introduced suggesting that the collector’s reliance on the creditor’s representations regarding the alleged debt was, under the circumstances, unreasonable even if the collectors did not knowingly or intentionally misrepresent the amount of the alleged debt.

Charles Gall and Michael Tomkies