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UNCLEAR OR INCOMPLETE VALIDATION OF DEBT NOTICES MAY VIOLATE THE FDCPA

The following cases illustrate that debt collectors should provide validation of debt notices that are clear and complete in order to avoid violating the federal Fair Debt Collection Practices Act:

A. Disclosing an indeterminate amount of interest: Russell v. Hartweg

The United States District court for the Western District of New York recently held that a debt collector may have violated the FDCPA by sending a validation of debt notice disclosing an indeterminate amount of interest. Russell v. Hartweg, No. 07-CV-311C(SR), 2008 WL 2157122 (W.D.N.Y. May 20, 2008).

In Russell, a debt collector sent a collection letter setting forth the “total” amount owed by the debtor and indicating that if the account was already a judgment, interest at 9% would be added.

The debtor sued the debt collector claiming that the letter did not disclose the amount of the debt as required by Section 1692g of the FDCPA. The debtor argued that she was not able to ascertain whether a judgment had been entered, whether 9% interest would be added to the total amount owed or the effective date of any judgment. Thus, she argued that the letter left open two possibilities as to the amount due (i.e., the total amount disclosed or, if a judgment had been obtained, the total amount plus 9% interest from some unspecified date).

The court agreed with the debtor and indicated that the letter did not clearly convey the amount of the debt as required by Section 1692g because a least sophisticated consumer would not know whether she owed the total amount owed as set forth in the letter or another amount that included interest. For this reason, the court found that the debtor stated a claim under Section 1692g and denied the debt collector’s motion to dismiss.

B. Incomplete Notice: Galuska v. Collectors Training Institute of Illinois, Inc.

The United States District Court for the Middle District of Pennsylvania recently held that a debt collector may have violated the FDCPA by sending a validation notice that did not include all required information. Galuska v. Collectors Training Institute of Illinois, Inc., No. 3:07-CV-2044, 2008 WL 2050809 (M.D. Pa. May 13, 2008).

In Galuska, a debt collector sent a debtor a collection letter stating that, “Unless you notify this office within thirty (30) days after the receipt of this notice that you dispute the validity of the debt, or any portion thereof, this debt will be assumed to be valid.”

The debtor sued the debt collector on the grounds that the above statement did not accurately provide the validation of debt notice required by Section 1692g of the FDCPA. According to the debtor, the statement was misleading because it did not indicate that absent the debtor’s notice, the debt would be assumed to be valid “by the debt collector.” The debt collector moved to dismiss.

The court found that a validation of debt notice without the phrase “by the debt collector” or equivalent language does not inform the least sophisticated debtor as to who will be assuming the debt to be valid, and thus the least sophisticated debtor could be misled into believing that the debt would be assumed valid by another entity (e.g., a court, credit reporting agency or other authoritative entity). The court indicated that the use of “this office” and references to the debt collector elsewhere in the notice could cause the least sophisticated debtor to believe that the debt would be assumed valid by a different entity because such language was not used to identify the assuming entity. For these reasons, the court found that the debtor stated a claim for which relief could be granted under the FDCPA, and thus denied the debt collector’s motion to dismiss.

See our 2007-4, 2007-5, 2007-6 and 2008-2 Debt Collection Digest Summaries of State Law Developments for recent cases in which debtors have challenged the content, format and timing of validation of debt notices.