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VALIDATION OF DEBT NOTICE MAY DISCLOSE ONLY THE AMOUNT SUBJECT TO COLLECTIONS RATHER THAN THE ENTIRE ACCOUNT BALANCE

The United States District Court for the Eastern District of Wisconsin has held that a debt collector’s collection letters did not violate the federal Fair Debt Collection Practices Act by disclosing the portion of the debtors’ debts that were owed and subject to collections rather than the debtors’ entire account balances. Barnes v. Advanced Call Center Technologies, LLC, No. 05-C-774, 2006 WL 3386880 (E.D. Wis. Nov. 21, 2006).

In that case, in order to collect on past due credit card accounts, the debt collector sent the debtors collection letters that included an amount next to the words “CURRENT AMOUNT DUE.” This amount represented the amount past due on a debtor’s account and not the total amount that the debtor owed. The letters also indicated that if paid in full, all collection activity would be stopped. If a debtor paid the “current amount due,” however, his or her balance would not have been reduced to zero.

The debtors sued the debt collector on the grounds that it violated Section 1692g(a)(1) of the FDCPA, which requires a debt collector to provide a validation notice that discloses, among other things, “the amount of the debt.” The debtors argued that the debt collector’s letters should have included only the entire account balance as the “amount of the debt.” The district court, however, disagreed. According to the district court, including only the entire account balance would have been more likely to confuse a debtor because he or she may have mistakenly believed that such balance must be promptly paid to avoid being sued, when in fact, only a portion of such balance was past due, presently owed and potentially immediately recoverable by a lawsuit.

The debtors also claimed that the debt collector violated Section 1692e of the FDCPA, which generally prohibits a debt collector from using any false, deceptive or misleading representation or means in connection with the collection of any debt. The debtors argued that the debt collector falsely stated that all collection activity would stop if the debtor paid the “current amount due.” The debtors believed that this statement was false because paying the “current amount due” would leave a debt that was legally owed to the creditor, which it would eventually attempt to collect. The district court, however, did not believe that the statement described above was false or liable to confuse an unsophisticated debtor because the debt collector’s collection activities would have stopped upon payment of the current amount due. The district court indicated that the mere possibility of a future default and collection activity resuming did not affect the truth of the statement that collection activity would stop upon the payment of the current amount due. Furthermore, the district court indicated that it was irrational for an unsophisticated consumer to interpret the letter to mean that payment of the past due amounts would somehow forgive the balance not currently due. For these reasons, the district court found that the collection letters were not confusing as a matter of law and granted the debt collector’s motion for summary judgment.

This case illustrates that a debt collector must be careful when disclosing the amount of a debt within a collection letter, particularly when attempting to collect only a portion of the debtor’s entire outstanding balance. Furthermore, a debt collector should be careful that any statements explaining the benefits of making a payment are accurate and could not be misconstrued by an unsophisticated consumer.

Margaret Stolar and Charles Gall