Banking and Finance Law Daily Wrap Up, TOP STORY—7th Cir.: Demanding verification of debt constitutes contesting the debt under FDCPA, (Jan 27, 2014)

By Richard A. Roth, J.D.

Debt collectors that did not precisely quote the Fair Debt Collection Practices Act in their notices that consumers could demand that debts be validated did not violate the act, the U.S. Court of Appeals for the Seventh Circuit has decided. An unsophisticated consumer would not be led by the notice to exercise an incorrect right, according to the court. A claim by one consumer that the use of the term “just debt” overshadowed the notice of rights also was rejected (Gruber v. Creditors’ Protection Service, Inc., Jan. 23, 2014, Manion, Circuit Judge).

The FDCPA requires debt collectors to tell consumers that they have the right to dispute a debt in collection, or any part of that debt, and that they have the right to demand the debt be validated (15 U.S.C. §1692g). In each of the four consolidated cases, the consumers complained of the debt collectors’ use of an identical notice, which said:

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 within 30 days from receiving this notice, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification.

According to the consumers, the FDCPA requires the second sentence of the notice to include, after describing the 30-day time limit, the phrase “that the debt, or any portion thereof, is disputed.” An unsophisticated consumer—the standard against which FDCPA compliance is to be measured—could be misled into requesting that the debt be verified instead of disputing the debt, they claimed.

Demanding verification v. disputing. The problem with the consumers’ theory, the court said, is that demanding that a debt be verified is treated as disputing the debt. There might be a literal distinction between the two, but unsophisticated consumers could not be expected to draw such a precise line. A consumer who should have disputed a debt but merely asked that it be verified also would have disputed the debt, the court said.

“Just debt.” One of the four consumers had an additional complaint. In the collection letter sent to her, the debt collector included the statement “we believe you want to pay your just debt” immediately before the notice of her rights. This was inconsistent with the notice and implied that a judgment already had been entered against her, she said.

The court disagreed. The collection letter did not include any contradictory language about how quickly the consumer was required to act or how much she owed. It merely characterized the debt as “just,” and that was permissible puffery.

The consolidated cases are No. 13-2084, 13-2164, 31-2297, and 13-2351.

Attorneys: John D. Blythin (Ademi & O’Reilly) for Karen A. Kryscio. Elizabeth A. Odian (Hinshaw & Culbertson) for National Account Systems of Madison, Inc.

Companies: Creditors’ Protection Service, Inc.; National Account Systems of Madison, Inc.; Tri-State Adjustments, Inc.; Vision Financial Corp.

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