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Second Circuit Rejects Alleged Duty to Itemize in an FDCPA validation Notice

In the latest decision on the adequacy of validation notices the Second Circuit Court of Appeals has rejected a plaintiff’s Argument that an FDCPA validation notice must itemize the component elements of the debt.  The court of appeals held that “a debt collection letter that informs the consumer of the total, present quantity of his or her debt satisfies Section 1692g [of the FDCPA], notwithstanding its failure to inform the consumer of the debt’s constituent components or the precise rates by which it might later increase.”

In Kolbasyuk v. Capital Mgmt. Servs., LP, the collection letter at issue contained the following language:

As of the date of this letter, you owe $5918.69. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For more information, write the undersigned or call 1-877-335-6949.

Kolbasyuk filed a putative class action alleging that the letter violated Sections 1692e and 1692g of the FDCPA because it failed to tell him “what portion of the amount listed is principal,” “what ‘other charges’ might apply,” “if there is ‘interest,’“ “when such interest will be applied,” and “what the interest rate is.” He also claimed that the letter conveyed the mistaken impression “that the debt could be satisfied by remitting the listed amount as of the date of the letter, at any time after receipt of the letter. The district court dismissed the case, noting that the letter “stated the amount plaintiff owed as of its date” and “stated that the amount owed may increase due to interest and fees.”

The court of appeals held that the “text of Section 1692g clearly forecloses Kolbasyuk’s argument” that CMS was required to break out the component parts of the debt, holding:

The word “amount” signifies a total, present quantity. See Amount, OXFORD ENGLISH DICTIONARY (2d ed. 1989) (defining “amount” as “the sum total to which anything mounts up or reaches . . . in quantity”). The word “debt,” as defined in the FDCPA, signifies an obligation to pay money. See 15 U.S.C. § 1692a(5) (defining “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction”). The “amount of the debt,” then, signifies the total, present quantity of money that the consumer is obligated to pay. And that is exactly the figure that CMS provided: the total, present quantity of money that Kolbasyuk was obligated to pay Barclays as of the date of CMS’s letter.2 Nothing in Section 1692g required CMS to inform Kolbasyuk of the constituent components of that debt or the precise rates by which it might later increase.

The court rejected Kolbasyuk’s argument that its decision in Carlin v. Davidson Fink LLP mandated a contrary conclusion, noting that Carlin involved a collection letter in which the “Total Amount Due” was merely an estimate. “The letter violated Section 1692g because Davidson Fink had only provided Carlin with an estimated, future amount that Carlin might owe, rather than the total, present amount that Carlin did owe.” In contrast, CMS’s letter to Kolbasyuk, clearly stated the total, present quantity of Kolbasyuk’s debt as of the date of the letter. Further rejecting Kolbasyuk’s assertion that a collection letter is incomplete if it omits information allowing the least sophisticated consumer to determine “the minimum amount she owes at the time of the notice, what she will need to pay to resolve the debt at any given moment in the future, and an explanation of any fees and interest that will cause the balance to increase” the court stated:

Carlin establishes that an estimated, forward-looking “Payoff Statement” may need to inform the consumer of “what she will need to pay to resolve the debt at any given moment in the future” or provide “an explanation of any fees and interest that will cause the balance to increase.” But where, as here, the debt collector has already informed the consumer of the “minimum amount she owes at the time of the notice,” Carlin simply lacks relevance.

Invoking the Second Circuit’s decision in Avila v. Riexinger & Associates, LLC, Kolbasyuk also claimed that CMS’s letter violated Section 1692e of the FDCPA because “[t]he least sophisticated consumer could reasonably believe that the debt could be satisfied by remitting the listed amount as of the date of the letter, at any time after receipt of the letter.” The court rejected that argument, too, finding that “CMS did disclose—quite explicitly—that Kolbasyuk’s balance might increase” when its letter stated: “Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater.”  The court held that “[n[ot even the least sophisticated consumer could conclude that his debt ‘could be satisfied by remitting the listed amount . . . at any time after receipt of the letter,’ in the face of an explicit warning to the contrary.”

The court of appeals in this case reaffirmed its commitment to the “safe harbor” disclosures an Avila and in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C.  Debt collectors have received a measure of assurance that their use of such safe harbor notices will protect them in the Second Circuit.