Missouri FDCPA Case Presents More Questions than Answers

A recent opinion from a federal district court in Missouri presents more questions than answers regarding debt collection within the thirty day validation period. In Schuller v. AllianceOne Receivables, Management, Inc., Case No. 4:15 CV 298 CDP, 2016 U.S. Dist. Lexis 13388 (D. Mo. Feb. 4, 2016), the consumer sued the debt collector focusing in on two recorded conversations which occurred within the thirty day validation period. The first call was initiated by the debt collector, but the second call was initiated by the consumer. During the first call, which was made just a few days after the initial demand letter was sent containing the requiring debt validation language, the debt collector indicated that the call was to collect the debt and the objective was to “see if we can work something out” with the account.  Schuller at *3-4.  During the course of the conversation, the consumer indicated he could only afford ten dollars a month and the funds would not be available until the first of the following month.  The second call was initiated by the consumer and occurred a few days later still during the thirty day validation and dispute period.  During that call, the consumer continually asked “when do I have to take care of this debt?”  Id. at *5.  In response, the collection agency indicated that it was looking for payment on the account “as soon as possible.”  Id. In response, the consumer asked if they wanted it paid immediately and the collection agency responded in the affirmative.  The consumer closed the call by informing the agency that he had retained counsel and provided his counsel’s information.

The consumer filed an FDCPA suit asserting, in part, that the collection agency’s collection efforts overshadowed his dispute, validation, and verification rights under 15 U.S.C. §1692g.  On summary judgment, the court ruled in the debt collector’s favor on all claims except for the §1692g claim.  With respect to that claim, the court found that the telephone conversations constituted a demand for payment which overshadowed the consumer’s §1692g(a) rights to request validation of the debt.  In doing so, the court pointed out that debt collectors are allowed to continue debt collection activity within the thirty day dispute period if they have not received a notice of dispute from the consumer. Whether the debt collection activity that occurs during this time violates §1692g is determined using the unsophisticated consumer standard. The court then went on to examine whether or not the communications overshadowed or were inconsistent with the 30 day validation period.  In reviewing the initial call, the court determined that even though the language used by the collector did not “overtly request a payment by a date certain within the dispute period,… it certainly indicates that a payment should be made within that time and failure to do so would be to risk some undefined negative consequence.” Id. at *16.  This, combined with the second collector’s indication that payment should be made in full as soon as possible, influenced the court’s decision.  “It seems clear that… [the collectors] were attempting to toe the line between permissible and impermissible collection efforts. But "the FDCPA is a broad remedial statute" whose terms "are to be applied in a liberal manner," and with this in mind, I conclude that defendant's representatives went too far.”  Id. at *17.

Most interestingly for debt collectors, the court in a footnote discussed the collection agency’s claim that the consumer baited the collector in the second call into violating the FDCPA and was not confused about his rights at that time. “The unsophisticated consumer is an objective standard, and the fact that the FDCPA may have been used as a sword instead of a shield in this instance does not change that analysis.” Id. at footnote 3.

The takeaway for debt collectors from this case is threefold. First, an intentional baiting by a consumer does not provide the debt collector with a defense to a §1692g claim. Second, the case emphasizes the importance of training collectors to understand how to handle phone calls with consumer, especially during the thirty day window for debt verification. Finally, the case emphasizes that the FDCPA presents many a Hobson ’s choice for debt collectors. Particular to this case, what can a debt collector do where they have sent the 15 USC §1692g(a) letter and the consumer calls the debt collector in the thirty day period:  can the debt collector discuss collection of the underlying account without running afoul of overshadowing?