Second Circuit: State and Local Law Violations Do Not Create Per Se FDCPA Violations

In a rather odd opinion, the Second Circuit Court of Appeals joined the majority of federal circuits who have held “that violations of state and local debt collection statutes are not per se actionable under the FDCPA.”  Gallego v. Northland Group Inc., 15-1666-cv, 2016 U.S. App. LEXIS 3025 (2nd Cir. Feb. 22, 2016).  In Gallego, the consumer filed a putative class action against a collection agency alleging that the collection letter violated the FDCPA.  Specifically, the plaintiff alleged that because the collection letter provided a telephone number to call the defendant but did not provide the name of any person who the plaintiff could speak to, the letter violated sections 1692e(10) and 1692f. Neither cited provision requires debt collectors to include names of individuals the consumer can speak to if he calls in, however, the New York City Administrative Code does.  Plaintiff contended that because the letter violated the NYC Administrative Code, the debt collector violated the FDCPA. The case came before the district court after the parties reached a tentative class settlement seeking conditional approval of the class wide settlement and certification of the conditional settlement class.  The District Court dismissed the plaintiff’s complaint sua sponte for lack of subject matter jurisdiction after denying plaintiff’s class certification. 

On appeal, the Second Circuit reversed and remanded the case to the trial court for further proceedings disagreeing with the district court’s basis for dismissal.  In doing so, the court differentiated between a lack of subject matter jurisdiction and a mere failure to state a proper claim, nothing that courts have been cautioned against collapsing the distinction between failing to raise a substantial federal question for jurisdictional purposes and failing to state a claim on the merits.   “The level of frivolity required for a federal claim to fail to invoke federal subject matter jurisdiction” is wholly insubstantial or obviously frivolous.  Shapiro v. McManus, 136 S. Ct. 450, 455 (2015).  “Unless a claim fails to clear even that low bar…”the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.” That is what the district court should have done.”  Gallego at *8 (internal citations omitted). 

In the eyes of the Second Circuit, the complaint in this instance was failed to state a proper claim. The court held that neither of the cited sections of the FDCPA would support a claim.  The FDCPA specifically preempts state laws which do not provide as much protection as the FDCPA, but any state laws which provide more protection than the FDCPA are allowed. This provision (§1692n) would not be needed if the FDCPA incorporated state laws.  The court found that the failure to provide the name of an individual a consumer could speak to when calling the debt collector was not a false representation or deceptive under § 1692e(10) or unfair and unconscionable under § 1692f.  As such, on remand the District Court will most assuredly see the defendant file a 12(b)(6) motion to have the complaint dismissed for failure to state a claim.  This is another positive case for debt collectors as another Circuit finds that the state and local law violations are not per se violations of the FDCPA.