Monday, August 14, 2017

No interest? No Disclosure? No Problem!

The juxtaposition of Sections 1692e and 1692g continues to be a battle ground for the consumer bar and collection industry.  Section 1692e prohibits false, deceptive or misleading representations in connection with the collection of a debt.  Section 1692g(a) requires that within five days of initial communication, the debt collector provide the consumer with a written notice which contains five pieces of information: (a) the amount of the debt; (b) the name of the creditor to whom the debt is owed; (c) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (d) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (e) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. 

A recent case out of the District Court for Oregon illustrates the extreme positions being taken by the consumer bar and provides some reassurances to the industry.  In Powers v. Capital Management Services, the collection agency sent a single letter which identified the original and current creditor, the account number as “5702” and the amount of the debt as $565.91.  Powers v. Capital Mgmt Servs., 2017 U.S. Dist. LEXIS 121536 (D. Ore. Aug. 2, 2017).  The consumer filed suit, alleging that: (a) by failing to disclose whether interest was or was not accruing on the balance of the debt, the agency violated 15 U.S.C. §1692g(a); and (b) by identifying the account number as being its last four digits, the agency misrepresented the account number in violation of 15 U.S.C. §1692e.

In addressing the first issue, the court quickly drew a distinction between accounts where interest is accruing and those in which it is not.  “Where interest is not accruing on a debt, the debt collector does not need to state that no interest is accruing.  Rather, it is only in instances when interest is accruing on a debt does Section 1692g(a)(1) require a debt collector to disclose that fact and include both principle and interest when stating the amount due.” Id. at *3-4.

Moving to the second issue, the court was dismissive of the consumer’s claim that the collection agency’s use of the last four digits of the account number was misleading.  The court observed that the numbers used were associated with the consumer’s account and the notice reflected the exact amount owing on the account.  Moreover, while there may have been better ways to identify the account – for instance, preceding the last four digits with xxx-xxx-xxx or with the phrase “account ending in”,  a “consumer of below average sophistication or intelligence, but still possessing a basic level of understanding and willingness to read with care, would understand that “5702” identifies their consumer… credit card account number.” Id. at *6.