The U.S. Court of Appeals for the Second Circuit found that a notice sent by collection agent Financial Recovery Services that did not specify whether the debts were accruing interest and fees, was not misleading under Section 1692e of the Fair Debt Collection Practices Act. The court found that because no interest or fees were accruing, the notice complies with Section 1692e and upheld the summary judgment decision by the trial court (Taylor v. Financial Recovery Services, Inc., March 29, 2018, Calabbresi, G.).
Collection notices sent by agent. The individual debtors, Christine M. Taylor and Christina Klein, defaulted on their credit card debt with Barclays Bank. The debts were then placed with Financial Recovery Services, Inc. (FRS), a collection agent, which the bank instructed not to accrue interest or fees on the debts. FRS sent a series of collection notices to Taylor and Klein. Each notice stated an identical and unchanging "balance due." None of the notices included any statement addressing whether those balances were accruing interest or fees. Neither Taylor nor Klein made any payments to FRS in connection with their debts prior to filing individually for Chapter 7 bankruptcy.
Summary judgment granted. FRS was granted summary judgment in the trial court after producing unrebutted evidence that neither Taylor’s nor Klein’s debt had accrued interest or fees during the time those debts were placed with the company and contended that the collection company was not obligated to add explicitly that no interest or fees were accruing.
Notices not misleading. The Second Circuit used the following principles to evaluate whether a collection notice violates Section 1692e: the FDCPA must be construed liberally to effectuate its stated purpose; and collection notices are to be looked at from the perspective of the "least sophisticated consumer."
According to the court, "a collection notice can be misleading if it is open to more than one reasonable interpretation, at least one of which is inaccurate." The debtors argued that the collection notices were misleading within the meaning of Section 1692e because the least sophisticated consumer could have interpreted them to mean either that interest and fees on the debts in question were accruing or that they were not accruing. The court stated that FRS’s collection notices were not misleading because no interest or fees were being charged and Taylor and Klein could have satisfied their debts by making reasonably prompt payment of the amounts stated in the notices.
The debtors alleged in the suit that FRS’ collection notices were "false, deceptive, or misleading" within the meaning of Section 1692e of the FDCPA, relying on a Second Circuit opinion, Avila v. Riexinger & Associates, LLC (2016), where the court held that a debt collector violates the FDCPA by stating the "current balance" of a consumer’s debt without disclosing that the balance is increasing due to the accrual of interest or fees.
The court determined that the debtors’ reliance on Avila was mistaken. The difference, the court explained, between the current case and Avila is that one of the plaintiffs in Avila had paid the stated balance of her debt but still had an unpaid balance that was accumulating interest. The collection notices could have been read to mean that prompt payment of the amounts stated would satisfy the debts in question; however prompt payment in this case "would have satisfied their debts."
According to the court "the only harm that Taylor and Klein suggest a consumer might suffer by mistakenly believing that interest or fees are accruing on a debt is being led to think that there is a financial benefit to making repayment sooner rather than later. This supposed harm falls short of the obvious danger facing consumers in Avila."
Additionally, the court stated that "construing the FDCPA in light of its consumer protection purpose, we hold that a collection notice that fails to disclose that interest and fees are not currently accruing on a debt is not misleading within the meaning of Section 1692e."
The court also did not agree with the debtors’ additional arguments which attempted to argue that the FRS’s notices were misleading because, even if Barclays did not accrue post placement interest on their debts, it nonetheless retained the right to do so.
The case is No. 17-1650-cv.
Attorneys: David Michael Barshay (Barshay Sanders, PLLC) for Christine M. Taylor. John P. Boyle (Moss & Barnett, PA) for Financial Recovery Services, Inc.
Companies: Financial Recovery Services, Inc.
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