Section 1692g of the FDCPA says collectors must provide notice to consumers within five days of the initial communication regarding the debt, stating the amount of the debt, the name of the current creditor, and explaining the consumer’s right to dispute the debt and to obtain verification. You might assume that a collector can comply with that section by simply copying the language from the statute into their initial notice to consumers. Simple enough to include this language and move on, right? Not exactly.
Although collectors are not required to quote from the text of section 1692g verbatim, that is probably a good first step. Even if the letter tracks the language of the statute word for word, however, a collector may still draw an “overshadowing” claim if he says something, or does something, during the thirty-day validation period that may confuse the consumer about their section 1692g rights. To avoid overshadowing claims, collectors must assess not only the wording, typeface and layout of their initial letters, but also all of their consumer interactions during the 30-day validation period.
It is not always easy to predict the language or conduct that might give rise to an overshadowing claim. The First Circuit recently observed: “Overshadowing is rarely a black-or-white proposition: there are many shades of gray. It is impossible to catalogue the manifold ways, some subtle and some not, in which a debt collector may attempt to circumnavigate section 1692g.” Pollard v. Law Office of Mandy L. Spaulding, 766 F.3d 98, 106 (1st Cir. 2014) (citation omitted).
The section 1692g requirements
To answer the question “what is overshadowing?” we look first to what Congress said the validation notice must contain. Section 1692g requires that within five days of the “initial communication with a consumer in connection with the collection of any debt” a collector must send the consumer a written notice containing, inter alia, the amount of the debt, and the name of the creditor to whom the debt is owed. See 15 U.S.C. § 1692g(a)(1), (2). The notice must contain “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; . . .”. Id. § 1692g(a)(3). In addition, the notice must include “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; . . .” Id. § 1692g(a)(4). Finally, the notice must contain “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.” Id. § 1692g(a)(5).
The statute gives certain limited protections to a consumer who disputes the debt during the 30-day period. If the consumer verbally disputes the debt, the collector need not respond, but the collector is no longer entitled to assume the debt is valid. Id. at § 1692g(a)(3). If a written dispute is sent by the consumer, the collector must cease further collection efforts until it provides the consumer with verification of the debt, a copy of a judgment, or, if it has been requested, the name and address of the original creditor. Id. at § 1692g(a)(4), (5). The statute also provides: “Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor.” Id. at § 1692g(b).
Obscuring the validation notice
The consumer must receive notice of his section 1692g rights in a manner that it not confusing. As the First Circuit observed, “confusion can occur in a myriad of ways, such as when a letter visually buries the required validation notice, contains logical inconsistencies, fails to explain an apparent inconsistency, or presents some combination of these (or similar) vices. In the last analysis, a collection letter is confusing if, after reading it, the unsophisticated consumer would be left unsure of her right to dispute the debt and request information concerning the original creditor. The emphasis, then, is on practical effect.” Pollard, 766 F.3d at 104 (citations omitted); see also Swanson v. Southern Oregon Credit Servs, Inc., 869 F.2d 1222, 1225 (9th Cir. 1989) (“The statute is not satisfied merely by inclusion of the required debt validation notice; the notice Congress required must be conveyed effectively to the debtor. It must be large enough to be easily read and sufficiently prominent to be noticed – even by the least sophisticated debtor. Furthermore, to be effective, the notice must not be overshadowed or contradicted by other messages or notices appearing in the initial communication from the collection agency.”) (citations omitted).
Even if the letter contains the full validation notice, it will violate section 1692g if the language of the notice is obscured by other text in the letter. See Swanson, 869 F.2d at 1225 (notice was “dwarfed” by bold faced type, several times larger than notice, stating: “IF THIS ACCOUNT IS PAID WITHIN THE NEXT 10 DAYS IT WILL NOT BE RECORDED IN OUR MASTER FILE AS AN UNPAID COLLECTION ITEM. A GOOD CREDIT RATING--IS YOUR MOST VALUABLE ASSET.”); compare Terran v. Kaplan, 109 F.3d 1428, 1434 (9th Cir. 1997) (no overshadowing: “The text of the letter is uniformly presented in ordinary, same-size font. No emphasis is placed on any particular statement, with the exception of the creditor's name and the name of the person to contact at Kaplan's office, both of which appear in uppercase letters.”). Even when a letter has a friendly tone, its content may overshadow the validation notice if it contains language that obscures the debtor’s section 1692g rights. See, e.g., Caprio v. Heathcare Revenue Recovery Group, LLC, 709 F.3d 142, 151 (3d Cir. 2013) (letter stating “if you feel you do not owe this amount, please call us toll free” overshadowed notice; consumer may believe that a phone call was sufficient to trigger duty to verify debt); Abramov v. I.C. Systems, Inc., _ F.Supp.3d_, 2014 WL 5147549 at *5 (E.D.N.Y Oct. 14, 2014) (directing consumer to dispute debt “in writing” if identity theft is suspected may overshadow right to verbally dispute debt); Oberther v. Midland Credit Management, Inc., _F.Supp.3d_, 2014 WL 4548871, at *6 (D. Mass. Sept. 15, 2014) (letter that gave only two options to stop referral of account to attorney – mail payment, or call to settle - without mentioning that submitting a dispute would also do so, overshadowed validation notice).
Demanding immediate payment
A collector is free to make a demand for immediate payment during the 30-day validation period. Doing so, however, can be risky. For example, in Savino, although a collector’s “request for immediate payment did not, standing alone, violate the FDCPA”, the letter violated the section 1692g by failing to also explain that the demand for immediate payment did not override the right to seek validation. See Savino v. Computer Credit, Inc., 164 F.3d 81, 86 (2d Cir. 1998) (notice stating “[t]he hospital insists on immediate payment or a valid reason for your failure to make payment” violated section 1692g); see also Russell v. Equifax, 74 F.3d 30, 34 (2d Cir. 1996) (the phrase “if you pay it within the next 10 days we will not post this collection to your file” overshadowed the validation notice).
Requesting “immediate” payment was held permissible in Wilson v. Quadramed Corp., 225 F.3d 350 (3d Cir. 2000), where the Court found that language stating the account had been placed with agency for “immediate collection” and that the agency would “afford [the debtor] the opportunity to pay this bill immediately and avoid further action against you” was not confusing. Id. at 356. The debtor was properly “presented with two options: (1) an opportunity to pay the debt immediately and avoid further action, or (2) notify Quadramed within thirty days after receiving the collection letter that he disputes the validity of the debt. As written, the letter does not emphasize one option over the other, or suggest that Wilson forego the second option in favor of immediate payment.” Id. Similarly, in Renick v. Dun & Bradstreet, 290 F.3d 1055 (9th Cir. 2002), the Court held that a letter asking the debtor to “send payment today” and stating that “PROMPT PAYMENT IS REQUESTED” did not overshadow the validation notice. Id. at 1057. In the same vein, the Court in Peter v. GC Services, LP, 310 F.3d 344 (5th Cir. 2002), held that the phrase “FULL COLLECTION ACTIVITY WILL CONTINUE UNTIL THIS ACCOUNT IS PAID IN FULL” did not overshadow the notice. Id. at 349. Likewise, in Taylor v. Cavalry Investment, LLC, 365 F.3d 572 (7th Cir. 2004), the Court held that the phase “Act now to satisfy this debt” was “in the nature of puffing” and did not overshadow the language explaining the debtor’s right to seek validation during the 30-day period. Id. at 575; see also Gruber v. Creditor Protection Serv., Inc., 742 F.3d 271, 275 (7th Cir. 2014) (language stating “We believe you want to pay your just debt” was puffing and did not overshadow the validation notice). In Terran, the Court held that the phrase “Unless an immediate telephone call is made to J SCOTT, a collection assistant of our office at (602) 258-8433, we may find it necessary to recommend to our client that they proceed with legal action” did not overshadow the validation notice, because it did not require “payment” immediately and merely requested a phone call. Terran, 109 F.3d at 1434.
Threatening suit or filing suit
A collector can file suit, and may refer to a potential lawsuit, within the 30-day validation period. Again, doing so can be very risky. In Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996), after reciting the validation notice, the letter promptly overshadowed it by stating “if the above does not apply to you, we shall expect payment or arrangement for payment to be made within ten (10) days” in order to avoid “additional proceedings by our firm” including a potential “civil suit” by the creditor. Id. at 226. The letter in Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997) overshadowed by validation notice by stating “if you wish to resolve this matter before legal action is taken you must do one of two things within a week of the date of this letter”: pay the debt or call the creditor to “make suitable arrangements for payment.” Id. at 499. The Court held that the language regarding a potential suit was confusing when read together with the validation notice: “He might well wonder what good it would do him to dispute the debt if he can't stave off a lawsuit.” Id. at 501. Although the First Circuit agreed in Pollard that the validation period was “not a grace period” it held that the letter overshadowed the notice, because it suggested “that a lawsuit is going to proceed without delay whether the consumer disputes the debt or not.” Pollard, 766 F.3d at 105. The Second Circuit held in Ellis v. Solomon And Solomon, P.C., 591 F.3d 130 (2d Cir. 2010) that serving a consumer with a summons and complaint during the 30-day validation period overshadowed the validation notice, because the collector did not provide “an explanation” clarifying that the lawsuit had no effect on the information contained in the notice. Id. at 136.
By contrast, in Zemekis v. Global Credit and Collection Corp., 679 F.3d 632 (7 th Cir. 2012), language stating that the debtor’s account “now meets ... [the] guidelines for legal action” and that “Capital One Bank (USA), N.A. may be forced to take legal action” did not overshadow the notice, because “The letter warns only that Capital One Bank had the right to pursue legal action. . . . As written, the letter alerted Zemeckis only to the possible repercussions she faced for failing to pay.” Id. at 636-37. In FHML v. Lamar, 503 F.3d 504 (6th. Cir. 2007), the collector did not overshadow the validation notice when it served a collection complaint that included the validation language in the text of the pleading. The consumer was properly advised that under state law, she had to respond to the complaint in twenty days, but she had thirty days to dispute the debt under the FDCPA. Id. at 511; see also Lansing v. Wilford, Geske & Cook, P.A., 2013 WL 5587956, at *4 (D. Minn. Oct. 10, 2013)(foreclosure complaint would not overshadow where validation letter stated: “[a]ny future actions taken by our office to begin a foreclosure proceeding do not terminate or limit the thirty-day period to dispute the validity of the debt, or any portion thereof, or your ability to request verification of the debt or the name of the original creditor, as described above.”).
Mentioning negative credit reporting
Informing debtors of the potential negative consequences of their failure to pay does not necessarily overshadow the validation notice. In Durkin v. Equifax, 406 F.3d 410 (7th Cir. 2005), a letter stating “CONTINUED REFUSAL TO HONOR THIS RETURNED CHECK WILL RESULT IN YOUR CREDIT FILE BEING IMPACTED WITH A NEGATIVE REFERENCE WHICH MAY IMPACT FUTURE CREDIT GRANTING DECISIONS” did not overshadow the validation notice. Id. at 425. The Court observed: “these letters do not indicate that the time for disputing the debt has passed. Nor do they misrepresent or cloud the amount of time remaining to dispute the debt. The letters encourage debtors to pay their debts by informing them of the possible negative consequences of failing to pay. The letters simply do not contain any overt misinformation, apparent contradiction, or noticeable lack of clarity concerning the validation period or the debtor's rights under § 1692g.” Id. at 417-18. The Fifth Circuit followed this same reasoning in McMurray v. ProCollect, Inc., 687 F.3d 665 (5th Cir. 2012), where the letter warned the consumer: “It is important that you pay your debt as failure to timely validate the referenced amount due will cause us to report your account to the credit reporting agencies. The negative mark can remain on your credit for up to seven (7) years, and may among other things significantly affect your ability to: (1) OBTAIN CREDIT; (2) OBTAIN EMPLOYMENT; (3) PURCHASE HOME OR CAR; OR (4) QUALIFY FOR APARTMENT RENTAL.” Id. at 667. In rejecting the overshadowing claim, the Fifth Circuit stated: “The supposed threat falls in the category of letters that encourage debtors to pay their debts by informing them of the possible negative consequences of failing to pay, words that do not overshadow the required notice language. . . The letter in this case essentially provided such warnings and nothing more. Thus, the notice language in ProCollect's letter is not overshadowed by the letter's bad-credit warnings.” Id. at 671 (citations and quotation marks omitted).
To avoid overshadowing claims, the best place to start is with the text of your validation letter. Make sure that it tracks the language of the statute, and that it does not contain any other language that might arguably obscure or contradict the debtor’s validation rights. Collectors should also assess any other communications or conduct that occurs within the 30-day validation period to determine if it presents any overshadowing risks.