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.
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).
Conclusion
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.
