An Open Letter to the CFPB: Court Rulings on Validation Notice Hurt Consumers and Collectors

Many debt collectors are extremely concerned that a recent series of rulings from Pennsylvania and New Jersey regarding the validation notice are contrary to the plain language of the Fair Debt Collection Practices Act (FDCPA) and will cause immediate harm to consumers. Thus, we are respectfully requesting that the Consumer Financial Protection Bureau (CFPB) review these concerns and issue guidance.

Attached is a copy of the decision in the Durnell v. Stoneleigh Recovery Associates, LLC case that was decided earlier this month. Durnell is one of several recent decisions from Pennsylvania and New Jersey holding that a debt collector is required to disclose that a consumer must dispute a debt in writing despite the fact that the FDCPA specifically does not require that a consumer dispute be in writing to be valid pursuant to §1692(a)(3), which provides:

(a) Notice of debt; contents
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing --

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) 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;

(4) 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

(5) 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.

(Emphasis added.)

To be clear, there is no question that a consumer must make a request for validation, or a request for the name and address of the original creditor, in writing. However, disputes may always be made by a consumer verbally. Including a non-statutory “in writing” requirement in the §1692g(a)(3) disclosure will severely and improperly limit the ability of consumers to dispute a debt by mandating that such disputes must be in writing. Further, including an “in writing” requirement for consumer disputes is contrary to the plain language of the FDCPA, contrary to the practices of all reputable debt collectors (that honor verbal disputes) and contrary to the rulings of the Second, Fourth and Ninth Circuit Courts of Appeal.

The Fourth Circuit held that there is a right to dispute the debt verbally in Clark v. Absolute Resolution Services, as did the Second and Ninth Circuits as discussed in the quote from Clark below:

On appeal, the Clarks ask whether section 1692g(a)(3) permits consumers to dispute the validity of a debt orally, or whether it imposes a writing requirement. This is a matter of first impression for this Court. The Third Circuit has held that section 1692g(a)(3) must be read to include a writing requirement, finding any other reading contrary to the purposes of the FDCPA. See Graziano v. Harrison, 950 F.2d 107 (3d Cir.1991). In contrast, the Second and Ninth Circuits have found that the plain text of section 1692g(a)(3) permits oral disputes, and that such a reading results in a logical, bifurcated scheme of consumer rights. See Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282 (2d Cir.2013); Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078 (9th Cir.2005).

In line with the Second and Ninth Circuits, we find that the FDCPA clearly defines communications between a debt collector and consumers. Sections 1692g(a)(4), 1692g(a)(5), and 1692g(b) explicitly require written communication, whereas section 1692g(a)(3) plainly does not.[2] ACS asks that we disregard the statutory text to read into it words that are not there. We decline to do so. "[W]here Congress includes particular language 491*491 in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) (internal quotation marks omitted).

Durnell and the related cases rely on the ruling in Graziano v. Harrison, 950 F.2d 107 (1991). In Graziano, the Court wrote:

Subsection (a)(3) states that unless the debtor disputes the debt within thirty days of receipt of notice, the debt collector will assume the debt to be valid. Subsection (a)(4) states that if the debtor disputes the debt in writing within thirty days, the debt collector must obtain verification of the debt and must send the debtor a copy of the verification.[9] Subsection (a)(5) states that, if the debtor makes a written request, the debt collector must provide the name and address of the original creditor. Subsection (b) states that if the debtor disputes the debt in writing within thirty days, the debt collector must cease collection efforts until the debt collector has verified the debt.[11] Adopting Graziano's reading of the statute would thus create a situation in which, upon the debtor's non-written dispute, the debt collector would be without any statutory ground for assuming that the debt was valid, but nevertheless would not be required to verify the debt or to advise the debtor of the identity of the original creditor and would be permitted to continue debt collection efforts. We see no reason to attribute to Congress an intent to create so incoherent a system. We also note that there are strong reasons to prefer that a dispute of a debt collection be in writing: a writing creates a lasting record of the fact that the debt has been disputed, and thus avoids a source of potential conflicts. We therefore conclude that subsection (a)(3), like subsections (a)(4) and (a)(5), contemplates that any dispute, to be effective, must be in writing. The district court was not in error in determining that the requirement of a writing did not render the statutory notice invalid.

Graziano holds that a letter stating that a writing is required to dispute under (a)(3) does not violate the FDCPA. However, the Court did not say that a letter that does not include a writing requirements for (a)(3) violates the FDCPA. This is an important distinction.

While we understand that the CFPB may be hesitant to get involved in pending litigation, the risk for immediate consumer harm if debt collectors were to follow these recent rulings may factor into your decision.

Thank you for your time!

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