Compliance with Reg F is Not the Same as Compliance With the FDCPA, Says Court

A District Court in New Jersey recently ruled that complying with Reg F does not necessarily equal compliance with the Fair Debt Collection Practices Act (FDCPA). Specifically, the NJ District Court held that although the date of the letter is not a requirement in the Model Validation Notice, failing to include a date in an initial demand that tracks the Model Validation Notice might violate the FDCPA.   

In Ginsberg v. I.C. System, Inc., (Civ Action # 22-1147; Dist ct. NJ 2003), a consumer received an initial demand letter that mirrored the format of Reg F’s Model Validation Notice (MVN). The letter stated a balance as of 1/25/2021 and referenced interest, fees, and payments “between 1/25/2021 and today.” The letter concluded by stating the amount the consumer owed “now.”  

Since the letter was not dated, the consumer filed a lawsuit claiming the debt collector withheld a material term, which made the letter difficult to understand. Without the ability to determine from the letter which date “today” and “now” refer to, the consumer alleged she was misled as to the status of the debt. According to the consumer, the letter’s misleading nature violated the FDCPA.  

The debt collector argued that since it complied with Reg F’s Model Validation Notice, which does not require the letter to be dated, It was entitled to a “safe harbor” from claims of an FDCPA violation. In response, the consumer argued that complying with the Model Form only ensures compliance with Reg F, not the FDCPA. Further, the consumer argued that any safe harbor applies to the form of the letter, not its substance.  

The Court agreed with the consumer. Following the lead of a February 2023 case from the Southern District of Florida (Roger v. GC Services Limited Partnership), the Court reasoned, “Regulation F never purported to make the use of the model validation notice a ‘safe harbor’ against statutory violations, only violations of the regulations themselves." Additionally, the Court noted that the Model Form might provide a “safe harbor,” but it only provides a “safe harbor” for the “form” of the required information, but not the “substance.”  

Therefore, the Court held that compliance with Reg F alone does not provide a “safe harbor” from a violation of the FDCPA. Since the omission of the date may have created confusion, the Court found that the consumer alleged sufficient facts for the case to continue. 

insideARM Perspective  

With the disclaimer that you should always consult your own counsel before changing your letters, the most straightforward surface takeaway from this case is that if you use words like “today” and “now,” it’s probably a good idea to date your letters.  

The more nuanced takeaway is that many in the ARM industry conflated Reg F with the FDCPA. However, during the implementation phase of Reg F,  many voices also said, “If it didn’t violate the FDCPA pre–Reg F, it won’t violate the FDCPA after Reg F.” In other words, Reg F provided regulatory clarity but did not serve to change the statutory text of the FDCPA. Those in the ARM industry shouldn’t forget this. While following Reg F is crucial for several reasons, it’s important to remember that the statutory text of the FDCPA still rules the day.