On August 16, Judge Freda L. Wolfson of the District of New Jersey ruled that a consumer plaintiffs claim that insurance language overshadowed the required debt validation warning can proceed.  In the case of Morello v. AR Resources, Inc., the named plaintiff Wayne Morello received a collection letter arising from a medical debt.  That letter contained a standard validation notice pursuant to § 1692g of the Fair Debt Collection Practices Act, informing Morello that he must dispute the validity of the debt.  Above this notice, the defendant debt collector, AR Resources, included the following sentence: If you carry any insurance that may cover this obligation, please contact our office at the toll-free number above.  Morello sued, claiming this sentence overshadowed the debt validation notice and, consequently, violated the FDCPA.  The defendants filed a motion to dismiss, which Judge Wolfson denied.

In denying the motion to dismiss, Judge Wolfson engaged in a detailed discussion of Third Circuit precedent involving these types of overshadowing claims.  She found that precedent dictated that debt collectors must not merely include the validation notice but also convey the terms of that notice effectively.  Judge Wolfson analyzed three cases from the Third Circuit Court of Appeals on this point: Graziano v. Harrison, Caprio v. Healthcare Revenue Recovery Grp., LLC, and Laniado v. Certified Credit & Collection Bureau.  The letter in Graziano contained a validation notice and a threat to take legal action within ten days unless the debt was resolved.  The Graziano court found that the juxtaposition of two inconsistent statements rendered the statutory notice invalid under § 1692g.  In Caprio, the front of the letter contained a statement requesting that the consumer call if he believed he did not owe the debt (with please call in bold typeface).  The debt validation notice was on the back of the letter.  The Third Circuit found this could lead the least sophisticated consumer to believe he could call to dispute the debt, thereby inadvertently waiving his right to dispute the debt because such disputes must be in writing.  Lastly, Judge Wolfson found that Laniado followed Caprio by inviting the consumer to call the debt collector “should there be any discrepancy.

Judge Wolfson then cited one of her previous decisions, rendered in Kassin v. AR Res., Inc., to find that the insurance language here overshadowed the debt validation notice.  Judge Wolfson reasoned that the language could lead the least sophisticated consumer who thinks that they do not owe the debt because they have insurance that should cover it to call the debt collector and inadvertently waive their right to dispute the debt in writing.  In other words, a debtor may mistakenly believe he or she could dispute the debt via telephone if the dispute was based on insurance coverage.  Judge Wolfson then distinguished her ruling from rulings in Cruz v. Fin. Recoveries (District of New Jersey) and Anela v. AR Res., Inc. (Eastern District of Pennsylvania).  She noted the insurance language in question in those cases was found to address resolving the debt, compared to disputing the debt.  In short, the insurance language in Cruz and Anela invited the consumer to call to provide information about insurance that could cover the debt.  Because she found the language in question in Morello to be more closely related to disputing the debt, there was a possibility that it could mislead the least sophisticated consumer.  For that reason, she denied the defendants motion to dismiss and strongly suggested she would rule in the plaintiffs favor at the dispositive phase of the trial.