Despite two controlling decisions by the Second Circuit in Avila and Taylor, claims involving the “amount of debt” disclosure under the Fair Debt Collection Practices Act (“FDCPA”) continue to evolve thanks to the relentless efforts by the New York plaintiffs’ bar. But these permutations of the “amount of debt” claims continue to be successfully pushed back by defendants. In a recent ruling, the United States District Court for the Eastern District of New York granted summary judgment in a debt collector’s favor and held that the collector was not required to disclose that the balance could increase due to a prospective award of costs in a state court action. A link to the decision can be found here.
Defendant Selip & Stylianou, LLP sent consumer plaintiff James Stewart a letter advising him that it was initiating a lawsuit in state court to collect an outstanding debt with a balance of $3,182.84. The letter also advised Stewart that the legal documents had already been filed. The complaint in the state court action sought costs associated with the lawsuit, but the letter did not disclose that the balance could increase due to such costs. Stewart sued the debt collector, claiming that the letter was false and misleading since it failed to disclose the potentially increasing nature of the outstanding balance.
On summary judgment, Selip & Stylianou submitted an affidavit demonstrating that the amount of debt was static because no interest or fees accrued on the debt. The affidavit further explained, “Only if legal action is commenced against a consumer does [creditor] seek actual disbursements incurred associated with any lawsuit, and even then only upon entry of judgment and only for the amount awarded in the judgment entered by the court.” Despite this sworn explanation, Stewart still argued that, because Selip & Stylianou was seeking costs incurred in prosecuting the state court action, the payment of the full amount disclosed on the face of the letter would have not satisfied the debt and the balance was thus not static. The Court disagreed and found that the balance remained static “even after the commencement of the [s]tate [c]ourt [a]ction because costs had not been awarded, and in fact, might never be awarded.” The Court also pointed out that subsequent letters which stated the same balance further undermined Stewart’s claims and that summary judgment in Selip & Stylianou’s favor was appropriate.
“Amount of debt” claims remain risky because an outstanding balance is listed in every collection letter and periodic compliance review is crucial due to the rapidly evolving precedent. Troutman Sanders will continue to monitor this line of cases.