A federal court in Pennsylvania recently awarded summary judgment in favor of a consumer who brought a suit under the Fair Debt Collection Practices Act against a collection agency. The plaintiff alleged, and the Court agreed, that the collection letter misleadingly indicated that a dispute could be made by phone, despite the letter’s inclusion of the statute’s debt validation language indicating that disputes must be in writing.

A copy of the ruling in Coulter v. Receivables Management Systems can be found here.

The plaintiff, Joshua Coulter, failed to pay a bill from a healthcare facility where he had received treatment, instead believing that his insurance would cover the bill.  The account was ultimately placed with the defendant collection agency, Receivables Management Systems (“RMS”). The following language from the RMS letter formed the basis for Coulter’s FDCPA claims:

Our records indicate that despite our client’s numerous requests for payment you have allowed your account to become seriously PAST DUE. Your payment of this balance, however, will allow us to cease further collection action against you.

If you feel that this balance may be due from your insurance carrier please contact your carrier prior to contacting the representative at the extension listed below.

Our Collection Representatives are available to work with you between the hours of 8:30 a.m. and 4:30 p.m. Mail your payment or call today.

Collection Representative: Phil Irvin Extension 3141

Federal Law requires us to inform you that:

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice, this office will: obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgement or verification.

In ruling on the parties’ cross summary judgment motions on the issue of liability, the Court began its analysis by explaining that, even when a debt collection letter includes the required validation notice, the letter may nevertheless run afoul of the FDPCA “if it fails to effectively communicate the required notice to the consumer.” This means, among other things, that the notice “must not be overshadowed or contradicted by accompanying messages from the debt collector.”

To determine whether a validation notice is “overshadowed or contradicted,” courts apply the “legal sophisticated debtor” test.  Under that standard, the Court ultimately agreed with Coulter that, although the issue was “a close one,” the letter could reasonably be understood to instruct the consumer to raise insurance-related disputes regarding the debt by calling RMS, thereby overshadowing and contradicting the statutory dispute language included in the letter requiring that any dispute be in writing to be effective.

This case is an important reminder for persons subject to the FDCPA to review their form communications to consumers for language that could potentially be seen to “overshadow” or “contradict” the included debt validation language.