On January 27, Judge Pamela K. Chen of the United States District Court for the Eastern District of New York denied a defendant debt collector’s motion to dismiss. Plaintiff Olga Madorskaya filed a lawsuit, individually and on behalf of a class, against Frontline Asset Strategies, LLC, claiming that a debt collection notice misrepresented the amount owed and was misleading in violation of the Fair Debt Collection Practices Act. Although the Court held that the total amount due was clearly stated, its decision ultimately turned on the “Interest Accrued” line item, which listed a non-zero monetary amount. Because no interest was accruing, however, including this amount created enough ambiguity to allow the FDCPA claims to proceed, and Frontline’s motion to dismiss was denied.
Madorskaya had incurred credit card debt that eventually was charged off by her credit card company. The company then sold the debt to a third party, who retained Frontline to collect on this debt. On February 14, 2018, Frontline sent a debt collection notice to Madorskaya, which stated:
Total Amount Due: $7,590.41
Last Pay Date: 04/10/2017
Total Due as of Charge-off: $7,681.89
Total Interest Accrued Since Charge-Off: $346.02
Total Non-Interest Charges or Fee Accrued Since Charge-off: $0.00
Total Paid on Debt Since Charge-off: $0.00
The notice also stated, “As of the date of this letter, you owe $7,590.41.”
Given the inclusion of this final sentence, the Court dismissed any claim that the notice misrepresented or misled as it related to the total amount due. The Court, however, ultimately denied Frontline’s motion to dismiss due to the inclusion of the non-zero monetary value for accrued interest.
Frontline argued that under Taylor v. Financial Recovery Services, it had no obligation to disclose interest that is not accruing. The Court distinguished Taylor on the basis that, in that case, the interest accrued was listed as zero. Here, Frontline listed the interest accrued since charge-off as $346.02. The inclusion of this non-zero value, therefore, could mislead a least sophisticated consumer to believe that interest was accruing. In the Court’s opinion, Frontline had an obligation to provide more information on whether interest was accruing.
Interestingly, even though the Court allowed the lawsuit to proceed, the case eventually may be decided on contract principles and the scope of a release agreement that Madorskaya entered into with the “current creditor to whom the debt is owed.” The Court took judicial notice of this release, but declined to grant Frontline’s motion on the basis of this release.