On March 30, 2020, the Third Circuit Court of Appeals issued its long awaited en banc decision in Riccio v. Sentry Credit, Inc., overruling decades-old precedent and holding Section 1692g(a)(3) of the Fair Debt Collection Practices Act (FDCPA) allows debtors to dispute a debt orally as well as in writing. See No. 18-1463 (3d Cir. Mar. 30, 2020). This decision brings the Third Circuit in line with all other courts of appeals that have considered the issue.
Factual and Procedural Background
The case arose out of a debt collection letter Sentry Credit, Inc. mailed to Maureen Riccio concerning a debt she incurred to M-Shell Consumer Oils. Sentry’s letter contained a validation disclosure that informed Riccio of her right to dispute the validity of the debt. The language of the validation disclosure closely tracked the statutory language of §§ 1692g(a)(3)-(5). The letter also provided three different options Riccio could use to contact Sentry regarding the debt: by mail, by phone, and through Sentry’s website.
Riccio brought a putative class action, alleging Sentry’s letter violated § 1692g(a)(3) of the FDCPA because it suggested Riccio could dispute the debt orally, rather than explicitly stating disputes must be made in writing as required under Third Circuit precedent in Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991). Sentry moved for judgment on the pleadings, arguing its letter properly complied with the Third Circuit’s mandate in Graziano. The district court agreed and granted Sentry’s motion. Riccio appealed.
The Language of § 1692g(a)
At issue in the case is the language of § 1692g(a) of the FDCPA, which reads in part:
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall . . . send the consumer a written notice containing – …
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
Analysis of FDCPA § 1692g(a)(3)
Starting with the language of § 1692g(a)(3), the Court noted the “provision refers only to ‘disputes,’ without specifying oral or written.” The Court then reviewed § 1692g in its entirety and discussed how certain provisions of the Section require a debtor to make a written dispute in order to obtain certain information about the debt while § 1692g(a)(3) does not contain any “in writing” requirement. The Court concluded “[t]hat intra-section variation strongly signals that § 1692g permits oral disputes.”
The Court applied the same analysis to the other provisions of the FDCPA that discuss consumer disputes. Similar to § 1692g(a)(3), these provisions also do not specify the method of communication required to lodge a dispute. The omission of a specific writing requirement in these provisions “amplifies the variation within § 1692g and . . . refutes Riccio’s suggestion that Congress inadvertently omitted a writing requirement from § 1692g(a)(3).”
The Court concluded its analysis of the statutory language with a discussion of the rule against surplusage. Since provisions (a)(4) and (b) of § 1692g require a debt collector to stop collection attempts and immediately validate the debt if a debtor disputes in writing, which is not required if a debtor disputes orally, the Court reasoned that reading an “in writing” requirement into provision (a)(3) would effectively strike that provision from the statute. “Put different, inserting a writing requirement into (a)(3) means that every dispute triggers (a)(4) and (b) . . . [i]f every dispute triggers (a)(4) and (b), then (a)(3) has no independent effect.”
The decision also details the Court’s specific reasoning for overturning Graziano, which stood as the law of the Third Circuit for almost 30 years. First, the Court noted that Graziano was a panel decision, which carry less weight than a decision en banc. Second, the Court recognized that it stood alone in the larger legal landscape of the Federal Courts of Appeals that have considered the issue, with the First, Second, Fourth, Fifth, Sixth, Seventh, and Ninth Circuits taking the opposite view of §1692g(a)(3). Finally, the Court noted case law postdating Graziano, including the Supreme Court’s decision in Lamie v. United States, 540 U.S. 526 (2004), would have likely led the Graziano Court to a different decision if available at the time.
The Court also noted the “growth of judicial doctrine” as a reason for its decision to overturn Graziano. Specifically, there has been a marked change in the way courts read statutes today; placing a greater emphasis on plain text of a statute and nothing extraneous.
To the Court, the nature of its decision was a “controlling interpretation of federal law,” which is provided full retroactive effect per Harper v. Va. Dep’t Taxation, 509 U.S. 89, 97 (1993). In so doing, the Court found Riccio’s claim against Sentry without merit. Sentry’s use of the statutory language “nearly word-for-word” effectively notified Riccio of her rights. Indeed, the Court concluded “[a] collection notice can never mislead the least sophisticated debtor by relying on the language Congress chose.”
As the Court notes, there are positives for both debtors and debt collectors as a result of this decision. For debt collectors, the decision allows for the use of uniform validation disclosures nationwide unless, and until, the CFPB’s proposed form validation disclosure is approved and put into effect. This should alleviate a considerable amount of consternation for debt collectors who have been the target of lawsuits with respect to this issue in the Third Circuit for the past three decades. For debtors, the decision “expand[s] the ways a debtor can dispute a debt’s validity [and] makes it easier for debtors to invoke its protections.”