In Almada v. Krieger, No. 21-55275 (9th Cir. Jan. 24, 2022), the Ninth Circuit partially reversed a decision by the U.S. District Court for the Southern District of California, granting summary judgment in favor of a debt collector in a Fair Debt Collections Practices Act (FDCPA) case. In doing so, it held that a collection letter, which indicated that the debtor could only dispute the underlying debt in writing, violated the FDCPA.

The plaintiff, Jeffrey Almada, allegedly owed money to a homeowner’s association, which retained the defendant, the Krieger Law Firm, A.P.C. (Krieger), to collect the debt. In attempting to do so, Krieger sent the plaintiff a letter, which, in relevant part, stated:

Under the federal Fair Debt Collection Practices Act, if you dispute this debt, or any portion thereof, you must notify this office in writing within thirty (30) days of receipt of this letter. After notifying this office of a dispute, all debt collection activities will cease until this office obtains verification of the debt and a copy of such verification is mailed to you. If you do not dispute the validity of this debt or any portion thereof within thirty (30) days of receipt of this letter, the debt will be assumed valid. You may request in writing, within thirty (30) days of receipt of this letter, the name and address of the original creditor, if different from the current creditor, which is the homeowners association named above, and we will provide you with the information. (Emphasis in the original).

The plaintiff argued that this passage violates FDCPA Section 1692g(a)(3), which requires debt collectors to provide a written notice, stating 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.” Focusing only on the third sentence of the passage, the District Court determined that no violation had occurred.

On appeal, the Ninth Circuit held that a debt collection letter that expressly states that the debtor must dispute a debt in writing violates the FDCPA. And in determining whether this has occurred, a court must view the letter “through the eyes of the least sophisticated debtor.” According to the Ninth Circuit, in this case, the standard requires the court to read the letter as a whole, including the bold face text. Because the bold text expressly states that a dispute must be in writing, the Ninth Circuit reversed the District Court’s grant of summary judgment in favor of Krieger.

However, the Ninth Circuit upheld the District Court’s finding that the letter was neither false, deceptive, or misleading in violation of FDCPA Section 1692(e) nor qualified as an unfair or unconscionable means to collect a debt in violation of FDCPA Section 1692(f). The plaintiff had argued that the letter at issue violated these provisions because the alleged debt included a “prelien fee” of $130 for the preparation of the collection letter by a paralegal. In affirming summary judgment as to these claims, the Ninth Circuit held: (a) California Civil Code Section 5650(b)(1) permits homeowners’ association to recover reasonable costs, including attorneys’ fees, incurred in collecting delinquent assessments; and (b) charges for work performed by paralegals qualifies as “attorneys’ fees.”