On November 20, a judge for the Southern District of New York granted a motion to dismiss a Fair Debt Collection Practices Act (FDCPA) class-action holding that a simple lack of a date on a model validation notice did not amount to a violation of the statute because it was not confusing to the least sophisticated consumer.

Continue Reading Judge Dismisses FDCPA Case Alleging Violations Based on Undated Model Validation Notice

In Bemero v. Lloyd & McDaniel, PC, the U.S. District Court for the Northern District of Illinois granted a motion to dismiss in a Federal Debt Collection Practices Act (FDCPA) case where the Model Validation Notice (MVN) was undated, finding the plaintiff lacked standing because she did not allege a concrete injury.

The defendant collections firm sent the plaintiff an MVN that was undated. The itemization portion of the letter stated that as of August 18, 2020, she owed $4,596.33 and “[b]etween August 18, 2020, and today,” she was not charged any interest or fees and no credits had been applied, resulting in a balance due of $4,569.33. The plaintiff claimed that because the letter was undated and the itemization said “today,” she was confused about what she owed and questioned whether the debt was legitimate. She claimed:

  • The missing date made her uncertain about the letter’s legitimacy;
  • She “would have pursued a different course of action” but for the confusing nature of the letter, but did not say what exactly she would have done;
  • “[T]he funds [she] could have used to pay all or part of the alleged debt were spent elsewhere;”
  • Her “reliance on the [l]etter, and the resulting inaction/non-payment” led the defendant to disseminate negative information about her to credit reporting agencies; and
  • She “spent time and money in an effort to mitigate the risk of future financial and reputational harm” resulting from the information disseminated about her nonpayment, though she did not provide any detail.

The plaintiff alleged violations of 15 U.S.C. §§ 1692d, 1692e, 1692f, and 1692g on behalf of a class of individuals in Illinois who received a similar undated letter. The defendant moved to dismiss for lack of standing and failure to state a claim. The court found the plaintiff failed to allege a concrete injury and dismissed for lack of standing.

The court noted that an injury in fact requires actual harm or “appreciable risk of harm.” The plaintiff’s allegation that she did not spend money because the letter was confusing was not an actual injury under Seventh Circuit precedent, which requires a consumer to “act[] to her detriment[] on that confusion.” While the plaintiff alleged her confusion resulted in negative credit reporting, she did not allege any false reporting or that her creditworthiness was harmed because of her reliance on the letter. The court noted a concrete injury might be shown by a plaintiff who plausibly alleges that absent confusion she would have paid the debt and increased her creditworthiness, but that was not this case.

This is one more case supporting the position that it is not enough to allege a mere violation of the FDCPA, the plaintiff must be able to show some type of concrete harm to establish standing.

On August 8, 2019, in Lavallee v. Med-1 Solutions, LLC, No. 17-3244 (7th Cir. 2019), the Seventh Circuit Court of Appeals rejected a debt collector’s argument that its email, which contained only a “secure message” hyperlink, was a “communication” under the Fair Debt Collection Practices Act (FDCPA) because the email did not convey any information about the debt. The Court also found that the email did not adequately convey the required § 1692g disclosures because the debtor had to follow a series of links to access the notice located on the debt collector’s webpage.


This action arose out of a November 2015 telephone conversation between Beth Lavallee and Med-1 Solutions, LLC, regarding two medical debts referred to Med-1 for collection. Lavallee believed this telephone conversation was the “initial communication” with this debt collector. She filed a lawsuit contending Med-1 failed to provide Lavallee with certain statutorily required disclosures, including the § 1692g validation notice, during or within five days after the telephone conversation.

In discovery, Med-1 produced evidence it had emailed Lavallee regarding her two debts several months prior to the November 2015 telephone conversation. The emails contained a “secure message” hyperlink, directing Lavallee to a Med-1 vendor’s web server, which she could use to access information about her debt, including the § 1692g disclosures. Importantly, Lavallee, who denied receiving the emails, would have had to navigate through several links or buttons and download a .pdf document to gain access to the information and disclosures.

Med-1 argued these emails constituted the “initial communication” between the parties, so it was not required to provide Lavallee with the § 1692g disclosures following the November 2015 telephone conversation. Med-1 also claimed it provided the § 1692g disclosures in the emails because Lavallee had access to this information via the “secure message” hyperlink. On cross-motions for summary judgment, the Southern District of Indiana found the emails were ineffective methods of transmitting the § 1692g disclosures because there was no evidence Lavallee accessed the disclosures and the requirement that a debtor click a hyperlink to access the disclosures made receipt of the notices unlikely. Med-1 appealed the decision.

Standing Analysis

Before turning to the “email as a communication” issue, the Seventh Circuit analyzed Lavallee’s Article III standing to bring the lawsuit. The Court recognized it recently found a debtor lacked standing to bring a claim based on an alleged violation of § 1692g(a) in Casillas v. Madison Ave. Assocs., Inc., 926 F.3d 329, 333 (7th Cir. 2019). In Casillas, the debtor received an incomplete validation notice that failed to disclose that the debtor could only dispute the debt in writing. The Seventh Circuit found the debtor lacked standing because “‘there was no prospect that [Casillas] would have tried to exercise’ her statutory rights.” Because the debtor “never explained how [the] omission ‘harmed or posed any real risk of harm to her interests under the Act[,]'” the Seventh Court concluded the debtor’s suit was based on a “bare procedural violation” and therefore lacked standing.

The Court found Casillas factually distinguishable from the circumstances involving Lavallee. Unlike in Casillas, where the disclosure was provided but lacked the “proper procedure” for the debtor to exercise her dispute rights, Med-1 failed to provide Lavallee with the disclosure at all (following the November 2015 telephone call or in the emails). The Court found this lack of information especially material to Lavallee because Med-1 was actively collecting on the account when the emails were sent while providing the required disclosures could have delayed the collection actions until Med-1 obtained the proper verification. The Court found these facts provided sufficient “concreteness” to Lavallee’s alleged injury to provide her standing.

An Email Containing A “Secure Message” Is Not a “Communication” Under the FDCPA

Med-1 conceded it did not provide the necessary § 1692g disclosures during, or following, the November 2015 telephone call with Lavallee. However, Med-1 argued it was not required to do so because the call was not the “initial communication” between the parties; instead, the previously sent emails were the initial communications. Thus, the two main issues before the Court on appeal were: (1) did Med-1’s emails constitute “initial communications” under the FDCPA; and (2) if so, did the emails sufficiently apprise Lavallee of her § 1692g rights? The Court answered both queries in the negative.

With respect to the first issue, the Court reasoned that Med-1’s failure to include any information about Lavallee’s debts in the body of the emails precluded a finding that the emails were “communications” under the FDCPA. To qualify as a “communication” under the FDCPA, an oral or written message must “convey . . . information regarding a debt.” In other words, a message must “inform its reader that it . . . pertains to a debt.” The Court found Med-1’s emails, which only contained Med-1’s email address, name, and the “secure message” hyperlink, did not suggest the emails were about a debt or even that they were from a debt collector.

Even if the Emails Were Communications, Med-1 Still Violated § 1692g

The Court also found the emails deficient under § 1692g because the disclosures were not contained within the body of the emails. Indeed, Lavallee would have had to navigate through several additional steps after clicking the “secure message” hyperlink to access the requisite disclosures. As the Court stated, “we’ve already rejected the argument that a communication ‘contains’ the mandated disclosures when it merely provides a means to access them.” See Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 875 (7th Cir. 2000). Med-1 argued its emails were analogous to an envelope that enclosed a letter containing the § 1692g disclosures. The Court rejected this argument; instead finding Med-1’s emails were more like “a letter that provides nothing more than the address of a location where the message can be obtained.”

The Seventh Circuit’s reasoning is consistent with the Consumer Financial Protection Bureau’s released Proposed Rule on Debt Collection. As we previously reported, the CFPB has signaled it is open to allowing debt collectors to provide important disclosures via electronic means, including email. However, the Rule requires that a validation notice, if provided by email, must be included in the body of the email.

On October 31, the Eastern District of Pennsylvania issued an opinion in Guzman v. HOVG, LLC, No. 18-3013, (E.D. Pa. Oct. 31, 2018), denying a debt collector’s motion to dismiss a Fair Debt Collection Practices Act-based action because the validation notice included in the collection letter did not clearly state that the debtor can only dispute the debt via writing to the debt collector. The court further held the validation notice was overshadowed by language that repeatedly instructed the debtor to call the debt collector with any questions regarding the debt even though Third Circuit precedent requires all disputes to be made in writing.

The action arose out of a debt collection letter HOVG mailed to plaintiff Javier Guzman in 2017. Included on the front side of the letter were directions for Guzman to call HOVG if he was unable to pay the balance of the debt or if he had any questions. The front side of the letter also informed Guzman that the reverse side of the letter contained “important consumer information.” Contained on the reverse side of the letter was a validation notice concerning Guzman’s rights to dispute the debt or request validation. The language of the notice tracked that of Section 1692g of the FDCPA, which does not expressly require that disputes be made in writing.

Guzman argued that the letter’s validation notice was misleading because it did not notify him that he can only dispute his debt in writing. Although the notice included the disclosure that if Guzman decided to dispute his debt in writing he would be afforded certain protections under the FDCPA, the notice did not state that the only way he could dispute the debt was in writing. HOVG responded that its letter was not a violation of the FDCPA because it accurately tracked the language of the FDCPA regarding a debtor’s right to request validation or dispute a debt. Therefore, HOVG argued, Guzman’s complaint should be dismissed because HOVG’s letter was not misleading as a matter of law.

Relying on three prior Third Circuit decisions, Caprio v. Healthcare Revenue Recovery Grp., Graziano v. Harrison, and Wilson v. Quadramed Corp., the district court agreed with Guzman that the least sophisticated debtor would find the validation notice misleading because it could be read to have two or more different meanings, one of which is inaccurate. Specifically, the court found that the least sophisticated debtor could read the first sentence of the notice, which stated Guzman had the right to dispute the debt but did not disclose that any dispute had to be in writing, to mean that a debtor could dispute a debt either orally or in writing. The court further found that when the two remaining sentences of the notice were considered, both of which explicitly stated Guzman would be afforded certain rights or protections if he disputed the debt in writing, the omission of the writing requirement in the first sentence bolstered the interpretation that a debtor could dispute the debt orally. Under Third Circuit precedent, all disputes must be made in writing to be effective and therefore, the notice’s implication that Guzman could dispute the debt orally was inaccurate.

The court further found that the language directing Guzman to call HOVG with any questions overshadowed the validation notice because it also suggested that Guzman could orally dispute the debt. Finally, the court found that the front side of the letter would not properly alert the least sophisticated debtor that a disclosure pertaining to important legal rights was contained on the reverse side. As such, the front side of the letter “obscure[d] any notice that the validation notice provides.”

While there is currently a circuit split regarding whether the FDCPA requires all disputes to be made in writing, this court’s decision makes it clear that debt collectors operating in the Third Circuit should consider including clear language regarding how a debtor may dispute his debt. We will continue to monitor and report on developments in this area of the law.

On May 2, the U.S. District Court for the District of New Jersey granted a debt collector’s motion to dismiss a putative class action brought under the Fair Debt Collection Practices Act, holding the validation notice in the collection letter was not overshadowed or contradicted by other language in the letter.

The case is Reizner v. National Recoveries, Inc., No. 2:17-cv-2572 (D.N.J. May 2, 2018).  A copy of the opinion can be found here.

Plaintiff Alex Reizner incurred a $96,601.75 debt with the U.S. Department of Education.  The DOE assigned the debt to National Recoveries, Inc. on March 28, 2017.  That day, NRI mailed a collection letter to Reizner notifying him that it was collecting on his debt to the DOE.  In the second paragraph, in bold font, NRI included the following validation notice:

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, that you dispute the validity of this debt or any portion thereof, this office will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such verification or judgment.  Upon your written request within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.

The letter also provided a phone number, fax number, and email address to which complaints, questions, or concerns could be submitted.

Reizner filed a putative class action, alleging the validation notice did not meet the requirements of § 1692g(a) of the FDCPA.

In viewing the letter from the perspective of the least sophisticated debtor, the Court rejected Reizner’s argument that the validation notice was overshadowed or contradicted.  The Court found compelling that the validation notice appeared in the first two paragraphs, preceded NRI’s address and telephone number, did not expressly state that Reizner should call to contest the debt, and was in bold typeface and set off from the rest of the letter.  Additionally, nothing in the rest of the letter threatened or encouraged Reizner to waive his right to challenge the debt.

In analyzing the letter, the Court distinguished the body of case law holding other collection letters in violation of the FDCPA.  Those letters often encouraged the recipient to call the debt collector, which could confuse the least sophisticated consumer into believing they did not need to dispute the debt in writing, as required by the statute.  Moreover, those letters often included a threat of immediate legal action if the debtor did not pay, which would contradict the 30-day timeframe in the validation notice.  In others, the validation notice appeared on the back of the letter or was otherwise inconspicuously buried in the text.  NRI’s letter, according to the Court, suffered from none of these defects.

NRI escaped liability because it prominently featured its validation notice and did not otherwise contradict it with threats of imminent action or an encouragement to call.

This decision highlights the importance of debt collectors including a clear and uncontradicted validation notice in their collection letters.  They should evaluate their collection letters to minimize exposure to potential liability under the FDCPA.

The United States District Court for the Southern District of California recently dismissed all of a plaintiff’s claims in the putative class action Matthew Stuppiello v. Southwest Credit Systems, L.P.   The Court held that a validation notice does not violate the Fair Debt Collection Practices Act by including a request for payment “and explain[ing] that payment of the debt will allow the consumer to avoid further collection activity.”  The Court also ruled that a creditor is sufficiently identified in a validation notice under the FDCPA by its commonly-used acronym.

The Court granted summary judgment for the debt collector, Southwest Credit Systems, L.P., because the validation notice provided the statutory required disclosures, was not overshadowed or contradicted by the request for payment, and complied with the FDCPA by identifying the creditor, AT&T, by its commonly-used acronym.  Stuppiello also could not maintain a separate cause of action under the California Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) because his claims were premised on the same conduct as his FDCPA claims.  The Court explained that “[a] claim for violation of [the] Rosenthal Act . . . requires showing that a defendant violated any of several provisions of the FDCPA.”

Section 1692g(a) of the FDCPA lists specific disclosurestypically referred to as the validation notice – that a debt collector must make to the consumer in writing.  “The purpose of [this section’s] notice requirement is specifically to ensure that debt collectors give consumers adequate information concerning their legal rights.”  Furthermore, section 1692g prohibits collection activities and communications during the 30-day period the consumer has to respond to the notice that overshadow or contradict the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.”

Stuppiello argued that the validation notice provided by Southwest was overshadowed and contradicted by the statement:

We are willing to work with you, but you must contact our office promptly.  Avoid further collection activity by enclosing your payment with the tear-off coupon below, or by contacting us . . . to make payment arrangements on your account.

However, the Court explained that this statement does not overshadow or contradict the consumer’s rights to dispute the debt or request information about the creditor because “[t]he notice does not state that this is the only or exclusive way to avoid further collection activity . . . [i]t simply provides the consumer with an avenue for avoiding further collection activities.”  The Court also held that language requesting payment that is “in the same font as the surrounding text; [is] not emphasized in any other way; [is] in the nature of a request rather than a demand; and carrie[s] no sense of urgency” does not violate the FDCPA.  Specifically, the Court distinguished the word “promptly”, used in Southwest’s validation notice, from the words “immediately” or “now” by stating that Southwest’s validation notice did not carry a sense of urgency.

Stuppiello also claimed that Southwest should have included “transitional language” to explain “that if he disputes the debt and requests a verification of the debt in writing, [Southwest] must cease any collection activities.”  Even though section 1692g(b) states this rule, the Court explained that this rule is not one of section 1692g(a)’s enumerated disclosures.  Therefore, a debt collector is not required to include such “transitional language” in the validation notice.

Lastly, Stuppiello alleged that Southwest violated section 1692g(a) and 1692e by using an acronym to identify the creditor in the validation notice.  Stuppiello argued that the use of an acronym to identify a creditor is misleading because section 1692g(a) requires the “full and complete” name of the creditor.  One of section 1692g(a)’s enumerated disclosures is the requirement to name the creditor to whom the debt is owed.  The Court rejected Stuppiello’s interpretation of this section and instead agreed with courts that have held “it is sufficient to avoid confusion if the debt collector uses the full business name of the creditor, the name under which it usually transacts business, or a commonly-used acronym.”

Further discussion regarding validation notices can be found here.


A district court in the Seventh Circuit has denied a motion to dismiss filed by a collection attorney acting on behalf of a debt collector client, holding that the plaintiff in the case could pursue her claim based on the attorney’s failure to provide his own § 1692g validation notice in an initial communication, even though the attorney’s communication did contain a proper validation notice on the debt collector client’s behalf, and even though the debt collector client had already sent a prior, properly noticed communication.  The case is Sanchez v. Jackson, 2016 U.S. Dist. LEXIS 160776 (N.D. Ill. Nov. 21, 2016).

The court addressed several issues in reaching its ruling.  First, citing Heinz v. Jenkins, 514 U.S. 291 (1995), the court found that the plaintiff had easily alleged sufficient facts to conclude that the collection attorney was a debt collector subject to the FDCPA.  Noting Heinz’s ruling that the FDCPA “applies to attorneys who ‘regularly’ engage in consumer-debt-collection activity,” the Sanchez court also observed that the letter in question – sent by the attorney, not the debt collector client – included the bold disclaimer, “This communication is from a debt collector.”

The court then rejected Defendants’ argument that the attorney was merely acting as the debt collector’s agent, finding persuasive Ninth Circuit case law to the contrary (see Hernandez v. Williams, Zinman & Parham PC, 829 F.3d 1068 (9th Cir. 2016)), as well as Congress’ repeal of the FDCPA’s former exemption for lawyers “collecting a debt as an attorney on behalf of and in the name of the client.”  The court further found this consistent with the prior Seventh Circuit case of Marquez v. Weinstein, Pinson & Riley, P.C., 836 F.3d 808 (7th Cir. 2016), concluding that the defendant attorney was an “independent attorney agent” debt collector.

Because the debt collector client had previously sent its own validation notice in a separate communication, the Sanchez court then waded into the question of whether § 1692g’s validation notice requirement “applies only to the first debt collector to make contact with a debtor, or rather to each successive debt collector in line.”  Acknowledging a split of authority, the court noted that “[t]he trend, however, has been towards the latter,” and ultimately declined to “read a loophole into § 1692g that would exempt successive debt collectors from sending a validation notice.”

Having concluded that a validation notice was required in the attorney’s initial communication to the debtor, the court then considered whether the validation notice that was provided – on behalf of the client debt collector – was sufficient.  After a lengthy, “holistic reading” of § 1692g, the court ultimately concluded that it was not, finding instead that relieving the attorney of the obligation to provide his own validation notice “would introduce needless confusion to the debt verification process.”  As a result, the court found that “an attorney debt collector making notification must provide his own debt notice in addition to, or in lieu of, that of his client.”


On August 23, the U.S. District Court for the District of New Jersey dismissed an action against a collection agency on issues related to a validation notice.  In Rosa v. Encore Receivable Management, Inc. et al., No. 15-cv-02311, the plaintiff alleged that the collection agency sent letters to at least 50 people in New Jersey that deceived consumers into believing they could dispute their debt by either calling or writing when in fact a consumer could only make a legally effective dispute in writing.  The Fair Debt Collection Practices Act requires that within five days of a debt collector’s initial communication with a consumer, the debt collector must provide written disclosures that include a “validation notice.”  The validation notice must inform the debtor of how to obtain verification of the debt in the event of a dispute and that he or she has thirty days in which to do so.  Courts have established that this notice must be conveyed effectively to the debtor and cannot be overshadowed or contradicted by other language contained in the correspondence.  In this case, the plaintiff alleged that language requesting that the debtor call or write to the collection agency in the event payment has already been made overshadowed the validation notice and provided an alternative option to dispute a debt that was not in compliance with requirements under the FDCPA for validation notices. 

In reviewing the validation notice in this case, the district court applied the standard from a case decided in the Third Circuit, Caprio v. Healthcare Revenue Recovery Grp., 709 F.3d 142 (3d Cir. 2013).  In Caprio, the court held that a validation notice is overshadowed or contradicted where the collection correspondence would make the least sophisticated consumer uncertain as to his rights.  The letter sent by the debt collector in Caprio instructed the debtor to either call or write if the debtor believed he did not owe the amount listed as due, and the language about calling the debtor was in bold typeface.  With respect to the form of the letter, the circuit court found that the message basically instructed the least sophisticated debtor to either call or write in order to dispute the debt.  Regarding the letter’s substance, the circuit court found that the language drew extra attention to the legally deficient option of calling the debt collector because the words “please call” and the toll-free number were printed in bold on the front of the letter.  No such emphasis was included in the validation notice, which was relegated to the back of the letter.  In that case, the circuit court found that the letter could reasonably be read to have two or more different meanings, one of which is inaccurate. 

In this action, the district court followed the Third Circuit’s two-prong analysis in Caprio to review both the form and substance of the correspondence.  The court found that the language instructed the consumer to call the debt collector only if the bill had already been paid.  Therefore, the language did not appear to be an alternative way to dispute the underlying debt.  Furthermore, the validation notice appeared on the same side of the correspondence and in typeface of the same font, size, and color as the instruction to call the debt collector, resulting in no extra emphasis or textual prominence of the phone number or instruction to call the debt collector.  Therefore, with respect to the options of either calling to notify the debt collector that the debt has been paid or following the procedure for disputing the debt, the court found there was no emphasis of one option over the other, and the letter did not leave the least sophisticated consumer uncertain as to his or her rights under the FDCPA.

On January 23, 2014, the Seventh Circuit Court of Appeals affirmed the dismissal of four lawsuits against debt collectors that challenged validation notices under 1692g(a)(4).

The disputed provision of the letters involved the 30-day language notifying consumes of their right to dispute the debt, which letters read in relevant part:

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

The plaintiffs argued that this second sentence failed to adequately provide them with the notice required by 1692g(a)(4) because it omits the phrase “that the debt, or any portion thereof, is disputed,” and thus it directs the consumer to request verification instead of disputing the debt. which requires the debt collector to include 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.”

The Seventh Circuit disagreed with plaintiffs’ theory, holding that “a request to verify a debt constitutes a ‘dispute’ under the [FDCPA]” because “even if there is a literal distinction between requesting verification of a debt and disputing a debt, we treat a request for verification as a dispute within the meaning of the [FDCPA].”  

Further, in one of these four lawsuits, the Court held that the statement “we believe you want to pay your just debt” did not overshadow the required Section 1692 language and did not imply a judgment had already been obtained on the debt.

Validation notice challenges are a recurring source of litigation for companies under the FDCPA’s purview, and collection agencies should remain mindful of ensuring that notices are consistent with the prevailing interpretations of the FDCPA in each of the jurisdictions where collection activities are conducted. This is particularly true concerning whether Section 1692g(a)(3) permits a consumer to orally dispute the validity of a debt given the growing split among the courts of appeals following the Fourth Circuit’s decision in Clark v. Absolute Collection Servs, Inc. that we previously discussed.

Reversing a district court’s dismissal for failure to state a claim under the Fair Debt Collection Practices Act (“FDCPA”), the Second Circuit (“the Court”) ruled in Mizrachi v. Wilson, Elser, Moskowitz, Edelman & Dicker LP that a threat of suit without further notice included in the defendant’s debt collection letter may have overshadowed notice of the consumer’s validation rights also included in the letter.

The defendant, law firm Wilson, Elser, Moskowitz, Edelman & Dicker LP, sent plaintiff Jordan Mizrachi a debt collection letter stating the firm had been instructed by the creditor “to commence litigation against [Mizrachi] in order to collect” the debt, and warned, “THERE MAY BE NO FURTHER NOTICE OR DEMAND IN WRITING FROM [WILSON ELSER] PRIOR TO THE FILING OF SUIT.” The letter further informed Mizrachi that he could avoid legal consequences by “paying . . . now or making a suitable payment arrangement.” Pursuant to the FDCPA, the letter also included a notice explaining Mizrachi’s right to dispute the debt by demanding validation within 30 days. Mizrachi filed suit, claiming the letter violated the FDCPA because the apparent demand for immediate payment in combination with a threat of severe legal consequences overshadowed the validation notice. The district court dismissed the suit for failure to state a claim.

In a summary order released Thursday, November 5, 2020, the Second Circuit reversed the district court and held the complaint adequately alleged violations of the FDCPA. The Court noted the letter threatened a lawsuit, cataloged myriad consequences of such a suit, and suggested payment or arrangement of payment “now” was the sole means of avoiding suit. The Court rejected Wilson Elser’s argument that the word “now” only applied to payment and not the making of “a suitable payment arrangement,” concluding: “Even if the letter does not literally demand immediate payment, these warnings, combined with the all-caps admonition that no further notice might follow before a lawsuit is filed, could have created the misimpression that immediate payment is the consumer’s only means of avoiding a parade of collateral consequences, thereby overshadowing the consumer’s validation rights.” Furthermore, the letter contained no “transitional language” explaining that the demand for payment did not override the consumer’s validation rights, so the uncertainty created by the demand was left unmitigated. The letter failed to mention that the consumer’s demand for validation pauses the collection process, causing uncertainty not only as to whether the consumer could dispute the debt but also as to whether the consumer could withhold payment while doing so.

Creditors and debt collectors should note carefully the Second Circuit’s reasoning in this case and ensure that demand letters do not create a misimpression that immediate payment is the only means of avoiding a lawsuit. Such a misimpression may be avoided by including clear transitional language to explain that any demand for payment does not override the consumer’s validation rights – an important step the defendant in this case failed to take.