Suing Debt Collectors – Illegal Demand for Payment During the Dispute Period

Consumers should realize that they have thirty days to dispute the debt pursuant to the FDCPA (15 U.S.C. 1692g).  The following is an excerpt from a brief I filed citing to the relevant law on the issue.  A debt collector may not demand payment from a consumer during the thirty days after the consumer receives the initial collection letter.

Defendant overshadowed Plaintiff’s Section 1692g rights when it demanded Plaintiff pay the debt immediately during the March 21, 2014 call.  Section 1692g(b) provides in relevant part:

Any collection activities and communication during the 30-day period [after the debt collector’s written notice under Section 1692g(a)] may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt….

15 U.S.C. § 1692g(b).

If a debt collector asserts that payment must be made within the dispute period without explaining that the consumer retains her dispute and verification rights, the collector has, by definition, overshadowed those rights.  Johnson v. Evans & Dixon, LLC, No. 4:13-cv-00671-NAB, at *7–16 (E.D. Mo. April 8, 2014) (attached as Exhibit 5); Glackin v. LTD Finan. Servs., L.P., No. 4:13–CV–00717 (CEJ), 2013 WL 3984520, at *2–3 (E.D. Mo. Aug. 1, 2013); McCafferty v. Schwartzkopf Law Office, Case No. 4:10 CV 1401RWS, 2011 WL 4916382, at *4 (E.D. Mo. Oct. 17, 2011); Ellis v. Solomon & Solomon, P.C., 591 F.3d 130 (2d Cir. 2010), cert. denied, 130 S. Ct. 3333 (2010); Robinson v. Transworld Sys. Inc., 876 F. Supp. 385, 391 (N.D.N.Y. 1995); Savino v. Computer Credit, Inc., 164 F.3d 81, 85 (2d Cir. 1998).  A collection communication overshadows the consumer’s validation right if it is made during the dispute and validation period and if “it fails to convey the validation information clearly and effectively and thereby makes the least sophisticated consumer uncertain as to her rights.”  Savino, 164 F.3d at 85.

The burden on the debt collector to comply with Section1692g is featherweight; if the collector simply waits thirty days before making a payment demand it will be in compliance with the statute.  Even if the debt collector wants to contact the consumer and make collection attempts within the thirty-day dispute period, it can comply with the statute by making it clear to the consumer that the consumer still retains their Section 1692g dispute and verification rights.  Defendant failed to do either.

In a recent case, Judge Jackson of this Court found that the defendant’s demand for creating payment arrangements within the dispute period overshadowed the consumer’s Section 1692g rights.  See Glackin, 2013 WL 3984520, at *3.  There, the plaintiff called the defendant to inquire about the status of her debt that the defendant was trying to collect.  Id. at *2.  The call occurred during the plaintiff’s thirty-day dispute period.  Id. at *2–3.  During the call, the defendant demanded that the plaintiff make payment arrangements before the expiration of the plaintiff’s dispute period.  Id.  Judge Jackson found that this payment demand overshadowed the plaintiff’s dispute and verification rights, reasoning that

[f]rom the standpoint of an unsophisticated consumer, defendant’s instruction to make a payment or arrange a payment plan on or before March 29, 2013 is confusing when compared to the 30–day dispute period, which would have run until April 10, 2013.  See Bartlett v. Heibl, 128 F.3d 497, 501 (7th Cir. 1997) (When a due date is set within the 30–day dispute period, the “net effect … turn[s] the required disclosure on its head.”).  For instance, if plaintiff made payment arrangements on or before March 29, 2013, it is unlikely that plaintiff, an unsophisticated consumer, would understand that she could still dispute the debt despite making such arrangements.

[A]n unsophisticated consumer would likely believe that setting up payment arrangements would act as a waiver of the right to dispute the debt.  Accordingly, the Court finds that defendant’s request for plaintiff to make a payment or make payment arrangements on or before March 29 improperly overshadowed and was inconsistent with the validation notice.

Id. at *3.

Likewise, Judge Baker’s very recent order in Johnson underscores the varied ways in which debt collectors overshadow a consumer’s dispute rights.  Johnson, Exhibit 5, at 14.  There, the consumer, Johnson, called the debt collector during her dispute period to inquire about the amount of the alleged debt.  Id. at 2.  During the call, the debt collector made repeated demands for payment of the debt.  Id.  For example, the debt collector stated that it “need[ed] to know if [Johnson] [was] interested in paying” the debt immediately.  Id.  The debt collector also requested that Johnson set up payment arrangements during the call to avoid the debt being forwarded to an attorney in the debt collector’s firm.  Id.  Finally, the debt collector flatly stated that the debt was “due immediately.”  Id. at 3.

Judge Baker found that these statements, made during Johnson’s dispute period, overshadowed her dispute rights.[1]  Id. at 5.  Judge Baker reasoned that although debt collectors are “perfectly free to demand payment” during the dispute period, such demands cannot “obscure” a consumer’s dispute rights.  Id. at 11 (emphasis omitted).  In particular, the court found that the debt collector’s statement that payment was “due immediately” would “certainly” be viewed by the unsophisticated consumer as a demand for immediate payment.  Id. at 14.  Even though the debt collector did not set a discrete deadline that truncated the dispute period, as in Glackin, the collector’s repeated requests for payment and its implied threat of suit indicated to the unsophisticated consumer that she must pay “immediately or very soon.”  Id. at 15.  As a result, the collector’s statements “were confusing, obscured Johnson’s rights under the FDCPA, and clouded the amount of time remaining for Johnson to dispute the debt.”  Id. at 16.[2]

Defendant overshadowed Plaintiff’s dispute rights by making demands for immediate payment within Plaintiff’s dispute period.  Plaintiff’s thirty-day dispute period as provided by Section 1692g(b) was ongoing at the time of the March 21, 2014 call for both debts at issue in this case.  SOF, ¶¶ 4–7.  In contravention of Plaintiff’s dispute rights, Defendant repeatedly stated during the March 21, 2014 call that the balance was due immediately and that Plaintiff should pay in full that day.  SOF, ¶ 8.  Specifically, Defendant stated that “once [the debts] get in collections, the balance is really due that day, so as soon as you can pay [the balance] would be the best.”  SOF, ¶ 9.  Further, Defendant stated that “the best thing for you to do is [pay] the full amount.”  SOF, ¶ 10.  Defendant also stated that Plaintiff could make arrangements during the call to pay the balance in two payments.  SOF, ¶ 11.  Finally, Defendant stated that Plaintiff should “try paying [the balance] off today” in order to avoid “continued action” with respect to the debts.  SOF, ¶ 12.  Defendant never explained to Plaintiff during the call that despite Defendant’s payment demands, Plaintiff retained her dispute and verification rights.  SOF, ¶ 13.

These demands for payment overshadowed Plaintiff’s dispute rights.  There was an explicit demand for immediate payment in full.  Such a direct request to pay within Plaintiff’s dispute period undeniably overshadows her dispute and verification rights.  See, e.g., Johnson, Exhibit 5, at 15–16; Glackin, 2013 WL 3984520, at *3.  As in Johnson, here Defendant’s repeated statement that the balance was due “today” would undeniably be viewed by the unsophisticated consumer as a demand for immediate payment.  Johnson, Exhibit 5, at 14.  Additionally, Defendant’s repeated demands for either immediate payment or payment arrangements, coupled with the threat of “continued action,” would obscure the unsophisticated consumer’s dispute rights and confuse her about the remaining time to dispute the debt.  Id. at 16.  Further, under Glackin, Defendant’s demand that Plaintiff set up payment arrangements immediately was inconsistent with her right to dispute the debt even if Plaintiff was not required to pay in full right away—such arrangements would be seen by the unsophisticated consumer as a “waiver” of her dispute rights.  Glackin, 2013 WL 3984520, at *3.

To an unsophisticated consumer, these payment demands within the dispute period were directly contrary to her rights under Section 1692g.  The unsophisticated consumer, viewing Defendant’s letters, would think that she had thirty days to gather information about the debt and dispute it, but Defendant’s demands in the call would lead her to believe that she either had no dispute rights or that Defendant would not honor those rights.

[1] Judge Baker noted that while the Eighth Circuit has not squarely addressed the issue, its prior opinions strongly suggest that applying the unsophisticated consumer standard is a question of law, not of fact.  Id. at 9–11.

[2] Judge Baker also observed that there is no requirement under Section 1692g(b) that the consumer dispute the debt before an overshadowing violation can occur.  Id. at 8.

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