The inference of “an implicit threat” in a collection letter is now enough to be considered a violation of the Fair Debt Collection Practices Act, following a published opinion that was issued on Friday by the Eleventh Circuit Court of Appeals, which overturned a lower court’s dismissal of a lawsuit alleging a collector violated the FDCPA when attempting to collect on a time-barred debt.
A copy of the ruling in Holzman v. Malcolm Gerald & Associates and LVNV Funding, LLC can be accessed by clicking here.
LVNV purchased a charged-off debt from a creditor and placed it with Malcolm Gerard & Associates for collection. Malcolm sent the plaintiff a letter seeking to collect on the unpaid debt. The letter, in part, said:
Original Creditor: HSBC BANK NEVADA, N.A.
BALANCE DUE: $869.51
Charge Off Date: 07/31/2007
Principal Balance: $615.41
Interest Balance: $254.10
Please be advised that LVNV FUNDING LLC, the Current Creditor-Debt Purchaser has purchased the account referenced above. LVNV FUNDING LLC has placed your account with us for collection.
Malcolm S. Gerald and Associates wants to help you resolve your delinquent account with LVNV FUNDING LLC. We would like to offer you a balance reduction to 30% of the balance due listed above. We will be able to accept $260.85 as a reduced payment in full on your account. To take advantage of this offer, the reduced amount listed must be received in our office no later than 05/31/2015. We are not obligated to renew this offer.
This communication is from a debt collector. This is an attempt to collect a debt. Any information obtained will be used for this purpose.
Make check payable to: Malcolm S. Gerald and Associates, Inc. If you would like to pay online, you may do so athttps://msgpayments.com
The plaintiff filed a class-action lawsuit, alleging the letter violated Sections 1692e and 1692f of the FDCPA alleging it was “false, misleading, or deceptive” because it could lead someone to believe there were legal consequences to not making the payment, even though the statute of limitations had expired, and attempting to collect on the unpaid debt was an “unfair and unconscionable” practice. The defendant moved to have the suit dismissed, a motion that was granted by a District Court judge in Florida.
The Appeals Court reversed the lower court’s ruling on the 1692e claim and remanded the case back to the District Court, but affirmed the dismissal of the 1692f count.
Wading into the definitions and implications of word choices in collection letters, the panel of judges from the Eleventh Circuit put the word “resolve” and added it to a deadline to accept the offer a reduced payment and the warning that the offer may not be renewed and reached a decision that the letter “could plausibly deceive or mislead an unsophisticated consumer as to the legal status of the debt, even in the absence of an express threat of litigation.”
That is, by urging the debtor to “take advantage” of the offer, the letter might have caused an unsophisticated consumer to mistakenly believe that the debt was legally enforceable and that he had something to gain by accepting the offer, or to lose by declining it. In fact, the letter reinforces this impression by announcing a deadline, thus creating some urgency for the debtor to accept the offered terms by making payment. In this regard, the letter states that payment “must be received in our office no later than 5/31/2015” and that Defendants are “not obligated to renew” the offer. As Plaintiff points out, an unsophisticated reader might conclude from this language that he is being presented with an ultimatum, and that failure to make payment within the required time frame would result in negative consequences, such as legal action.
The defendants argued that what the court is asking of them is to provide legal advice to individuals when sending collection letters, by advising them as to the merits of a potential statute of limitations defense. But the panel called that defense “disingenuous.”
Many courts have ruled that using the word “settle” in a collection letter generated the impression of a lawsuit “settlement” and could lead an unsophisticated consumer into thinking that if the offer was not accepted, a lawsuit was on the horizon. So many companies have switched to using resolve instead. But that is now even a problem for the courts.