On March 29, 2017, the U.S. Court of Appeals for the Second Circuit found the statement of “amount of debt due” insufficient under the Fair Debt Collection Practices Act (FDCPA). The opinion explains an FDCPA statement is insufficient if it omits: (1) information necessary to allow the least sophisticated consumer to determine the minimum amount owed at the time of the notice; (2) the amount required to resolve the debt at any given time in the future; and (3) an explanation of any fees and interest that will increase the balance.
The facts in Carlin v. Davidson Fink LLP were undisputed. In June 2013, the debt collector filed a foreclosure complaint seeking to collect on the debtor’s defaulted mortgage. Attached to the complaint was a “Notice Required by the [FDCPA]” stating that the amount of debt due was set forth in the complaint. The complaint, however, did not state this amount, and the debtor requested verification. On August 9, 2013, the debt collector sent a letter in response to the debtor’s verification request. The letter contained, among other things, a payoff statement (Payoff Statement), which was valid through August 14, 2013. The Payoff Statement included a total amount due of $205,261.79, but also stated that this amount may include “estimated fees, costs, additional payments, and/or escrow disbursements” not yet due, without specifying the nature of such additional amounts or how such additional amounts were calculated. The debtor contended that the Payoff Statement, by failing to provide such information, violated the FDPCA’s requirement that the amount of the debt due be provided within five days after an initial communication with the debtor for the collection of a debt. The debtor alternatively contended that the complaint (because it attached the “Notice Required by the [FDCPA]”), as well as the request for verification he sent to the servicer, were initial communications under the FDCPA.
The Court rejected the debtor’s claims that the complaint and request for verification were initial communications under the FDCPA. The Court held that communication in the form of a formal pleading in a civil action is not an initial communication and that the “exclusion naturally extends to exhibits attached to a complaint.” The Court also held that a communication initiated by a debtor to a debt collector does not qualify as an initial communication.
In addressing the alleged Payoff Statement shortcomings, the Court stated that a payoff statement is incomplete where it omits information allowing the least sophisticated consumer to determine the minimum amount owed at the time of the notice, the amount needed to resolve the debt at any given point in the future, and an explanation of any fees and interest that will cause the balance to increase. The Court found, due to the Payoff Statement’s failure to specify the nature of the additional amounts, or how such additional amounts were calculated, that it was impossible to determine whether the Payoff Statement accurately conveyed this information and whether the debt collector was entitled to such amounts. Based on these shortcomings, the Court held that the Payoff Statement failed to satisfy the FDCPA requirements and that the debtor had adequately alleged that the Payoff Statement failed to clearly state the amount of the debt. On this basis, the Court reversed the district court’s dismissal of the case, and remanded the case for further proceedings.
The Second Circuit’s March 29, 2017 opinion can be viewed here: