Agencies seek to maintain Congress’s vision of applying the validation process to each subsequent collector of a consumer debt

By John Adams

On August 20, 2014, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) filed a joint amicus brief in an appeal of a Fair Debt Collection Practices Act (FDCPA) case in the United State Court of Appeals for the Ninth Circuit. The case, Maria Hernandez v. William, Zinman & Parham, P.C., focuses on the FDCPA’s debt validation notice process well known to the consumer law bar and concerns the interpretation of which communication qualifies as a debt collector’s “initial communication” under 15 U.S.C. § 1692g(a). According to the agencies, the Ninth Circuit has not previously defined the phrase.

Background

In cross motions for summary judgment filed in the U.S. District Court for the District of Arizona, the issue became whether the statutory language of § 1692g(a) obligated the defendant (debt collector) to comply with the requirements of the validation notice process[1] if the defendant’s communication to the plaintiff was not the initial communication that the plaintiff received about the alleged debt. The defendant’s argument, which the district court adopted, reasoned that since an earlier, initial debt collector’s communication to plaintiff activated the §1692g requirements, defendant’s communication—sent as a subsequent debt collector—was not subject to the validation notice requirements. The district court reached this conclusion by determining that the statutory language suggested that there would be only a single initial communication, and that subsequent debt collectors—by their later-in-time status unable to be considered the sender of the initial communication to the consumer about the debt—were not responsible for sending the statutory validation notice.

In granting summary judgment for defendant, the district court’s plain text interpretation of the section anticipates only one initial communication, thereby releasing subsequent debt collectors from the requirements of the debt validation process. This has obvious adverse implications for consumers attempting to challenge the validity of debts which may have been sold multiple times before collection begins in earnest.

The Bureau and Commission’s argument for the reversal of the district court takes a two-prong approach, beginning with a textual analysis that emphasizes the consistently broad meaning given to “a debt collector” and the absence of an “initial” limitation that the district court mistaken inserted into the broader phrase that Congress actually used in the statute. The agencies seek to clarify that statute’s use of the phrase “the initial communication” has been read to mean each debt collector’s intial communicaiton with a consumer, and that interpretation is the most likely one in light of the legislative history that demonstrates that Congress’s purpose for enacting §1692g was to end the frustrating issue of debt collectors collecting the wrong payments from incorrect individuals.

Lastly, the agencies’ brief reminds the Court that as the federal agencies responsible for enforcing the FDCPA, their reasonable construction of the statute deserves great weight in the Court’s ultimate interpretation of the statutory language.

The Bureau and Commission’s Joint Amicus Brief

The District Court’s Memorandum of Decision and Order

[1] The validation notice process under 15 U.S.C. §1692g(a) involves the following:

Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—(1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement 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; (4) 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 the judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.