Ninth Circuit Narrows FDCPA Restrictions on Collection Letters

In Riggs v. Prober & Raphael, 2012 U.S. App. LEXIS 11631 (9th Cir. Cal. June 8, 2012), the Ninth Circuit clarified the scope of its restrictions on validation notices under the Fair Debt Collection Practices Act (“FDCPA”) and consequently under California’s Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”).   Both the FDCPA and the Rosenthal Act seek to eliminate abusive debt practices by debt collectors and provide protections for consumer debtors.   

A validation notice, also known as a collection letter, is part of the FDCPA’s protective mechanisms for consumer debtors.  Section 1692g(a) of the FDCPA requires that a debt collector send a consumer debtor a written validation notice within five days of the debt collector’s initial attempt to collect any debt.  This validation notice must include: (1) the amount of the debt, (2) the name of the creditor, (3) a statement that the consumer must dispute the validity of the debt within 30 days after receipt of the notice or there is a presumption that the debt is valid, (4) a statement that the consumer has the write to obtain verification of the debt if they notify the debt collector within 30 days, and (5) a statement that upon the consumer’s written request within 30 days the debt collector will provide the consumer with the original creditor’s name and address, if different from the current creditor.  The FDCPA also provides that “a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  15 U.S.C. § 1692(e).

In 2006, Riggs purchased a car under a retail installment contract and borrowed $13,361.21 of the purchase price from Fireside Bank.  She failed to make her monthly payments between September and December 2008 and Fireside Bank repossessed and sold the car and applied the proceeds to Riggs’s debt, leaving $8,191.89.  Fireside Bank hired Prober to collect the remaining money from Riggs, making him a debt collector under the FDCPA.  Prober sent a validation notice in April 2009, which included the provision: “Please be advised that if you notify Fireside Bank’s attorneys in writing within 30 days that all or part of your obligation or judgment to Fireside Bank is disputed, then Fireside Bank’s attorneys will mail to you a written verification of the obligation or judgment and the amounts owed to Fireside Bank.”  Riggs did not contact Prober and made no payment towards her debt.  She alleged that Prober’s validation notice violated the FDCPA because it required her to dispute her debt in writing and therefore misrepresented her right to dispute the debt in violation of 15 U.S.C. §§ 1692g(a)(3), 1692e, and 1692e(10).

The Court ruled in favor of Prober and found that the language of the collection letter implicitly required a written statement to dispute the debt, but did not explicitly do so and thus did not violate the FDCPA.  Riggs narrows and clarifies the Ninth Circut’s previous FDCPA decision Camacho v. Bridgeport Fin., Inc., 430 F.3d 1078, 1082 (9th Cir. 2005).  In Camacho, the Court ruled that a collection letter or validation letter violated the FDCPA because it stated that the debtor’s disputes “must be made in writing.”  However, in Riggs, the Court narrowed the scope of Camacho and held that a collection letter that implied that a debtor’s dispute must be in writing did violate the FDCPA even if an unsophisticated debtor may have some confusion over the letter.  The Court found that part of the potential confusion for debtors stemmed from ambiguity within the FDCPA itself so that it would be “untenable to read the FDCPA to prohibit validation notices that simply mimic the statute’s own shortcomings.”  Therefore, the Court held that a validation notice only violates Section 1692g(a)(3) of the FDCPA if it expressly requires a consumer to dispute his or her debt in writing.