Law firm dunning letter prompts Fair Debt suit

A Virginia Beach law firm is facing a potential class action based on a collection letter sent to a borrower who defaulted on a home mortgage loan.

Richmond U.S. District Judge Henry E. Hudson refused to dismiss the homeowner’s suit alleging the law firm violated the Fair Debt Collection Practices Act.

The Richmond federal court’s Sept. 19 decision in DeCapri v. Law Offices of Shapiro Brown & Alt LLP (VLW 014-3-490) is the second suit in recent months in which multiple claims against a law firm survive dismissal under the federal consumer protection statute. Lawyers who do collections may want to check their notice letters to make sure the language complies with recent court rulings.

The Shapiro firm’s July 15, 2013, letter notified DeCapri the firm had been hired to initiate foreclosure proceedings on DeCapri’s home.

DeCapri alleged the letter made “multiple misleading and inaccurate disclosures” and violated the “cornerstone debt validation disclosure requirements under 15 U.S.C. § 1692g.”

This “cornerstone protection” requires debt collectors to send written “validation notices” to debtors informing them of their rights to dispute a debt and to request that a debt be verified.

Providing written notification seeking debt validation within 30 days after receipt of notice from the debt collector, may buy the consumer some time, as the debt collector must halt collection activity until the requested information is mailed to the consumer.

In DeCapri, the borrower faulted the firm for providing inconsistent disclosure statements.

The purported disclosure under 15 U.S.C. § 1692g(a)(3) first told the debtor he had to notify the firm within 30 days of receiving the letter that he disputed the debt. But the § 1692g(a)(4) disclosure said written communication to the debt collector was necessary in order to invoke consumer rights under the FDCPA.

Hudson pointed out that § 1692g(a)(3) permits consumers to dispute the validity of a debt orally, while § 1692g(a)(4) does not.
Hudson said that as far as he could tell, courts that have confronted the validation issue “have held that a debt collector’s failure to include the ‘in writing’ requirement violates subsection (a)(4).”

Judged by the “least sophisticated consumer” standard, the law firm letter in this case “obscures the import of communicating with [the debt collector] in writing,” as the disclosure of the consumer’s right to have the firm cease collection efforts pending debt verification is “buried on the second page and disclosed in an illogical sequence,” Hudson wrote.

The “potentially confusing and misleading elements” and sequence of presentation kept the law firm on the hook, under the court’s reasoning.

Making assumptions

The law firm letter also failed to make clear that it is the “debt collector” who will assume the debt is valid if the debtor does not dispute the debt, DeCapri alleged.

Hudson said omitting the qualifying phrase “by the debt collector” from the letter’s assertion of a right to assume the debt was valid violated § 1692g(a)(3) of the FDCPA. He denied the law firm’s motion to dismiss the claim.

Hudson cited a March opinion by another Richmond federal judge recognizing a similar claim, Fariasantos v. Rosenberg & Assocs. LLC (VLW 014-3-148).

The Shapiro law firm letter also could mislead a debtor into thinking that if he failed to dispute the debt within 30 days, he forfeited the right to challenge the debt.

“This is simply untrue, as the FDCPA makes disputing a debt optional and set no time limit on a consumer’s exercise of that option,” Hudson wrote.

Petersburg lawyer Dale W. Pittman represented DeCapri.

As the court opinion recognized, “this foreclosure mill’s purported validation notice letter was so convoluted, confusing, deceptive and inaccurate, it violated the FDCPA six ways to Sunday,” Pittman said.

In the past two years, Pittman has filed some dozen FDCPA suits challenging debt collectors’ failure to give accurate and truthful notice as required by the Act’s “cornerstone” provision governing debt validation. Pittman also represents the plaintiff in the Fariasantos case still pending in Richmond federal court.

Virginia Beach lawyer John C. Lynch, who represented the Shapiro firm, could not be reached for comment by press time.