Filing a collection lawsuit during the 30-day debt validation period can get a collector in hot water unless he is really careful. The United States Court of Appeals for the Second Circuit recently decided a case where Citibank hired a law firm to collect Janet Ellis’s alleged credit card debt. The law firm, Solomon & Solomon, promptly sent the FDCPA required notice advising her of the debt and informing her that she had 30 days in which to dispute its validity. Otherwise the firm would assume the debt was valid. So far, so good.
The Fair Debt Collection Practices Act requires that within five days of its initial communication with a consumer, a debt collector must send a written “validation notice” setting forth the consumer’s right to dispute the debt. The consumer then has 30 days in which to send a notice to the debt collector that he disputes. During this 30-day period, the debt collector generally is free to continue collection activities so long as they do not “overshadow” or are not “inconsistent” with the disclosures in the validation notice.
In this case, after the validation notice was sent, but still within the 30 days, Solomon & Solomon served Ellis with a collection lawsuit. The Connecticut State Marshal showed up at her home and served her with a summons stating “YOU ARE BEING SUED.” The summons then went on to instruct Ellis about the need to file an appearance and alert insurance carriers. In neither the validation notice nor the lawsuit did the law firm inform Ellis about the effect the suit had on her right to seek validation.
The Court ruled that without an explanation of the relationship between the suit and the notice, a consumer could reasonably conclude that being taken to court trumps any other out-of-court rights that she may have. The Court ruled that a validation notice is overshadowed when the consumer is served with a lawsuit that does not clarify that the suit has no effect on the information contained in the validation notice. To be on the safe side, the Court suggested that debt collectors who sue during the notice period provide an explanation of the lawsuit’s impact in both the validation notice and in the summons and complaint. It should clarify that the commencement of the lawsuit does not trump the rights contained in the validation notice. Ellis v. Solomon and Solomon PC, 591 F.3d 130 (2d Cir. 2010).
Here is possible clarifying language which is drawn from another case:
This advice pertains to your dealings with me as a debt collector. It does not affect your dealings with the court, and in particular it does not change the time at which you must answer the complaint. The summons is a command from the court, not from me, and you must follow its instructions even if you dispute the validity or amount of the debt. The advice in this letter also does not affect my relations with the court. As a lawyer, I may file papers in the suit according to the court’s rules and the judge’s instructions.
Thomas v. Law Firm of Simpson & Cybak, 392 F.3d 914, 919-20 (7th Cir. 2004).