In an important ruling for debt collectors, the Ninth Circuit Court of Appeals held in Hernandez v. Williams, Docket No. 14-15672 (2016), that the failure of a debt collector (successor or otherwise) to send its own “validation notice” under 15 U.S.C. § 1692g(a) to a consumer violates the Fair Debt Collection Practices Act (“FDCPA”), specifically 15 U.S.C. § 1692g, even when a prior debt collector sent its own validation notice to the same person. In doing so, the Court reasoned that placing the requirement on any and all debt collectors involved was in line with the consumer-protection purpose of the FDCPA.
In Hernandez, Plaintiff brought a putative class action against a successor debt collector law firm, alleging that the law firm violated the FDCPA by sending a debt collection letter that lacked the disclosures required under § 1692g. The law firm had been retained by the original debt collector to assist in its collection efforts after its efforts were unsuccessful. Because the original debt collector had already sent the required disclosures under § 1692g to which the consumer failed to respond, the law firm did not send its own notice before collecting the debt.
Under § 1692g, “[w]ithin 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—
- the amount of the debt;
- the name of the creditor to whom the debt is owed;
- 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;
- 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 a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
- 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.”
The District Court granted summary judgment for the defendant, holding that the original debt collector had sent the “initial communication” to which § 1692g applied, and therefore the successor debt collector was not required to comply with that provision. The Ninth Circuit reversed the District Court’s judgment, holding that the provision applies independently to any and all debt collectors involved in the collection.
The defendant had argued that the phrase “the initial communication” in the provision referred only to the very first communication sent regarding the debt. The Ninth Circuit acknowledged that “in isolation” defendant’s interpretation is correct, however, the Ninth Circuit found that in the “broader structure of the [FDCPA],” the opposite interpretation was the correct one. Hernandez, at *15-16 (slip opinion). The Court found that the phrase “a debt collector” in the provision and “throughout the statute” was used “to impose obligations and restrictions on all debt collectors throughout the entire debt collection process.” Id. The Court also found that “[i]nterpreting ‘the initial communication’ to refer to the first communication by any debt collector is also more in keeping with the FDCPA’s declared purpose of protecting consumers from abusive debt collection practices,” including because “[e]ach time a debt is resold between collectors, information about the debt may be lost and misinformation introduced.” Id. at *24-25 (slip opinion).
One issue that the Court did not address was whether the defendant “was exempt from § 1692g(a)’s requirements because it was acting as an agent for [the original debt collector]” because it was not argued on appeal. Id. at *4, fn. 1 (slip opinion). Regardless of the merits of that argument, the most practical and compliant solution is for subsequent debt collectors to issue their own “validation notice” to avoid being sued and explaining to regulators why they do not issue their own notice. Moreover, it is likely that we will learn at the CFPB Field Hearing on July 28, 2016, that the CFPB will require such notices to be issued.