A recent case out of Connecticut waves a yellow flag at debt collectors who file lawsuits within 30 days of sending a consumer a validation notice under the Fair Debt Collections Practices Act (“FDCPA”). On January 13, 2010, the Second Circuit Court of Appeals held that a law firm and two of its lawyers violated the FDCPA, 15 U.S.C. § 1692 et. seq., when it filed suit against a debtor during the 30-day validation period without providing additional explanation to the debtor about how the lawsuit affected the notice. Ellis v. Solomon and Solomon, P.C., et. al., No. 09-1247-cv (2d Cir. Jan. 13, 2010).
Under Section 1692g(a) of the FDCPA, a debt collector must send a written communication to a consumer within five days of initial contact which alerts the consumer to her right to dispute the debt. The consumer has 30 days to do so. See 15 U.S.C. § 1692g(a), (b). Meanwhile, a debt collector can continue to collect the debt but its methods must not overshadow or be inconsistent with the disclosures in the notice. Id. at § 1692g(b). In the Second Circuit, whether the methods are legal are viewed under the “least sophisticated consumer” standard: If the additional methods of collection “would make the least sophisticated consumer uncertain as to her rights”, they are improper. Ellis, slip op. at 8 – 9 (citing Greco v. Trauner, Cohen & Thomas, LLP, 412 F.3d 360, 363 (2d Cir. 2005)).
In Ellis, Defendants sent the Plaintiff-consumer a validation notice, and two weeks later served her with summons and a complaint. In affirming the district court’s award of summary judgment to the plaintiff, the Second Circuit held that the validation notice was “overshadowed” where a debt collector serves a consumer with a summons and complaint during the validation period without explaining that the lawsuit has no effect on the information conveyed in the validation notice. Ellis, slip op. at 11. The Circuit Court held that even though collection agents have a right to continue their efforts to collect debts during the validation period under the FDCPA, if they do not wait until the end of the 30-day period they must explain the lawsuit’s lack of impact on the disclosures to the consumer. Id. at 11-12. The Circuit Court advised that this explanation should be included in the validation notice, or in a notice provided with the summons and complaint, or that the “best practice” would be to include the explanation in both. Id. at 12.