Debt Buyers, Collection Agencies: Be Clearer with Your Collection Letters

From the Department of Don’t Do That: Don’t put yourself at risk with unclear or confusing communications to consumers.

United Collection Bureau is being hit with a lawsuit because its collection letters were too confusing and did not explicitly identify the creditor.

You can read the most recent ruling on the case here: Joshua Walls v. United Collection Bureau Inc. UCB was contacted for our story, but was not available by press time.

A consumer received a debt collection letter from UCB in 2011. It identified Resurgent Capital Services as the “client,” LVNV Funding as the “current owner,” and Credit One Bank as both the “original merchant” and the “original creditor.”

The consumer claimed that UCB did not clearly state the name of his creditor, in violation of the Fair Debt Collection Practices Act. UCB, in this case, went above and beyond what was necessary — which was not helpful to them at all in regards to this particular episode.

UCB filed a motion to dismiss the lawsuit because it said that it had indeed listed the original creditor as the “original creditor” and the “current owner” (listed as LVNV) should be taken to mean “the creditor to whom the debt is owed.”

It’s that “should” that’s at the crux of this. It’s almost never a good idea to leave language up for interpretation.

The judge on the case, U.S. District Judge John Grady, agreed with the debtor: things could have been much clearer on the collection letter. Last week, he dismissed UCB’s motion to dismiss, paving the way for the case to move forward.

“Defendants assert repeatedly that the letter is not confusing because it accurately specifies that LVNV is the ‘current owner of the debt,’” the decision states. “First, LVNV is not so identified. The letter refers to LVNV simply as ‘current owner.’ Current owner of what?, a significant number of unsophisticated debtors might reasonably ask themselves.”

The case will resume soon, as a status hearing is scheduled for May 30. There is still a chance UCB will prevail here. The judge just didn’t like the firm’s arguments for early dismissal.

All of this hangs on the FDCPA, 15 USC 1692g § 809. Validation of debts:

(a) Within 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—

(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed; (emphasis added)
(3) 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;
(4) 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
(5) 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.

Complaints about confusing or obfuscating language in collection letters are easy for consumers to make. They have access to the FDCPA, too. They’re also equally easy for agencies to protect themselves against.

Be clear and explicit — but also concise. And, apparently, in the case of debt buyer collections, the phrase “creditor to whom the debt is owed” should be spelled out.

In the hopes of collecting more dollars, you may be putting your company at risk.