Circuit Court Rules Dispute in Writing Not Needed to Sue Under FDCPA

The Fourth Circuit Court of Appeals recently upheld a lower court ruling that found a debt collection agency in violation of the FDCPA for continuing to call a debtor after the bill had been paid to the original creditor. The agency argued that it never received a dispute in writing after the debt was paid.

Russell v. Absolute Collection Services was decided on August 15 by a three-judge panel in the 4^th Circuit. The opinion is precedential.

The particulars of the case stretch all the way back to late 2008 when Russell defaulted on a medical debt of $501. After being initially contacted by Absolute Collection Services in December 2008, the plaintiff promptly resolved the debt with the medical office that rendered services. Less than 30 days elapsed between the first contact and the debt being marked as paid in full by the medical office.

But a month later, Absolute again contacted Russell regarding the debt, this time by phone. She told the collector that the debt had been paid and the check had cleared. The collector noted the payment. Later that month, Absolute sent another letter demanding payment.

Upon returning the call, Russell was advised to send proof of payment to Absolute but did not do so. After another communication in which Absolute threatened to report the debt to credit bureaus, Russell filed a complaint with the BBB. Absolute, following up on the BBB complaint, contacted their client and confirmed that the debt had, in fact, been settled. The firm ceased collection efforts at that point.

Russell then sued Absolute under the FDCPA (1692e(8)) arguing that by threatening to report the debt to credit bureaus amounted to communicating “credit information which is known or which should be known to be false.”

But Absolute said that it couldn’t have known about the status of the debt because 1) Russell never communicated that it had been paid in writing, and 2) it never received an update from the client until it proactively contacted the medical office after the BBB complaint.

A district judge sided with Russell in her motion for judgment on a matter of law during a jury trial awarding her $1,000 under the FDCPA, $6,000 under the North Carolina Collection Agency Act, and $30,501 in actual damages. Absolute appealed to the Fourth Circuit.

The panel unanimously affirmed the lower court’s ruling in its entirety. The judges said that Russell effectively communicated the accurate status of the debt to Absolute and there was no need to dispute the debt in writing.

“Russell had no reason to challenge the validity of the debt within the first thirty days of receiving the initial collection letter because the debt was indeed valid,” the judges noted in their opinion. “Instead, she paid the bill and notified Absolute Collection of her payment. It would be inconsistent with the FDCPA’s remedial scheme to hold that a plaintiff’s ability to state a claim under the FDCPA is extinguished because the plaintiff failed to dispute the validity of the debt when he or she had no reason to seek validation in the first place.”

The case is somewhat similar to another recent Fourth Circuit decision also involving Absolute. While that case, Clark et al. v. Absolute Collection Service, involved language in a collection letter, it was the demand that any dispute be made in writing that turned the panel in favor of the plaintiffs.

In line with the Second and Ninth Circuits, the Fourth Circuit found that the FDCPA clearly defines communications between a debt collector and consumers. Sections 1692g(a)(4), 1692g(a)(5), and 1692g(b) explicitly require written communication, whereas section 1692g(a)(3) plainly does not.