Judge Rules for Debt Collector; Oral Disputes Do Not Trigger Cessation of Collection Efforts Under FDCPA

A district judge in Georgia last week sided with a debt collector in an FDCPA suit where the consumer plaintiff claimed violations because collection efforts continued after she orally disputed a debt and did not dispute the debt in writing for seven months. The ruling, while positive for the ARM company, further confuses the oral vs. written dispute issue.

In Hinkle v. Midland Credit Management, the defendant collection agency was attempting to collect a T-Mobile debt which its parent company, Encore Capital Group, owned. In December 2011, the collector sent a letter to the consumer seeking a resolution the account, which had an outstanding balance of approximately $300. Defendants offered to settle the account for approximately $270.

The letter contained disclosures including the current balance, amount due, original creditor, current owner and servicer, and a validation notice that stated disputes should be made in writing within 30 days of receiving the notice.

Hinkle orally disputed the debt in a call six days later. But Midland continued to call Hinkle and continued to report the debt to credit reporting agencies. The company placed five collection calls over the next seven months.

In July 2012, Hinkle sent a letter to Midland disputing the debt and informing the company that she was filing an FDCPA lawsuit. Shortly after the verbal dispute, Midland did change the CRA reporting on the account to “unpaid and disputed.”

The suit claimed that Midland violated FDCPA by not including the proper validation notice in the initial letter. Also, since she had disputed the debt, the five calls placed by the company were barred by the statute. She also included FCRA claims for continuing to report the debt.

District Judge Dudley Bowen, Jr. carefully parsed the validation notice and wrote that “The language in the letter is nearly identical to the language in the statute. Thus, there is no question that Defendants provided Plaintiff a proper validation notice. Defendants are therefore entitled to judgment as a matter of law on Plaintiff’s [§ 1692g(a)] claim.”

Turning attention to the oral vs. written dispute, Dudley found that “Plaintiff’s oral notice of dispute did not trigger a statutory obligation for Defendants to cease their collection efforts,” relying on a Texas District Court case from 2011.

The judge granted Midland’s motion for summary judgment.

The ruling is the latest in a long series of extremely contradictory rulings on oral vs. written disputes.

Early last year, the Fourth Circuit held that language in validation notices requiring disputes to be in writing, similar to what Midland provided, did in fact violate the FDCPA and that consumers should have the right to orally dispute debts. That case used as precedent a similar 2013 case in the Second Circuit, which in turn used a decision from the Ninth Circuit.

But in 1991, the Third Circuit ruled the opposite way, writing that a debtor must send a written statement to effectively dispute a debt.

Interestingly, the Georgia court does not fall into any of the above circuits (it’s in the Eleventh) similar to the Texas district case cited by Dudley (in the Fifth).

So for the time being, validation notice language requirements vary on a circuit-by-circuit basis. That is not likely to change until a Supreme Court decision, or more likely, the CFPB passes nationwide regulations mandating validation language.