Court Rules Sending Validation Through CFPB Portal Does Not Satisfy FDCPA

A federal judge in Texas has ruled that a debt collector does not comply with the requirements of the Fair Debt Collection Practices Act (FDCPA) when responding to a consumer’s request for verification of a debt by uploading a letter via the Consumer Financial Protection Bureau (CFPB) online portal.  The case is Ghanta v. Immediate Credit Recoveries, Inc. (Case No. 3:16-cv-00573, U.S. District Court, Northern District of TX).

A copy of the court’s Order can be found here. 

Background

Emory University hired Immediate Credit Recovery, Inc. (ICR) to collect tuition expenses allegedly owed by Plaintiff. ICR sent initial correspondence to Plaintiff on June 11, 2015. The letter included the following language: 

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt, or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice that you dispute the validity of this debt or any portion thereof, this office will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification.

(Editor’s note: Emphasis was added by the court in its Order.)

In response, plaintiff emailed correspondence to ICR on June 22, 2015, disputing the debt. Plaintiff sent a second request for debt verification to ICR via the CFPB online portal on November 9, 2015. ICR uploaded a letter to the CFPB portal on November 9, 2015, stating that its client, Emory University, indicated plaintiff “does in fact owe the balance” and “is responsible for th[e] bill.” 

ICR reinitiated collection efforts against plaintiff by sending a collection letter on December 14, 2015. Plaintiff filed a lawsuit claiming that the December letter violates the FDCPA because ICR failed to mail him verification of the debt before reinitiating collection efforts. 

ICR argued that the letter electronically uploaded to the CFPB portal (the portal letter) constitutes sufficient debt verification, rendering the subsequent collection efforts lawful. But plaintiff claims the portal letter is insufficient to satisfy defendant’s debt verification obligation because it (1) was not mailed to plaintiff, and (2) does not contain enough information to allow him to sufficiently dispute the debt. 

Both parties moved for summary judgment.

Editor’s note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. 

The Court’s Decision

The case was heard by the Honorable Reed O’Connor, United States District Court Judge. 

Judge O’Connor wrote: 

“The FDCPA provides that if a consumer notifies the debt collector within 30 days of receiving initial communication that the debt, or any portion thereof, is disputed, the debt collector must “cease collection of the debt” until it “obtains verification of the debt . . . and a copy of such verification . . . is mailed to the consumer by the debt collector.” 15 U.S.C. § 1692g(b). 

ICR first argued that the plaintiff did not have the requisite standing to bring the case because Plaintiff did not establish a “concrete” injury as required under Spokeo v. Robins, 136 S. Ct. 1540, (2016). Judge O’Connor quickly dismissed that argument by deciding that plaintiff’s alleged FDCPA violation is sufficient to establish that he suffered injury from the reinitiation of collection efforts and grant standing to maintain suit.

Judge O’Connor then determined that the dispute in this case centers on whether ICR failed to properly verify the disputed debt and mail a copy of the verification to plaintiff before reinitiating collection efforts—thus violating § 1692g(b) of the FDCPA. 

Failure to Mail Debt Verification 

Judge O’Connor wrote: 

“Because Plaintiff disputed his debt in writing within 30 days of Defendant’s June 22, 2015 initial collection letter, Defendant was required under the FDCPA to cease collection efforts until it obtained verification of the debt and mailed a copy to Plaintiff. 15 U.S.C. § 1692g(b). Defendant (ICR) urges this Court to impose a contemporary view of the FDCPA and read “mailed” as a requirement to merely “send” verification of the debt in any way practical. 

While modes of communication have certainly changed since the FDCPA was enacted in 1977, Congress alone possesses the power to amend the statute’s requirements as this Court is not empowered to engage in interpretive updating. 

Defendant argues it has complied with the FDCPA’s purpose, but the Court must begin with the text of the statute, not its spirit, to determine what it requires. Section 1692g unambiguously requires the debt collector to send the consumer verification of the debt by mail. 15 U.S.C. § 1692g(b). Defendant’s electronic upload of the portal letter falls outside the FDCPA’s minimum requirement that the debt verification be “mailed” to the consumer. 

When the text of a statute is plain and unambiguous, as is the FDCPA’s requirement that the debt collector mail debt verification to the consumer, the Court must enforce the language according to its terms. 

Defendant was unable to cite, and the Court is unaware of, a case finding the debt collector satisfied its statutory duty to mail the consumer verification of the debt by electronically uploading a letter to the CFPB portal.” 

Insufficient Debt Verification

Judge O’Connor also agreed with the Plaintiff on this issue. He wrote: 

“Even if this Court were to find that Defendant’s electronic debt verification addressed to CFPB satisfied the FDCPA’s requirement that it be “mailed” to the consumer, the portal letter does not contain enough information to constitute debt verification. 

The FDCPA does not define what constitutes sufficient debt verification, and the Fifth Circuit has not directly addressed the issue. Accordingly, verification will carry its ordinary meaning. Verification is defined as an “acknowledgment” or “recognition of something as being factual.” See Black’s Law Dictionary (defining “verification” as “acknowledgment” and “acknowledgment” as “recognition of something as being factual”) (10th ed. 2014); see also Webster’s Unabridged Third New International Dictionary (1986) (defining “verification” as “the act or process of verifying or the state of being verified: the authentication of truth or accuracy by such means as facts, statements, citations, measurements, or attendant circumstances”). This Court finds that the dictionary definitions of verification shed limited light on the sufficiency or insufficiency of Defendant’s portal letter. 

Circuit courts that have addressed the FDCPA’s verification requirement found that it requires, at a minimum, enough information to allow the consumer to “sufficiently dispute the payment obligation.” Debt verification under the FDCPA usually requires “an itemized accounting detailing the transactions in an account that have led to the debt” because it allows the consumer to determine if he or she actually owes the debt. 

Defendant’s portal letter fails because it contained no information for Plaintiff to determine if he had already paid the alleged debt or Defendant was attempting to collect from the wrong consumer. Defendant’s portal letter did not indicate the amount of the debt, when the alleged debt accrued, or any description of the transaction resulting in the alleged debt. The portal letter merely responded to the CFPB by reiterating the creditor’s belief that Plaintiff “does in fact owe the balance,” which does not provide enough information for Plaintiff to adequately dispute the debt. 

The portal letter at issue here stated that the creditor, Emory University, confirmed “Mr. Ghanta does in fact owe the balance. Mr. Ghanta did not graduate and felt he should not have to pay [Emory]. He is responsible for the bill.” The Court finds that without further details as to how and when the debt accrued, the portal letter fails to provide sufficient information for Plaintiff to adequately dispute the debt.” 

insideARM Perspective

This case should be reviewed by compliance departments at every debt collector. It discusses two issues that should be front and center when responding to verification requests. 

First, the FDCPA requires mailing of the verification. Section 1692g(b) of the FDCPA provides in relevant part: 

“If the consumer notifies the debt collector in writing within . . . [thirty days] that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of the judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.” 

As much as the industry would like to increase the use of electronic communications with consumers (a preferred method of communication for many consumers), the 1977 statute does not, on its face, allow that alternative. 

Second, the question of what is necessary to properly respond to a validation request is open to interpretation. Industry best practices would say that more information and detail is better than less information and detail. At a minimum the response should provide detail on “the amount of the debt, when the alleged debt accrued, or any description of the transaction resulting in the alleged debt.” Copies of statements, charges and other critical information should also be included.