3rd Circuit: 2nd Collection Letter Within 30 Days of First Letter is "Overshadowing"

On August 30, 2017, the Court of Appeals for the Third Circuit issued an opinion determining that a second collection letter sent to a consumer within thirty days of an initial letter “overshadowed and contradicted the “Validation Notice” in the initial letter.  The case is Laniado v. Certified Credit & Collection Bureau, (Case No. 16-3430, U.S. Court of Appeals, Third District).

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

Background

In May of 2014, Laniado filed suit against Certified Credit & Collection Bureau (Certified) under the Fair Debt Collection Practices Act (FDCPA). The allegations in the suit implicate two letters sent by Certified: (1) a letter mailed to Laniado on or about February 13, 2014; and (2) a second letter mailed to Laniado on or about March 5, 2014. It was undisputed that the initial demand letter contained the 30-day Validation Notice required by 15 USC § 1692g.”  However, according to Laniado, the March 5, 2014 letter (the second letter) contained language that overshadowed and contradicted the “Validation Notice” in violation of 15 U.S.C. §§ 1692g and 1692e(10). 

This case has already had quite a life. Certified moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(6). In March of 2015, the District Court granted that motion. Laniado appealed. In January, 2016 the Court of Appeals vacated the District Court’s order, remanded the case and directed the District Court to consider the case of Caprio v. Healthcare Revenue Recovery Group, LLC, 709 F.3d 142 (3d Cir. 2013). On remand, in July of 2016, the District Court again granted Certified’s motion to dismiss. In August of 2016, Laniado again appealed. 

The Court of Appeals described the second letter that is the crux of the case: 

“Turning to the March 5, 2014 letter, we note that the letterhead listed (below the debt collector’s name) Certified Credit’s mailing address and a toll-free telephone number (“PO BOX 336 RARITAN, NJ 08869 TOLL FREE 888.750.9500”). The letterhead also identified Certified Credit’s website and fax number. The bottom part of the letter evidently consisted of a detachable slip (which Laniado was asked to enclose with her payment). The slip included Laniado’s name and address as well as information about the client, account number, date, file number, and “BALANCE DUE” (i.e., “216.50”). (Id.) At the very bottom of the page, the document stated the following: “CALL OUR 24 HOUR AUTOMATED CUSTOMER SERVICE 800-354-4744 OR VISIT OUR WEBSITE: WWW.CERTIFIEDCCB.COM.” (Id.) Where the return address would typically be located, Certified Credit’s letter set forth another toll-free telephone number (“TOLL FREE 800-253-2920”), the date, a subject-matter line, the patient’s name, the account number, and the date of service. (Id.) It also contained instructions (below the signature line and above the slip) to see the reverse side for important information, noted that Certified Credit accepted all major credit cards, and referred to Western Union and Quick Collect.

The body of the March 5, 2014 letter consisted of the following three paragraphs:

THE ABOVE ACCOUNT HAS BEEN PLACED WITH US FOR COLLECTION. SETTLEMENT IS EXPECTED TO BE MADE WITH THIS OFFICE. KINDLY REMIT PAYMENT IN FULL. 

SHOULD THERE BE ANY DISCREPANY PLEASE CALL TOLL FREE 800-253-2920 OR FOR OUR 24 HOUR AUTOMATED CUSTOMER SERVICE CALL 800-354-4744. 

THIS IS AN ATTEMPT TO COLLECT A DEBT BY A DEBT COLLECTOR AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.” 

The Court of Appeals Opinion 

In short, the Court of Appeals ruled that the second letter overshadowed and contradicted the Validation Notice in the first letter.

First of all the court determined that “whether language in a collection letter contradicts or overshadows the Validation Notice is a question of law, not a question of fact. 

The court then applied the “least sophisticated debtor” standard to ascertain whether the second letter overshadowed or contradicted the Validation Notice. The court wrote:

“Considering the substance of the March 5, 2014 letter that Certified Credit sent to Laniado, we find that it is materially indistinguishable from the letter at issue in Caprio. The debt collector’s letter in Caprio instructed “to call or write ‘if you feel you do not owe this amount.’” Id. at 151 (citation omitted). “At the very least, the ‘least sophisticated debtor’ could reasonably “feel” that he or she “do[es] not owe this amount” if he or she actually disputed the debt and its validity. If so, this “please call” language basically instructed such a debtor to call or write in order to dispute the debt itself.”

Likewise, the letter currently before us instructed Laniado to call either a toll-free telephone number or a 24-hour automated customer service number should there be any discrepancy. The least sophisticated debtor could reasonably believe there was a discrepancy if he or she “actually disputed the debt and its validity.” “If so, this ‘please call’ language basically instructed such a debtor to call . . . to dispute the debt itself. While he or she certainly could (and, in actuality, must) raise a debt dispute in writing, it is well established that a telephone call is not a legally effective alternative for disputing the debt.

Given the substance and form of the second letter, we conclude that it did overshadow and contradict the notice.” 

insideARM Perspective 

What should compliance professionals take from this case? More than anything, it should be clear that any letter sent within the thirty day validation period is high risk, at least in the Third Circuit. The risk/reward analysis when considering a second letter should persuade ARM companies to hold off on a second letter until the thirty day period has expired. 

This case has been ongoing since May of 2014. It has bounced back and forth between the District Court and the Court of Appeals twice. It is clear that the District Court judge and the Appellate Court judges are not on the same page on this issue. 

Finally, it should be noted that the opinion is listed as “Not Precedential.” The court notes: This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does not constitute binding precedent. Regardless of the non-precedential status, it is clear what the three judge panel of the Third Circuit thinks about this issue.