Does the FDCPA Permit a Consumer to Dispute the Validity of a Debt Orally?

By on February 4, 2014

On January 31, 2014, the United States Court of Appeals for the Fourth Circuit addressed the issue of whether a debt collection notice that advised consumers that they could only dispute the validity of their debt in writing violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.

In Clark v. Absolute Collection Service (Case No. 13-1151), consumers brought a putative class action under the FDCPA against Absolute Collection Service, Inc. (“ACS”).  As a result of their inability to pay for two debts at a health care facility, the consumers’ accounts were referred to ACS for collection.  ACS sent collection notices to the consumers with the following disclosure:

All portions of this claim shall be assumed valid unless disputed in writing within thirty (30) days; in which case, verification of the debt or a copy of the judgment will be provided to you.  If the original creditor is different from the above named creditor, the name of the original creditor will be provided upon request.

The consumers sued ACS in federal court alleging that the collection notice failed to comply with the FDCPA.  The consumers asserted that: (1) ACS violated their right to challenge the debt orally under section 1692g(a)(3) of the FDCPA because the collection notice stated that the debt would be “assumed valid unless disputed in writing;” and (2) ACS’s imposition of a writing requirement amounted to the use of “false representation or deceptive means to collect or attempt to collect any debt” in violation of the FDCPA.  ACS moved to dismiss the complaint for failure to state a claim and argued that section 1692g(a)(3) of the FDCPA contained an inherent writing requirement.  The district court agreed and dismissed the complaint.

On appeal, the United States Court of Appeals for the Fourth Circuit addressed whether section 1692g(a)(3) permits a consumer to dispute the validity of a debt orally, or whether it imposes a writing requirement.  The Fourth Circuit found that the FDCPA clearly defines communications between a debt and consumers.  Section 1692g(a)(4), 1692g(a)(5) and 1692g(b) explicitly require written communication, whereas section 1692g(a)(3) plainly does not.  Accepting that section 1692g(a)(3) does not contain an explicit writing requirement, ACS then argued that it must be read as imposing an inherent writing requirement or else the procedure would be inconsistent with the other debt dispute mechanisms under section 1692g.  However, the Fourth Circuit found this argument to be unpersuasive.

The Fourth Circuit concluded that section 1692g(a)(3) triggers statutory protections for consumers independent of the later sections 1692g(a)(4), 1692g(a)(5) and 1692g(b).  Furthermore, the Court concluded that under well-established principles of statutory construction, this Court must give effect, if possible, to every clause and word of a statute.    Hence, relying on the writing requirements in sections 1692g(a)(4), 1692g(a)(5) and 1692g(b) to give effect to section 1692g(a)(3) would violate these principles of statutory construction.

As a result, the Fourth Circuit has held that section 1692g(a)(3) permits consumers to dispute the validity of a debt orally, and it does not impose a writing requirement.   In the wake of this decision, debt collectors subject to the FDCPA would be well-advised to revisit and, if necessary, revise their notice language on their initial communications with consumers.

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