Under FDCPA, a lawsuit is ‘communication’

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“They were doing what lawyers traditionally do — filing a lawsuit in state court on behalf of their client. To hold that they must include in their court pleadings all the notice/validation, etc. information required by the FDCPA seems very odd indeed.” Hon. Terence T. Evans in dissent

A law firm’s filing a summons and complaint on behalf of a creditor after a debtor missed payment on an installment contract was an “initial communication” that triggered obligations to inform the debtor of his validation rights under the FDCPA, a divided Seventh Circuit panel held on Jan. 13.

In 1998, Frank Thomas purchased a Chevrolet Blazer under an installment contract immediately assigned to GMAC. In 2000, he received a default letter from GMAC informing him that his payment on the vehicle was past due.

Two months later, GMAC, through its attorneys, Simpson & Cybak (Simpson), sued Thomas in Illinois state court to recover the vehicle. The complaint included a statement that, “[p]ursuant to the [FDCPA], you are advised that this law firm is a debt collector attempting to collect a debt, and any information obtained will be used for that purpose.” The summons included similar language.

Thomas then brought suit in Illinois federal court against GMAC and Simpson under the Fair Debt Collection Practices Act (FDCPA), claiming that neither party sent him a debt validation notice advising him of his rights as a debtor, pursuant to 15 U.S.C. 1692g(a).

The district court granted both defendants’ motions to dismiss, and Thomas appealed. The Seventh Circuit affirmed the dismissal of the suit against GMAC, but reversed as to Simpson, in a decision written by Judge Ann Claire Williams and joined by Judge Ilana D. Rovner. Judge Terence T. Evans dissented.

The Statute

Section 1692g(a) requires that, within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector must send the debtor a written validation notice containing certain information. The notice must inform the debtor of the amount of the debt, the name of the creditor, and that the debt will be assumed valid if the debtor does not dispute its validity within 30 days of the receipt of the notice.

Furthermore, the notice must include a statement that, if the debtor disputes the debt within 30 days of the notice, the debt collector will obtain and send the debtor verification of the debt and, upon written request, send the debtor the name and address of the current creditor, if different from the original creditor.

A “communication” is defined as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” 15 U.S.C. 1692a(2).

GMAC

The court agreed with the district court that GMAC was not required to notify Thomas of these debt validation rights, because it is not a “debt collector” under the act, but a “creditor.”

The court reasoned, “a contrary position could create significant unintended obligations for debt collectors. Debt collectors would be responsible for notifying debtors of their debt validation rights within five days of an ‘initial communication’ that the debt collector did not send or for one communicated before the creditor retained the debt collector. Nothing in the FDCPA suggests that Congress intended creditors’ unilateral actions to obligate debt collectors to inform debtors of their rights; rather, the Act is intended to deter debt collectors from employing their own abusive tactics. Because we decide that GMAC’s letter to Thomas does not constitute an initial communication for FDCPA purposes, no obligation to inform Thomas of his validation rights arose upon the sending of the letter.”

Law Firm

However, the court held that Simpson’s filing of the summons and complaint in state court was an “initial communication” within the meaning of the FDCPA, triggering the obligation to notify Thomas of his validation rights within five days.

The court reasoned, “When Simpson filed the summons and complaint, it conveyed information regarding Thomas’s debt. The plain language of a statute ‘should be conclusive except in the “rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.”’ This is not such a case; rather, viewing the filing of a summons and a complaint as an ‘initial communication’ is consistent with the drafter’s intent (cites and footnote omitted).”

The court added that the statute’s purpose of protecting consumers from unfair, harassing, and deceptive debt collection practices is furthered by its interpretation, by helping ensure that debtors are informed about their validation rights and that debt collectors will investigate claims before initiating litigation to collect debts.

Noting that the FDCPA affords greater protections than state courts by subjecting violators to civil liability, the court found Simpson’s argument that state courts offer sufficient protections to guard against abusive debt collection tactics during litigation to be unpersuasive.

The court relied on the U.S. Supreme Court’s decision in Heintz v. Jenkins, 514 U.S. 291, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995), in which the Court held that the FDCPA applies to lawyers who regularly try to collect debts through litigation.

The court acknowledged that Heintz did not address whether initiating a lawsuit fell within the definition of a “communication,” but concluded “its opinion suggests that concerns about interfering with litigation are not sufficient to warrant ignoring the statute’s plain language. Defendants’ argument is further belied by the fact that the FDCPA does not require debt collectors to notify debtors of their rights in those communications. Instead, debt collectors have the option of notifying debtors within five days of the initial communication.”

Pending Legislation

The court also acknowledged that legislation pending in Congress would specifically exclude formal pleadings from the definition of “communication.”

Nevertheless, the court concluded that this supported its interpretation, stating, “the proposed amendment may be viewed as an indication that Congress considered the FDCPA’s current definition of ‘communication’ to include the filing of a summons and complaint.”

Accordingly, the court reversed the dismissal of Simpson from the suit.

The Dissent

Judge Evans dissented, asserting, “I agree that the FDCPA’s definition of “communication” could be read to encompass the filing of a summons and complaint by a lawyer. But I don’t think it should be read that way. To do so, I submit, leads to a result that is not consistent with the purpose of the FDCPA, nor with the traditional view of what lawyers must do when they take a pivotal step in that relationship — instituting formal legal proceedings in a court of law to collect a debt (emphasis in original).”

Although acknowledging that a lawyer who sends dunning letters to debtors is a debt collector subject to the FDCPA, Evans added, “in this case, the lawyers were not sending dunning ‘communications’ to Mr. Thomas. Instead, they were doing what lawyers traditionally do — filing a lawsuit in state court on behalf of their client. To hold that they must include in their court pleadings all the notice/validation, etc. information required by the FDCPA seems very odd indeed.”

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Adopting the reasoning of Judge Moody in McKnight v. Benitez, 176 F.Supp.2d 1301, 1304 (M.D.Fla.2001), Evans quoted, “There is no indication whatsoever that Congress considered state law legal remedies to be ‘abusive,’ nor does it appear necessary to alter the procedures for filing state lawsuits to level the playing field.

After all, if state lawsuits are used in an abusive manner, protection already exists in the court where the action is brought.

Evans further noted that the FDCPA contains a separate section entitled, “Legal Actions by Debt Collectors,” and could have, but does not, specifically include mention of legal actions in the definition of “communication.”

Quoting further from Judge Moody, Evans iterated, “The absence of doing so is one indication that Congress did not intend the revolutionary changes to long-standing judicial remedies which are required if a legal action is considered a ‘communication’” within the meaning of the Act. Id.

Addressing the legislation pending before Congress to specifically exclude pleadings from the definition of “communication,” and rejecting the majority’s interpretation, Evans concluded, “I think it’s more likely that the purpose of the proposed amendment is to make explicit what is clearly implicit. The proposed amendment is, I submit, more easily viewed as an effort to curtail erroneous interpretations of what is included in the word ‘communication’ under the FDCPA.”

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David Ziemer can be reached by email.