Opinion
No. 04-CV-216 (JBW).
July 15, 2004
MEMORANDUM, JUDGMENT ORDER
I. Introduction
Plaintiff James Swift filed a complaint against Maximus, Inc., on behalf of himself and others, claiming violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 ("FDCPA"). Defendant has moved for summary judgment. The motion should be denied for the reasons stated below.
II. Facts
Defendant Maximus holds a contract for the collection of student loan accounts with the United States Department of Education ("DOE"). In November of 2003, plaintiff's account was referred to Maximus for collection by the DOE. Plaintiff's loan had been in default since 1993. Prior to Maximus's collection efforts, plaintiff had not made a payment since the initial year of the loan. As of November 24, 2003, plaintiff's balance due was $9,984.74.
The factual basis for the claim is contained in a letter dated November 24, 2003, in which defendant notified plaintiff that his account was in default. The relevant portions of the main text on the front page read:
Your student loan account has been referred to MAXIMUS by the United States Department of Education for the purpose of securing payment of this delinquent debt.
The records of the U.S. Department of Education indicated that no payments have ever been received on this account. This account is seriously delinquent and demands your immediate attention.
Payment in full of this debt must be received within 30 days after the date of this notice to avoid further collection activities.
If you are unable to pay the amount in full, please contact our office . . . to make suitable repayment arrangements.
Compl. at Ex. A. The bottom of the front page reads: " NOTICE: SEE REVERSE SIDE FOR IMPORTANT INFORMATION. " The reverse side of the letter, in slightly smaller print, reads in relevant part:
Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt of 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, 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. If you request this office in writing within thirty days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.Id.
III. Law
A. Standard of ReviewRule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed.2d 265 (1986).
The party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion," and identifying which materials "it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323. The burden then shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L.E.2d 202 (1986); see also Fed.R.Civ.P. 9(b) ("In all averments of fraud or mistake, the circumstances constituting the fraud shall be stated with particularity.").
All inferences are to be drawn from the underlying facts in the light must favorable to the party opposing the summary judgment motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S. Ct. 1348, 89 L. Ed.2d 538 (1986). The mere existence of some peripheral factual disputes will not defeat an otherwise properly supported motion for summary judgment. Anderson, 477 U.S. at 247. "[O]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. at 248.
B. Fair Debt Collection Practices Act
Section 1692g(a) of the FDCPA states:
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing —
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
When contained in a debt collection letter, the notice specified by section 1692(g)(a) is referred to as the "validation notice." Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996). In Russell, the Court of Appeals for the Second Circuit considered the same question before this court, namely "whether, from the perspective of the least sophisticated consumer, language contained in the notice overshadowed or contradicted the mandatory validation notice; if so, then the Act is violated." Id. at 35. "A notice is overshadowing or contradictory if it would make the least sophisticated consumer uncertain as to her rights." Id.
In Russell, the plaintiff sued after receiving two notices from a debt collector. The first notice was dated February 26. It informed her that the debt was placed for "immediate collection" and that if she paid within ten days, the delinquency would not be "post[ed] . . . to [her] file." The reverse side contained the validation notice. Dated March 17, the second notice demanded payment within five days. The court found that the demand for payment within ten days in the first notice overshadowed and contradicted the validation notice. The court also ruled that the second notice violated section 1692g. The second demand for payment — within five days — gave the debtor twenty-five days from the first notice to decide whether to challenge the claim. That is less than the thirty days period that the consumer may mull over disputing the claim. The court concluded: "No consumer — much less the least sophisticated one — is expected to know that the language on the back of the first notice takes precedence over the second notice when the instructions contained in the two notices are read in combination." Id. at 36; see also Sanvino v. Computer Credit, Inc., 164 F.3d 81, 86 (2d Cir. 1998) (finding violation of FDCPA when the letter "ask[ed] for immediate payment without also explaining that its demand did not override the consumer's rights under Section 1962g to seek validation of the debt"); Terran v. Kaplan, 109 F.3d 1428, 1433 (9th Cir. 1997) ("In each of these cases, payment was demanded within a time period less than the statutory thirty days granted to dispute the debt and this demand was communicated in a format that emphasized the duty to make payment, and obscured the fact that the debtor had thirty days to dispute the debt.") (emphasis in original); Chauncey v. JDR Recovery Corp., 118 F.3d 516, 519 (7th Cir. 1997) (holding that there was contradiction in letter requiring "that plaintiff's payment be received within the 30-day period, thus requiring plaintiff to mail the payment prior to the thirtieth day to comply") (emphasis in original).
McStay v. I.C. System, Inc. is also instructive. 308 F.3d 188 (2d Cir. 2002). The debt collector's letter read in part: "Your delinquent account has been turned over to this collection agency and the balance is due. Please be advised that if after 30 days your account is not paid in full or otherwise closed, the account information will be forwarded to [a credit agency]. This may hinder your ability to obtain credit in the future." Id. at 189. The bottom of the page instructed the reader to see the reverse side, which contained the validation notice. The plaintiff claimed that the text on the front of the letter overshadowed the validation notice. Specifically, she claimed that "because a specific date appeared on the front of the letter and because the `thirty days' language was ambiguous, a debtor could easily be confused as to when her rights would begin and end." Id. at 190. The court of appeals disagreed, holding that "any confusion created by the ambiguity on the front of the letter dissipates when read in conjunction with the language on the back." Id. at 191. The court declined to state that a validation notice must be printed on the front page of a letter to be compelling. Under this scenario, the court assumes that the least-sophisticated consumer would read the letter in its entirety. The letter, when read completely, was found to "contain no contradiction and create no reasonable confusion as to when the thirty-day time period commenced." Id.
In Rumpler v. Phillips Cohen Assoc., Ltd., the court declared that section 1692g was not violated when the debt collection letter did not "threaten adverse consequences in the event the debt [was] not paid within 30 days of receipt of the Letter." 219 F.Supp.2d 251 (E.D.N.Y. 2002); see also Hillaire v. Delta Funding Corp., 2002 WL 31123860 (E.D.N.Y. Sept. 26, 2002) (finding that letter did not violate FDCPA when it contained transitional language emphasizing consumer's right to dispute claim within thirty days of receipt); Harrison v. NBD, Inc., 968 F. Supp. 837, 848 (E.D.N.Y. 1997) (holding that the fact that a discount offer on the debt expired before the thirty statutory period did not "provide evidence of overshadowing").
IV. Application of Law to Facts
The crucial sentence in the instant letter declares: "Payment in full of this debt must be received within 30 days after the date of this notice to avoid further collection activities." The reverse side contained the validation notice. Plaintiff considers the letter problematic under the FDCPA in two regards: it demands (1) that payment be received within thirty days and (2) that payment be received within thirty days after the date of the notice rather than after receipt of the notice.
The consumer confronts two messages upon reading this letter. First, the consumer is told-upon threat of adverse consequences-that the debt collector must receive payment in full within thirty days from the date of the notice. Second, the reverse side of the letter informs the consumer that she has thirty days from her receipt of the letter to dispute the claim. The messages are contradictory and arguably confusing under a least-sophisticated consumer standard.
Under Savino, a demand for immediate payment without an explanation that the "demand [does] not override the consumer's rights under Section 1962g" constitutes a violation of the FDCPA. Savino, 164 F.3d at 86. In Russell, the consumer also confronted contradictory statements. The main text of the letter indicated that Russell had ten days in which to pay in full or suffer consequences; the back of the letter contained the validation notice. The court of appeals found that the possibility of confusion in such circumstances was high: The consumer might believe that any action other than payment within ten days would affect her credit rating despite the inclusion of a validation notice.
In the instant case, defendant demands prompt payment from plaintiff. Although the FDCPA allows consumers thirty days from the receipt of a notice to dispute the debt, defendant demands payment thirty days from the date of the notice. Based on comments made at the hearing, the presumptive mailing date of the letter was the end of business on Monday, November 24, 2003 from Grand Rapids, Michigan. As Thursday, November 27, 2003 was a legal holiday, plaintiff arguably did not actually receive the notice in Brooklyn until Friday, November 28, 2003. Thus, the consumer's window of opportunity is shortened. Moreover, the notice states that payment must be received within the thirty day limit. Even the least-sophisticated consumer would calculate that payment must be mailed in advance of a deadline in order to be received by that deadline. See, e.g., Chauncey, 118 F.3d at 519 ("But the letter required that plaintiff's payment be received within the 30-day period, this requiring plaintiff to mail the payment prior to the thirtieth day to comply.") (emphasis in original). Consequently, the consumer holds a notice that demands payment from less than thirty days from when she received the letter, and she calculates that payment must be mailed several days before the deadline. The letter's demand for payment takes on a quality of "immediateness."
Coupled with the demand for immediate payment, the letter threatens adverse consequences. Compare Savino, 164 F.3d at 86, which stated that the demand for immediate payment violated the FDCPA, with Rumpler v. Phillips Cohen Assoc., Ltd., 219 F.Supp.2d 251 (E.D.N.Y. 2002), which held that a notice did not violate the FDCPA because there was no demand for immediate payment and no adverse consequences. The least sophisticated consumer is capable of conjuring a host of frightening actions approximating the vague "further collection activities" phrase contained in the letter.
Even in Russell, in which the letter violated the FDCPA, the debt collection notice acknowledged in the main text the right of the consumer to dispute the debt. 74 F.3d at 32. In Savino, the court stated that an immediate demand for payment must be paired with "transitional language" that might inform the consumer of the statement of her rights in the validation notice. 164 F.3d at 86. The court presumes that the letter is read in its entirety, see McStay, 308 F.3d at 191, but when the statements are contradictory there is a greater need for clarifying transitional language, cf. Hillaire v. Delta Funding Corp., 2002 WL 31123860, *3 (E.D.N.Y. Sept. 26, 2002) (stating that letter used a "transitional phrase" as suggested by Savino). Defendant could have easily included language reminding plaintiffs of their rights under section 1692g in that portion of the letter that instructs the consumer to call the office to make payment arrangements.
In McStay, the court held that "`the least sophisticated consumer is not liable to conclude that the thirty-day period commenced on the date the letter was written as opposed to received." McStay, 308 F.3d at 191 (quotations omitted). The opposite is true in this case. The letter clearly states "after the date of this notice." This directly contradicts the language of the validation notice, and a consumer of average sophistication-much less least-sophisticated-may be confused by the statements.
The sentence demanding payment does not, by itself, violate the FDCPA. The letter, however, does not adequately explain that the consumer retains his or her rights pursuant to section 1692g. The demand for payment overshadows and conflicts with the validation notice on the reverse side of the letter. Defendants are not entitled to summary judgment.
V. Conclusion
The least sophisticated consumer would consider the debt collection notice as a demand for immediate payment. The payment was to be received within thirty days from the date of the notice. The letter conveyed that the consumer would suffer adverse consequences if payment was not forthcoming. The demand for payment could be found to have overshadowed and contradicted the validation notice, thereby violating the FDCPA.
The motion for summary judgment is denied.
A pre-trial conference is set for August 19, 2004 at 10:00 a.m. to consider, with in limine matters, settlement, including modification of future collection letters, attorney's fees and other relevant matters.
The case is set for trial on September 20, 2004 at 10:00 a.m. All discovery is to be completed at least ten days before trial. The parties will exchange trial briefs, witness lists and summaries of expected testimony, lists of exhibits and pre-marked exhibits.
A jury is demanded. The parties shall provide proposed charges the day of trial together with evidentiary briefs.
Since the collection letter in question was issued to collect a debt owed to the Federal government, the government may appear as a friend of the court.
SO ORDERED.