News & Resources

FAIR DEBT COLLECTION PRACTICES ACT UPDATE -- 1999 *

DANIEL A. EDELMAN

September 25, 1999

Daniel A. Edelman 1999

*This article is reproduced here without the supporting footnotes. For the entire article with the supporting materials, please contact Edelman, Combs & Latturner .

TABLE OF CONTENTS

I. INTRODUCTION

This article provides an overview of recent developments concerning the application of the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. ("FDCPA") (the full text is in an appendix). The statute regulates the conduct of "debt collectors" in collecting "debts" owed or allegedly owed by "consumers." It is designed to protect consumers from unscrupulous collectors, whether or not there is a valid debt. The FDCPA broadly prohibits unfair or unconscionable collection methods; conduct which harasses, oppresses or abuses any debtor; and any false, deceptive or misleading statements, in connection with the collection of a debt; it also requires debt collectors to give debtors certain information. 15 U.S.C. 1692d, 1692e, 1692f and 1692g.

In enacting the FDCPA, Congress recognized the "universal agreement among scholars, law enforcement officials, and even debt collectors that the number of persons who willfully refuse to pay just debts is minuscule [sic] ... [T]he vast majority of consumers who obtain credit fully intend to repay their debts. When default occurs, it is nearly always due to an unforeseen event such as unemployment, overextension, serious illness, or marital difficulties or divorce."

The FDCPA is liberally construed in favor of the consumer to effectuate its purposes.

Statutory damages are recoverable for violations, whether or not the consumer proves actual damages.

II. STATUTORY COVERAGE AND DEFINITIONS

WHAT IS A "DEBT"

"Debt" is defined as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C. 1692a(5) (emphasis added). Business and agricultural loans are therefore not "debts" covered by the FDCPA. A personal guaranty of a business loan is also not covered.

The following are areas of recent litigation activity concerning what is a "debt":

DISHONORED CHECKS

In recent years there has been a substantial amount of litigation concerning whether dishonored checks are "debts" within the meaning of the FDCPA. The statutory definitions clearly encompass dishonored checks, in that liability on such a check is an "alleged obligation . . . to pay money arising out of a transaction", subject to the FDCPA if the "property . . . which [is] the subject of the transaction" was "primarily for personal, family, or household purposes."

The only appellate courts to have addressed the issue have held that dishonored checks are debts. In Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., a divided Seventh Circuit held:

Resorting to legislative history is unnecessary here, however, because the language in the statute's definition of "debt" is plain.

A "debt," the collection of which is governed by the FDCPA, is defined in the Act as

any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

15 U.S.C. 1692a(5). Appellants would have us read into this definition the additional requirement that the debt flow from a specific type of consumer transaction -- one involving the offer or extension of credit. However, we see no language in the Act's definition of "debt" (or any other section of the Act) that mentions, let alone requires, that the debt arise from an extension of credit. Nor do we find patent ambiguity in the definition of "debt." The definition is not "beset with internal inconsistencies [or] . . . burdened with vocabulary that escapes common understanding." [citation] In the absence of ambiguity, our inquiry is at an end, and we must enforce the congressional intent embodied in the plain wording of the statute. [citation]

On the contrary, the plain language of the Act defines "debt" quite broadly as "any obligation to pay arising out of a [consumer] transaction." In examining this definition, we first focus on the clear and absolute language in the phrase, "any obligation to pay." Such absolute language may not be alternatively read to reference only a limited set of obligations as appellants suggest. [citation] As long as the transaction creates an obligation to pay, a debt is created. We harbor no doubt that a check evidences the drawer's obligation to pay for the purchases made with the check, and should the check be dishonored, the payment obligation remains. [citation]

Bass was followed by a later Seventh Circuit decision, Ryan v. Wexler & Wexler, by the Ninth Circuit, in Charles v. Lundgren & Associates, P.C. by the Eighth Circuit, in Duffy v. Landber, and by the Tenth Circuit in Snow v. Riddle. The Sixth Circuit and the Ohio Court of Appeals, in two related cases, also held that a dishonored check is covered. Remarkably, the Sixth Circuit decision was marked not for publication.

Finally, an Eleventh Circuit decision addressing whether obligations arising from an auto rental are "debts" approved the reasoning of Bass and held that an extension of credit is not required under the FDCPA. A subsequent Eleventh Circuit decision states in dicta that a check is a debt.

The overwhelming majority of lower court decisions either hold that dishonored checks issued by the debtor for consumer goods or services fall within the FDCPA or apply the FDCPA to such debts. The legislative history of the FDCPA clearly states that dishonored checks are covered. The Report of the House Banking Committee accompanying H.R. 5294 states:

Opponents of this legislation claim that, regardless of the amount of consumer harassment or deception, there should be no legislation because the number of unpaid bills and bad checks keeps increasing. This reasoning is misleading. The issue is not one of uncollected debts, but rather whether or not consumers must lose their civil rights and be terrorized and abused by unethical debt collectors.

The House Report also stated that "the committee intends that the term 'debt' include consumer obligations paid by check or other non-credit consumer obligations."

Similarly, the hearings on the FDCPA contain discussion of the effect of the proposed legislation on checks. Indeed, the American Collectors Association representative submitted a statement which complained that the proposed legislation "would make it more difficult for financial collection services to collect or attempt to collect bad checks."

The Federal Trade Commission has also consistently held that checks are subject to the FDCPA. The FTC Staff Commentary on the FDCPA illustrates the definition of "debt" with the example of an NSF check used to purchase goods or services intended for household or personal use. The Commission itself has adopted this position in a ruling denying a petition to quash a subpoena served on a debt collector specializing in dishonored checks. The FTC has also brought several civil actions against debt collectors based on attempts to collect dishonored checks.

However, debt collectors persistently claim that a dishonored check is not a "debt," and occasional cases have agreed with them. Their basic argument is that the definition of "credit" in the Truth in Lending Act ("TILA") should be used to limit the definition of "debt" in the FDCPA. They rely on Zimmerman v. HBO Affiliate Group, for this proposition. In Zimmerman, the Third Circuit affirmed dismissal of plaintiff's FDCPA complaint based on a demand letter sent to persons who allegedly intercepted cable signals. The court found that the illegal interception of signals was not a consensual "transaction" and therefore was not covered by the FDCPA's definition of debt.

We find that the type of transaction which may give rise to a "debt" as defined in the FDCPA, is the same type of transaction as it dealt with in all other subchapters of the Consumer Credit Protection Act, i.e., one involving the offer or extension of credit to a consumer. Specifically it is a transaction in which a consumer is offered or extended to acquire "money property, insurance, or services" which are "primarily for household purposes" and to defer payment.

There was no issue as to whether issuance of a check to pay for goods or services is an FDCPA "transaction."

The Zimmerman dicta regarding the extension of credit is wrong. While the Zimmerman court referred generally to FDCPA "transactions" as involving the same sort of circumstances as other matters regulated by the Consumer Credit Protection Act, the CCPA includes far more than just TILA and clearly encompasses consensual "transactions" that do not involve loans or credit sales. The FDCPA definition of "creditor" is clearly broader than the TILA definition, in that it includes not only someone who "offers or extends credit" but anyone to "whom a debt is owed." For this reason, four other Courts of Appeals have disapproved the implementation of the above-quoted language in Zimmerman.

Check guaranty companies are statutory "debt collectors" because the check was in default at the time it was acquired by the guaranty company.

The statutory liability of a prior endorser on a check which is deposited or cashed and returned for insufficient funds may not be a "debt," if there is no purchase of goods or services for consumer purposes.

RENT, CONDOMINIUM ASSESSMENTS

An issue closely analogous to the dishonored check issue is presented by attempts to collect rent and condominium assessments. There is no extension of credit in the sense of incurring an obligation and repaying it over time with interest. Nevertheless, the consumer incurs an obligation to pay money in the future as part of a consensual transaction.

In Newman v. Boehm, Pearlstein & Bright, the Seventh Circuit had no difficulty in concluding that condominium assessments were FDCPA "debts:"

By paying the purchase price and accepting title to their home, the Riters became bound by the Declaration of Covenants, Conditions, and Restrictions of their homeowners association, which required the payment of regular and special assessments imposed by the association. . . . It is therefore clear that the obligation to pay in these circumstances arose in connection with the purchase of the homes themselves, even if the timing and amount of particular assessments was yet to be determined. . . . Because the statute's definition of a "debt" focuses on the transaction creating the obligation to pay (Bass, 111 F.3d at 1325), it would seem to make little difference under that definition that unit owners generally are required to pay their assessments first, before any goods or services are provided by the association. That would only be important if the statute required a credit obligation, which Bass says it does not. 111 F.3d at 1326. Regardless of whether the assessment or the service comes first, the obligation to pay is derived from the purchase transaction itself. The assessments at issue in this case therefore qualify as "obligations of a consumer to pay money arising out of a transaction." 15 U.S.C. 1692a(5).

Other recent decisions reach the same conclusion.

Other claims for money pursuant to a lease are also covered. In Brown v. Budget Rent-A-Car Systems, Inc., the Eleventh Circuit held that a claim by a car rental company against a consumer renter for property damage to the rented vehicle was covered by the FDCPA, even though no extension of credit was involved:

Does a "debt" require the extension of credit? We start with the plain language of the statute. See Holly Farms Corp. v. NLRB, 517 U.S. 392 (1996). The only relevant reference to an extension of credit in the Act is in the definition of "creditor." The Act defines "creditor" in the disjunctive. As "a general rule, the use of a disjunctive in a statute indicates alternatives and requires that those alternatives be treated separately. Hence, language in a clause following a disjunctive is considered inapplicable to the subject matter of the preceding clause." Quindlen v. Prudential Ins. Co. of America, 482 F.2d 876, 878 (5th Cir. 1973).

The Seventh Circuit recently provided a thorough analysis of the definition of debt as used in the FDCPA. In Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322 (7th Cir. 1997), the parties disputed whether a dishonored check created debt that would invoke the protections of the FDCPA. The Bass court found that the payment obligation which arose from a dishonored check constitutes a debt as defined in the Act. Id. at 1325. The court commented on the broad definition of debt in the Act and reasoned that "as long as the transaction creates an obligation to pay, a debt is created." Id. We agree with that reading of the statute. Extension of credit is not a prerequisite to the existence of a debt covered by the FDCPA. Budget's assertion that Brown is obligated as a result of consumer transaction suffices to bring the obligation within the ambit of the FDCPA. See 15 U.S.C. 1692a(5)

It should be noted that the claim was against the renter: claims against tortfeasors who have no contractual relationship with the creditor are generally not thought to be covered by the FDCPA.

In Romea v. Heiberger & Associates, the court held that unpaid apartment rentals were a "debt," no extension of credit being necessary under Bass. The court further held that a statutory eviction notice is subject to the Act:

Defendant argues also that the Section 711 notice was not a communication to collect a debt within the meaning of the statute. Section 1692a(11) defines "communication" as "the conveying of information regarding a debt directly or indirectly to any person through any medium. In view of the fact that the Section 711 notice demanded payment on pain of the commencement of eviction proceedings, there is no colorable argument that it does not satisfy the FDCPA's sweeping definition of communication.

In Travieso v. Gutman, Judge Weinstein of the Eastern District of New York likewise held that apartment rent was a "debt" to which the FDCPA applied. "Rent clearly fits the definition of debt embodied in the FDCPA." However, there are several district court decisions and a Florida appellate decision to the contrary.

TORT CLAIMS

A tort claim arising from an auto accident is not a "debt". Thus, a claim for property damage to a car is a debt if asserted by a lessor's debt collector or collection attorney against a consumer lessee, but not if asserted by the representative of an accident victim or his subrogated insurance carrier against a tortfeasor with whom he has had no contractual dealings.

Statutory liability under an Ohio statute for civil damages arising from alleged shoplifting is not a "debt" within the coverage of the FDCPA. Tort claims arising from the illegal reception of microwave television signals are also not within the definition of "debt".

However, the fact that the law requires purchase of the goods or services that are the subject of a transaction does not mean that the transaction is not a "debt."

DEBTS REDUCED TO JUDGMENT

Consumer debts reduced to judgment are covered by the FDCPA. However, a District of Maryland case held that a settlement agreement resolving a lawsuit brought to collect a consumer debt was not covered because the plaintiff "did not incur this obligation to receive consumer goods or services." This is clearly wrong, since 1692a(5) does not require that the obligation be incurred to receive consumer goods or services. It defines "debt" to include "any obligation . . . to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes . . . ." Furthermore, it covers such an obligation "whether or not such obligation has been reduced to judgment." There is no reason that a judgment resulting from a consumer contract should be covered but an equivalent settlement agreement should not be covered.

1. DEBTS EXPECTED TO BE PAID BY A THIRD PARTY

An Eastern District of Pennsylvania decision rejected a debt collector's contention that a medical bill was not a "debt" because it should have been paid by the patient's insurance carrier. "Mr. Adams was the party ultimately liable for retiring the debt. Whether he retires the debt with funds from his checking account or pursuant to his contract with a health insurance carrier is of no moment."

A questionable District of Connecticut case holds that an attorney sending a notice of a mechanics' lien to a homeowner on behalf of a subcontractor (rather than the contractor with whom the homeowner had a contractual relationship) is not a "debt collector". The decision appears to be wrong because the debt arises argues out of a transaction (that between the consumer and the contractor) including the consumer and entered into for personal, family or household purposes.

TAXES, FINES, AND GOVERNMENTAL OBLIGATIONS

Liabilities for taxes are not considered "debts" within the FDCPA. A fine for failing to return a library book is not a debt.

In Pollice v. National Tax Funding, LP, the court held that charges for water and sewer service originally owed to a municipality and purchased by a buyer of bad debts were "debts" subject to the FDCPA, even though tax liens are not.

CHANGE IN PURPOSE OF DEBT

A questionable Northern District of Illinois decision holds that where an individual obtains a mortgage to finance purchase of his residence and later rents the property, and a debt collector sent a collection letter after he began renting it our, the transaction was for business and not personal purposes. It is on appeal.

CHILD SUPPORT OBLIGATIONS

Liabilities for child support obligations are not considered "debts" within the FDCPA.

WHO IS A "DEBT COLLECTOR" SUBJECT TO THE ACT

Generally, the FDCPA covers the activities of a "debt collector." There is a two-part definition of "debt collector": "any person [1] who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or [2] who regularly collect or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. 15 U.S.C.

1692a(6). The creditor itself is excluded from the definition of "debt collector", unless it uses a name which suggests that a third-party debt collector is involved in the collection process.

Also excluded from the definition of "debt collector" are the following:

Officers and employees of the creditor while collecting the debt in the creditor's name.

Affiliates of the creditor. Section 1692a(6)(B) creates an exemption for "any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts." Courts have disagreed as to whether the collector, the creditor, or both must not be principally engaged in the collection of debts.

Officers or employees of the United States or any state. Private debt collectors collecting student loans and other obligations which meet the definition of a "debt" and were originally owed to a governmental unit do not qualify for this exemption.

Process servers.

Bona fide non-profit debt counselors.

Persons who service debts which are not in default (e.g., services of mortgages and student loans). This exemption does not operate in favor of such entities when they acquire a loan after default. However, where a loan is restructured and the restructured loan is not in default, the fact that the loan was in default prior to being restructured does not make entities purchasing or servicing the loan FDCPA debt collectors.

"[A]ny person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement . . . ." The fiduciary relationship must exist for purposes other than debt collection. Thus, a receiver or trustee of a corporate creditor or the personal representative or trustee of an individual creditor are treated as if they were the original creditor. The fact that a collection attorney or agency is the agent, and therefore the fiduciary, of the creditor does not give rise to an exemption.

Persons who collect debts "originated by such persons". An "originator" is one who played a significant role in originating the obligation.

A secured party in a commercial credit transaction involving the creditor that takes possession of the creditor's receivables by enforcing its security interest. That is, if consumer lender ABC pledges its consumer receivables to commercial lender XYZ and XYZ, pursuant to its rights under the security agreement, directs the consumer to pay XYZ, XYZ is not a "debt collector".

CREDITOR WHO USES NAME INDICATING

THIRD PARTY INVOLVEMENT AS DEBT COLLECTOR

Creditors may become "debt collectors" by using names in collecting their debts which falsely suggest the involvement of third party debt collectors or attorneys. The simplest situation covered by the "other name" exception of 1692a(6) is that where creditor ABC sends its debtors letters which demand payment in the name of XYZ Collection Agency, XYZ either being a totally fictitious entity or a real entity which has no significant involvement in the actual collection of ABC's debts. On its face, such conduct makes ABC a "debt collector" under 1692a(6) and simultaneously violates the prohibition against deceptive collection practices, 1692e. Numerous pre-FDCPA cases held that this practice violated 5 of the FTC Act.

The FTC has stated that a creditor is using a name "other than [the creditor's] own" if the creditor is using a name which on its face it "would indicate that a third person is collecting or attempting to collect [the creditor's] debts" and no disclosure is made of the relationship between the name used in dealing with the consumer prior to default and the name used in attempting to collect after default, even if the creditor or an affiliate lawfully owns the name used to make collection.

In Maguire v. Citicorp Retail Services, Inc., the Second Circuit reversed a summary judgment for the defendant in a case where Citicorp Retail Services sent out letters under the letterhead of "Debtor Assistance" to collect private label credit card debts:

At the summary judgment stage, we can not find as a matter of law that a least sophisticated consumer would have known that the Debtor Assistance letter was from Citicorp. The letter Maguire received bore the letterhead "Debtor Assistance" creating the impression that a third party, Debtor Assistance, was collecting its debts. Citicorp had not consistently used the name Debtor Assistance from the beginning of the credit relationship so that the plaintiff could have known "at all times that [she was] dealing with the same entity." Dickenson, 770 F. Supp. at 1127 n.5 (no FDCPA liability because store used same name from the beginning of the credit relationship). To the contrary, plaintiff had never received correspondence from Debtor Assistance, nor has she ever been contacted by someone from Debtor Assistance. Maguire testified in her deposition that she had "no clue" as to the identity of Debtor Assistance and that she did not understand that the letter she received was from Citicorp.

The prior correspondence between Citicorp and Maguire did not establish or even suggest, that Citicorp was affiliated with Debtor Assistance. Cf. Olga Button v. GTE Serv. Corp., 1996 U.S. Dist. LEXIS 16971 (W.D. Mich. 1996) (relatedness apparent from the course of communications because of stationery used, return address of the envelopes, address to which payment was to be returned, and text of correspondence). A consumer would not be aware that Debtor Assistance is a unit of Citicorp from the address on the letter because, although Debtor Assistance actually shares the same address as Citicorp, the monthly billing statements from Bradlees do not disclose Citicorp's address. Moreover, while the phone number listed in the Debtor Assistance letter is issued to Citicorp and Citicorp pays all bills and costs associated with the phone number, the letter does not reveal those facts and a consumer would not be aware that Citicorp operates the phone lines because all phone calls are answered by personnel who identify themselves as employees of Debtor Assistance.

Further, this is not a situation where the relatedness of the two entities would be apparent from the similarity of the creditor's and its affiliate's name. Cf. Young v. Lehigh Corp., No. 80C4376, 1989 WL 117960, at *22 [1989 U.S. Dist. LEXIS 11525, 1989-2 Trade Cas. P 68,790] (N.D. Ill. 1989) (finding that plaintiff could not have been "duped into believing that Lehigh Corporation was not affiliated with Lehigh Country Club, Inc.")

"[T]he scope of creditor liability under 1692a(6) goes beyond the creditor's use of aliases or pseudonyms to instances where the creditor merely implies that a third party is collecting a debt when in fact it is the creditor that is attempting to do so."

AFFILIATES OF CREDITORS

A number of cases address the situation where ABC incorporates a wholly-owned subsidiary, XYZ, and then has it engage in collection activities. This requires consideration of the "affiliate exemption" in 1692a(6)(B), and its relationship with the other provisions of 1692a(6).

Section 1692a(6) provides that the term "debt collector" does not include:

(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts . . . .

If the affiliate's business consists primarily or solely of debt collection, the affiliate is subject to the FDCPA. The questions are then presented whether (i) it is deceptive for the affiliate to engage in debt collection activities without disclosure of the fact that it is an affiliate of the creditor and (ii) the creditor is liable for the affiliate's deceptive practices.

If the affiliate's business does not consist principally of debt collection (for example, if the affiliate services current accounts as well as those in default), the question is whether the provision in 1692a(6) that a creditor who uses the name of a third party in collecting its own debts is a debt collector is applicable to an affiliate of the creditor.

In Aubert v. American General Finance, Inc., the Seventh Circuit answered the last question in the negative. Aubert obtained a credit card from American General Financial Center. The account became delinquent. Aubert then received a letter from the "AGFC Collection Group." AGFC Collection Group is an internal corporate division of Service Bureau of Indiana, Inc. ("SBI"). SBI and AGFC, the company that issued Aubert's credit card, were both wholly owned subsidiaries of American General Finance, Inc. ("AGF"). SBI came within the affiliate exemption because (i) its principal business was not the collection of debts (it also performed various servicing functions for current AGFC credit card accounts) and (ii) it did not provide collection services to any non-affiliated corporate entities. The court concluded that SBI came within the affiliate exemption and that a disclosure obligation would not be superimposed on it:

SBI was collecting a debt "owed or due or asserted to be owed or due another." Therefore, when read alone, 1692a(6)'s definition of a "debt collector" indicates that SBI's collection activities on behalf of AGFC are covered by the Act. After defining "debt collector," however, the statute excludes from its definition any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts. 15 U.S.C. 1692a(6)(B). Thus, a corporate affiliate is excluded from the Act's coverage so long as it satisfies two conditions: (1) the affiliate collects debts only for entities with which it is affiliated or related; and (2) the principal business of the affiliate is not debt collection. [citations] As we indicated above, Aubert does not dispute that SBI, AGFC's corporate affiliate, satisfies both of these conditions.

In support of his claim against SBI, Aubert does not argue that the language of 1692a(6)(B) compels a contrary reading. Instead, he argues that a "plain meaning" interpretation of the affiliate exclusion would create a loophole that is inconsistent with the intent and purposes of the Act: While a creditor that collects its own debts under "any name other than [its] own" is considered a "debt collector" under 1692a(6), our reading of 1692a(6)(B) enables an affiliate of that creditor to collect debts under any name that it chooses, so long as the affiliate otherwise satisfies the conditions required for exclusion from the Act. Therefore, an affiliate could collect debts under an assumed name without regard for protecting corporate goodwill. Aubert argues that this loophole enables creditors, acting through their affiliates, to engage in the same abusive practices that Congress intended to eliminate by enacting the FDCPA. To avoid the loophole, Aubert asks us to read an additional condition into 1692a(6)(B): that corporate affiliates must collect debts in the name of the creditor.

While Aubert raises a strong policy argument in support of his position, our role, when the language of a statute is plain, is to enforce that statute according to its terms. [citation] Legislation is frequently the product of compromises that are not readily apparent to the judiciary. Therefore, "invocation of the 'plain purpose' of legislation at the expense of the terms of the statute itself takes no account of the processes of compromise and, in the end, prevents the effectuation of congressional intent." [citation] As this case demonstrates, many corporations operate under names that are not readily identifiable with those of their affiliates. Yet while Congress prescribed two conditions for the exclusion of corporate affiliates under 1692a(6)(B), it did not prescribe the third condition that Aubert asks us to read into the statute. Should Congress desire to eliminate this loophole, it is, of course, free to amend the FDCPA and add conditions to the 1692a(6)(B) exclusion. We, however, do not enjoy that freedom. "We are bound by the particular rules enacted by Congress and are not free to carve out our own exceptions merely because we believe that they would best serve Congress' policies and goals." [citation] We therefore hold that the district court appropriately granted summary judgment in favor of SBI.

Finally, the court held that no basis had been shown for disregarding the corporate formalities of the three defendants and holding them jointly responsible under the FDCPA because they engaged in a single economic enterprise.

Similarly, in Harrison v. NBD, Inc., the court held that a parent corporation that had a subsidiary collect its debts was not subject to the FDCPA unless it controlled the debt collector's activities:

ICS is the entity which extended the credit to the plaintiff and on whose behalf NBD attempted to collect the debt. Although a creditor is generally not covered by the FDCPA, the plaintiff reasons that ICS is subject to the FDCPA because it attempted to collect the debt under a different name, NBD, indicating that a third party was collecting the debt. The corporate affiliation between ICS and NBD is not disclosed in the letter. Therefore, the plaintiff maintains that ICS is a "debt collector" subject to the FDCPA. The court finds this argument unpersuasive.

In cases where a creditor collected its own debts by using a different name, thus implying that a third party was the debt collector, the creditor controlled almost all aspects of debt collection, or used an alias . . . .

The plaintiff alleges that NBD and ICS are subsidiaries of NEC. NBD and ICS are two distinct entities. Nowhere in the plaintiff's amended complaint is it alleged that the two corporations are, in reality, one single economic entity or that ICS controls NBD's collection process. The alleged "approval" by ICS of NBD's collection practices is insufficient as a matter of law, to convert ICS' status as creditor to that of "debt collector."

On the other hand, in order to prevent evasion of the law, the Federal Trade Commission and other courts have applied the "other name" proviso 1692a(6) to more complex situations where a creditor uses, or authorizes the use of, a name other than the one under which the creditor dealt with the consumer, and which is likely to lead the consumer to believe that a third party is attempting to collect the debt.

The FTC Staff Commentary expressly imposes this standard on "affiliates" of the creditor. The FTC Official Staff Commentary to the FDCPA, 53 Fed.Reg. 50097, 50102, states:

1. APPLICATION OF DEFINITION TO CREDITOR USING ANOTHER NAME

Creditors are generally excluded from the definition of "debt collector" to the extent that they collect their own debts in their own name. However the term specifically applies to "any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is" involved in the collection.

A creditor is a debt collector for purposes of this act if:

o He uses a name other than his own to collect his debts, including a fictitious name.

o His salaried attorney employees who collect debts use stationery that indicated that attorneys are employed by someone other than the creditor or are independent or separate from the creditor [the same should apply to salaried nonattorney employees, as herein]. . . .

o The creditor's collection division or related corporate collector is not clearly designated as being affiliated with the creditor; however, the creditor is not a debt collector if the creditor's correspondence is clearly labeled as being from the "collection unit of the (creditor's name)," since the creditor is not using a "name other than his own" in that instance. (Emphasis added.)

Some courts have similarly indicated, sometimes relying on 15 U.S.C. 1692j, that all of the 1692a(6) exceptions for persons associated with creditors and for services should be construed as subject to the restriction that there can be no use of a name which conveys the false impression that an independent third-party debt collector is involved or which dissociates the name used in dealing with the consumer prior to default with the name used in making collections.

An FTC opinion letter of Sept. 19, 1985 discusses a situation in which XYZ and ABC were two entities under common ownership, XYZ handled the collection of ABC's delinquent debts, XYZ's principal business was not debt collection, and XYZ failed to disclose its relationship with ABC in effecting collections. The FTC stated that these facts would result in an FDCPA violation:

[T]he [affiliate] exclusion does not necessarily apply if a creditor "in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is attempting to collect such debts." Strictly speaking, this provision does not make XYZ subject to the Act because XYZ is not the creditor. However, because the collection activity would assumably be conducted under the XYZ name, its debt collection activities may subject the creditor, ABC Corporation, to the Act. For example, if, as your letter suggests (and is necessary for XYZ to come within the 803(6)(B) [1692a(6)(B)] exception), XYZ is not fully independent of ABC Corporation but uses a name which conveys the impression that it is independent, the use of such name in collecting ABC Corporation's debts would (a) bring ABC Corporation within the scope of the Act and (2) violate the Act's Section 807(10) [1692e(10)] and 807(14) [1692e(14)]. [f.n.: Section 807(10) prohibits the use of false representations and deceptive collection means when collecting debts. Section 807(14) prohibits the use of any name other than the true name of the collector when the collector is engaged in collection activities.] The Commission staff has stated that it would generally be a violation of 807(10) for a creditor to use a controlled entity to collect its own debts under a name that conveys the impression that a third party is collecting the debts.

Under the circumstances outlined in your letter, and in view of the ownership overlap and on-going business connections, it appears that ABC Corporation could not successfully maintain that XYZ was an independent collection entity at the same time it sought 803(6)(B) exemption. . . .

In Grammatico v. Sterling, Inc., Sterling owned a jewelry store, Kay. Sterling collected Kay's accounts using the name "Sterling," without disclosure of any relationship between Sterling and Kay. Sterling claimed that it came within the "affiliated creditor" exemption, 1692a(6)(B). The court held that the various provisions of the FDCPA had to be read together and in light of the statutory purpose, and that the FDCPA applied where company A collected debts for related company B, without disclosure of the relationship, and under circumstances where a consumer would believe that a third party was collecting the debt. "[I]t's the impact on the consumer, not the technical corporate realities of the situation, which govern the application of the second sentence." Neither the "own name" language in 1692a(6) nor the "affiliated creditor" exemption permitted such deception to be practiced on the consumer.

Likewise, in Little v. World Financial Network, Inc., a corporate affiliate was held to be a debt collector because a debt to Lane Bryant was being collected by World Financial without disclosure of the corporate relationship between the two. Similarly, in Vernon v. BWS Credit Services, Inc., Beneficial had its debt collected by wholly-owned subsidiary, BWS, which did not disclose relationship with Beneficial; the court found the FDCPA applicable.

Also instructive is Britton v. Weiss, Britton received a collection letter purporting to emanate from an independent law office of Weiss. Weiss was actually employed by the creditor, New York Telephone. While employees of creditors, like affiliates of the creditor, are normally not "debt collectors," the letter conveyed the false impression that it came from an independent law office:

Plaintiff claims here that the March 6, 1988 letter from defendant was deceptive, that defendant clearly represented himself as an independent attorney not collecting debts in the name of the creditor, and that defendant is therefore covered by the terms of the FDCPA. Plaintiff points out that the letter was not written on NYT stationery which bears the well-known "blue bell" logo. While the letter does refer to New York Telephone in the street address, it is printed in small, lower case type. On the other hand, plaintiff states, the designation "attorney" below defendant's signature is in upper-case letters. Indeed, as plaintiff asserts, it might appear to a debtor that defendant was an independent attorney who had offices in a New York Telephone building, since there is no other representation that he is an employee or otherwise affiliated with the telephone company. The letter, plaintiff maintains, was an attempt to deceive the plaintiff into believing that this was not merely a communication from the collection department of NYT, but a more serious step in the collection process: the intervention of a private attorney.

The court, citing the FTC materials referred to above, agreed that the letter conveyed the false impression that it came from an independent attorney:

A plain reading of the March 6, 1988 letter from defendant to plaintiff is indicative of defendant's intent to deceive plaintiff into believing he was an independent attorney. The letter is not written on stationery bearing the logo of NYT. Defendant is identified at the bottom of the letter simply as an "attorney," and he in no way indicates that he is an employee of NYT. Several passages in the letter indicate that defendant intends the plaintiff to believe he is acting on his own, and not on behalf of NYT: "Your former telephone account has been referred to me for collection"; "I am writing to permit you to pay this debt at a reasonable rate per month"; "All payments must be made directly to my office"; "So long as you abide by the above terms and conditions, I shall take no further action"; "However, should you fail to make any monthly payment, I shall immediately commence a lawsuit against you for the recovery of the full balance. . . ." While the words "New York Telephone" appear in small print, it is clear that the "least sophisticated consumer" could believe that the account was being handled by an independent collection agency, with all the attendant serious consequences for the consumer.

On the other hand, a court held that a creditor which consistently used its assumed business name in dealing with customers, rather than its incorporated name, did not thereby become a "debt collector," and that corporate affiliates with similar names could take advantage of the "affiliate" exception.

Where, however the "debt collector," although separately licensed and incorporated, is "dominated" by the creditor, there is a violation.

Finally, there is no reason that an affiliate of a creditor cannot be liable under 1692j if the provisions of that section are satisfied. Section 1692j is not dependent on meeting the definition of "debt collector". Indeed, "Courts have found that both creditor-defendants and the 'flat-rater' who furnishes the collection letters may be liable for violations of 1692j."

WHAT CONSTITUTES "USE" OF THIRD PARTY'S NAME

Several decisions reach opposite conclusions as to whether a creditor which causes letters to be sent on the letterhead of an attorney or collection agency "uses" the name of the attorney or agency. In Villareal v. Snow, the court answered the question in the negative where the letters were sent out by the attorney, even though the attorney did not have any of the contract documents or statements of account necessary to determine whether the debt was owed, was paid on a per-letter basis, and did not exercise any professional judgment with respect to the debt. In Fratto v. Citibank (South Dakota), N.A., the court held that the question was one for the jury, where the letters were placed in the mail by a third party functioning essentially as a mailing service. In both cases, the principal purpose of the letters was to induce the debtor to telephone the creditor's in-house collection department.

Logically, if the actual sender of the letter does not act as an attorney or collection agency, and the purpose of the communication is to induce contact with or payment to the creditor, the creditor is "using" the name of the third party in the ordinary dictionary meaning of "use", making the creditor a statutory "debt collector" under 1692a(6). The intended distinction is that between contracting for the professional services of a third party and borrowing a name to make one's own collection efforts more effective.

In Sokolski v. Trans Union Corp., the court held that where Trans Union merely sent letters to a list of debtors furnished by the creditor and provided no meaningful debt collection services, it violated the FDCPA:

. . . While it is true that Bank One identifies itself in the body of the June 15 Letter as the destination for the 800 telephone call, the letter conveys the impression that Bank One is using Trans Union as a collection agency. Trans Union's activities, however, are limited to the furnishing of collection letters. Trans Union does not received the files of the debtors and any correspondence received by Trans Union is sent directly to Bank One. Trans Union has no authority to negotiate collection of debts and is not paid a percentage of debts collected. Instead, Trans Union receives a flat fee based upon the number of letters sent. These circumstances fall squarely into the definition of flat rating as described by Congress.

This case falls in sharp contrast with cases where courts have refused to find that a creditor is debt collector. In Scrimpsher v. Wegmans Food Markets, Inc., 17 B.R. 999 (N.D.N.Y 1982), for example, in addition to sending dunning letters, the collection agency offered a "complete range of collection services," including direct contract with debtors, the location of debtor assets and referrals to collection attorneys. Scrimpsher, 17 B.R. at 1007-08. Similarly, in Epps v. Etan Industries Inc., 1998 U.S. Dist. LEXIS 19120, 1998 WL 851488 at *2-4 (N.D.Ill. December 1, 1998) no flat rating arrangement was found where the collection agencies activities included active communication and negotiation with debtors.

Here, the activities of Trans Union never went beyond coordinating the mailing of letters and forwarding responses to Bank One. This

arrangement allowed Bank One to be involved in the collection of its own debts while also appearing to use the services of a collection agency. Under these circumstance, Bank One is properly held liable as a debt collector under 15 U.S.C. 1692a(6).

On the other hand, Epps v. Etan Industries Inc., no flat rating arrangement was found where the collection agencies' activities included active communication and negotiation with debtors.

The undisputed evidence demonstrates that CPA drafted and mailed the collection letters, consulted with Blockbuster regarding debtor payment, was available to field inquiries from debtors, and recommended a course of action for Blockbuster with regard to stubborn debtors. . . . [T]he facts in the instant case demonstrate that CPA performed traditional debt collection services for Blockbuster.

In Larson v. Evanston Northwestern Healthcare Corp., the court stated

the pertinent considerations as follows:

Evidence that indicates that the collection agency's participation is so minimal that the creditor should be deemed the actual debt collector, and therefore subject to liability, includes: (1) the collection agency is a mere mailing service or performs only ministerial functions; (2) the letters state if the debtor does not pay, the debt "will be referred for collection"; (3) the collection agency is paid merely for sending letters rather than on the percentage of debts collected; (4) the collection agency does not receive any payments or forwards payments to creditor; (5) if the debtor fails to respond to the letter(s), the collection agency has no further contact with the debtor or the creditor decides whether to pursue collection; (6) the collection agency does not receive the files of the debtors; (7) the collection agency never discussed with the creditor the collection process or what steps should be taken with certain debtors; (8) the collection agency cannot initiate phone calls to debtors; (9) any correspondence received by the collection agency is forwarded to the creditor; (10) the collection agency has no authority to negotiate collection of debts; (11) the letters do not state the collection agency's address or phone number; (12) the letter directs questions or payments to the creditor; and (13) the creditor has substantial control over the content of the letters. . . .

On the other hand, evidence that indicates that a creditor is not acting as a debt collector includes: (1) the collection agency provides traditional debt collection services for the creditor such as direct contact with debtors, locating debtors' assets, and referrals to collection attorneys; (2) accounts remain with collection agency if debtor does not pay after receipt of a letter; (3) the collection agency has authority to decide to pursue debts that remain unpaid after letters are sent; (4) the collection agency provides follow-up services; (5) the creditor pays only for successful collection efforts; (6) the creditor exercises only limited control over the collection agency; (7) the collection agency retains information about the debtors; (8) the letters state collection agency's telephone number or address; (9) the collection agency drafts the letters; (10) the collection agency collects debts for others; (11) the collection agency answers debtors' inquiries; and (12) the collection agency recommends how to pursue stubborn debtors.

Decisions in this area tend to be very fact-specific.

PURCHASERS OF LOAN PORTFOLIOS

INCLUDING DEFAULTED DEBTS

Recently, it has become common for banks, credit card companies and other creditors to sell their delinquent debts to companies which specialize in the purchase and liquidation of bad debts.

A financial institution which purchases delinquent debts is a "debt collector" within the meaning of the FDCPA with respect to the delinquent debts.

"The legislative history of section 1692a(6) [which defines 'debt collector'] indicates conclusively that a debt collector does not include . . . an assignee of a debt, as long as the debt was not in default at the time it was assigned." Conversely, the assignee of a debt which is in default at the time of the assignment is a "debt collector," if the assignee's principal purpose is the collection of debts, or the assignee regularly engages in the collection of debts. "For instance, a mortgage servicing company is not considered a debt collector when it acquires loans originated by others and not in default at the time acquired. However, to the extent the mortgage servicing company receives delinquent accounts for collection it is a debt collector with respect to those accounts."

Under this test, a company which acquires a block of receivables is a "debt collector" with respect to those receivables in default at the time of acquisition. The leading case is Kimber v. Federal Financial Corp., where the purchaser of credit card receivables from W.T. Grant, which had gone bankrupt, was held to be a "debt collector" with respect to those receivables which were delinquent at the time they were acquired. The court stated:

The first part of 1692a(4) defined the universe of creditors as either those who originate a debt or those to whom a debt is owed; in either case, the creditors are not collecting the debts for others. The second part of 1692a(4), the assignee exception, then purports to exclude from this universe those persons who collect assigned or transferred debts that are already in default when assigned or transferred. To say that this exception applies only to those who collect debts for others would be to render the exception superfluous and meaningless; those who collect debts for others are not in the original definitional universe, and there is therefore no need to exclude them. Rather, the excluding factors in the exception are that the debts are the result of an assignment or transfer and that the debts were already in default at the time of assignment or transfer. With the phrase `for another' at the end of the exception, Congress merely intended that the debts should have originally belonged to another and that the creditor was therefore in effect a third-party or independent creditor.

Similarly, in Cirkot v. Diversified Systems, the Connecticut District Court held that an entity which attempted to collect delinquent debts in loan portfolios acquired (through the FDIC) from defunct banks is a "debt collector" covered by the FDCPA with respect to the delinquent debts.

The Federal Trade Commission has expressed agreement that under the current language of the FDCPA the test of whether an assignee is a "debt collector" is whether the debt was assertedly in default at the time of its acquisition. In late 1993 the FTC proposed amending the FDCPA so that whether an assignee is a "debt collector" "will depend upon the nature of the overall business conducted by the party to be exempted rather than the status of individual obligations when the party obtained them." However, the proposal was not adopted, and the test of whether an assignee is a "debt collector" subject to the FDCPA remains "the status of individual obligations when the party obtained them." "Banks are not debt collectors if they service debts that they originated or debts that were not in default when obtained by the bank. However, if a bank services a loan portfolio, it is a debt collector for those loans in the portfolio that it did not originate and which were in default when obtained."

The successor in interest to a creditor's business or line of business, openly identified as such, has been held not to be a "debt collector."

LAWYERS AS "DEBT COLLECTORS"

Lawyers were originally excluded from the definition of "debt collector." In 1986, Congress removed the attorney exemption. Now, the "FDCPA does apply to a lawyer . . . with a general practice including a minor but regular practice in debt collection." The legislative history of the amendment states that collection attorneys were not being effectively policed by the legal profession and courts, and that the removal of the exemption was necessary to "put a stop to the abusive and harassing tactics of attorney debt collectors."

In Heintz v. Jenkins, the United States Supreme Court held that litigation conduct of attorneys in collecting consumer debts is not exempt from the FDCPA, rejecting the arguments of the collection bar to the contrary. Unlawful conduct by collection attorneys in court proceedings is now covered. However, some judges are nevertheless still reluctant to find violations based on the contents of pleadings.

The amount of collection activity necessary to make a lawyer a "debt collector" -- one who "regularly" collects consumer debts -- is minimal. A law firm's debt collection work which amounted to less than 4% of its total business brought it within the definition. "While the ratio of debt collection to other efforts may be small, the actual volume is sufficient to bring defendant under the Act's definition of 'debt collector.'" An attorney who represented four collection agencies, filed over 150 collection suits in a two-year period, and sent one particular collection letter over 125 times in a 14-month period was a debt collector even though debt collection was merely incidental to his primary law practice. Another decision holds that sending 60 collection letters during a period of several weeks is sufficient. On the other hand, an attorney who collected less than 20 consumer debts in a 10-year period was not a debt collector.

In two questionable decisions, courts held that a nascent collection lawyer who sent out about two dozen or three dozen letters at one time was not engaged in regular debt collection.

A lawyer should be classified as a "debt collector" if either a volume threshold or a percentage-of-time threshold is met, or if the lawyer holds himself out as engaging in consumer debt collection. A volume threshold is necessary because a law firm that handles a modest number of consumer collection matters as part of providing a full range of services to its clients should be required to comply with the FDCPA. One court has held that "It is the volume of the attorney's debt collection efforts that is dispositive, not the percentage such efforts amount to in the attorney's practice." The Fifth Circuit has held that a law firm that sent out 600 demand letters was a "debt collector" notwithstanding the fact that only a small fraction of its time was spent in that activity.

A percentage threshold and a "holding out" test are also necessary because the FDCPA should apply to (i) a lawyer with a nascent collection practice and (ii) a lawyer who attempts to obtain collection business, even if he is not successful in obtaining very much of it.

MASS MAILERS

Several recent decisions held that companies which provide debt collectors with the service of generating and mailing large numbers of form letters, but do not participate in the composition of the letters and are not compensated based on the amounts received, are not debt collectors. A related decision held that Western Union is not a "debt collector" where all it does is transmit a collection message.

CREDITORS THAT USE MASS MAILERS

It should follow from the last point that where a creditor hires a company that merely mails letters without further collection activity, or otherwise engages in conduct not sufficient to make it a debt collector, and the name of the mailer or another third party is used on the mailings, the creditor is both (a) making itself a debt collector under the 1692a(6) proviso and (b) engaging in deceptive collection efforts in violation of 1692e. See II.B.3, supra.

OTHER "DEBT COLLECTOR" ISSUES

The Ninth Circuit has held that Western Union could be a "debt collector" as a result of furnishing its "Automated Voice Telegram" service:

As the company's advertisements acknowledge, the AVT service was "specially developed for the credit and collections industry." The dual role of the service is to 1) retrieve unavailable telephone numbers for creditors and debt collection agencies; and 2) to catalyze debt collection activity through telegrams bearing the Western Union name. As noted above, Western Union's advertisements state that its "revolutionary new collections service" will "stimulate recoveries dramatically."

Western Union contends that, in requiring telegram recipients to release their telephone numbers, it is merely "confirming" the numbers in compliance with the FCC-approved tariff governing the AVT service. We find this argument to be disingenuous. As appellant notes, "one cannot 'confirm' what one does not know." In the case at bar, the parties have stipulated that neither Western Union nor DCS knew Appellant's telephone number prior to receiving his response to the telegram. To confirm is to corroborate, and one cannot corroborate a confirmation process is that the number reported verbally by Appellant matched the number on Western Union's caller ID screen. This does not confirm the identity of the caller, but merely shows that the caller has candidly reported the from which he telephoned. Because obtaining the telephone number does not serve to identify the calling party, there is no essential reason for requiring disclosure of the number. The chief purpose of the alleged "confirmation" process is to obtain unlisted or otherwise unavailable telephone numbers which Western Union then turns over to creditors and debt collection agencies.

Check guaranty agencies, which purchase dishonored checks from merchants and seek to collect them from consumers, are "debt collectors."

The franchisor of a check collection company had such right of control over its franchisee as to make the franchisee its agent with regard to the franchisee's acts so as to subject the franchisor to coverage of the FDCPA.

Repossession agencies are not debt collectors within the FDCPA unless they perform common collection services, such as sending dunning letters, making telephone calls, etc. The fact that the repossessed property is sold and applied to the debt is not enough. An unusual Seventh Circuit decision holds that the imposition of a modest fee ($25) by a repossessor does not violate the FDCPA.

WHAT IS A "COMMUNICATION"

Certain substantive prohibitions of the FDCPA apply to "communications." 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). Usually this takes the form of dunning letters or telephone calls. However, the term is broadly and literally construed to encompass other forms of conveying information as well.

WHO IS ENTITLED TO SUE

The FDCPA applies to "consumer" debts, and certain substantive provisions, e.g., 1692c, only protect "consumers." A "consumer" is "any natural person obligated or allegedly obligated to pay any debt." 15 U.S.C. 1692a(3). The consumer's executrix has standing to bring an FDCPA action.

It should be noted that certain substantive protections of the FDCPA are not limited to "consumers," e.g., 1692e. Persons who do not in fact owe money but who are subjected to improper practices by debt collectors are entitled to the protection of the FDCPA.

XXXI. VIOLATIONS

LEAST SOPHISTICATED OR

UNSOPHISTICATED CONSUMER STANDARD

Most courts have held that whether a communication or other conduct violates the FDCPA is to be determined by analyzing it from the perspective of the "least sophisticated debtor." "The basic purpose of the least-sophisticated-consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd."

The Seventh Circuit has held that a violation should be determined from the perspective of the "unsophisticated consumer." Since the "least sophisticated consumer" has never been interpreted to impose liability for bizarre or idiosyncratic interpretations of collection demands. It does not appear that the difference in language represents a significant difference in substance. This was confirmed by a later Seventh Circuit decision, Avila v. Rubin, which held:

We reiterate our standard today, but we don't want to be involved in the splitting of split hairs. Anyway it's viewed, the standard is low, close to the bottom of the sophistication meter. * * *

Gammon does not significantly change the substance of the "least sophisticated consumer" standard as it had been routinely applied by courts. Instead, Gammon concluded that the term "unsophisticated consumer" is a simpler and less confusing formulation of a standard designed to protect those of below-average sophistication or intelligence. As a result, the court stated "we will use the term, 'unsophisticated,' instead of the phrase, 'least sophisticated,' to describe the hypothetical consumer whose reasonable perceptions will be used to determine if collection messages are deceptive or misleading." Gammon, 27 F.3d at 1257. The new terminology reconciles the former standard's literal meaning with its application. Id. As Avila correctly observes, the unsophisticated consumer standard is a distinction without much of a practical difference in application.

A district court in the Seventh Court has described the standard as follows:

The Seventh Circuit evaluates communications from debt collectors "through the eyes of an unsophisticated consumer." Jang v. A.M. Miller & Assocs., 122 F.3d 480, 483-84 (7th Cir. 1997); see Avila v. Rubin, 84 F.3d 222, 226 (7th Cir. 1996). The unsophisticated consumer is a "hypothetical consumer whose reasonable perceptions will be used to determine if collection messages are deceptive or misleading." Gammon v. GC Serv. Ltd. Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994). This presumes a level of sophistication meter," Avila 84 F.3d at 226, and "protects the consumer who is uninformed, naive, or trusting," Jang, 122 F.3d at 483-84 (quoting Gammon, 27 F.3d at 1257). Still, the standard "admits an objective element of reasonableness," which "protects debt collectors from liability for unrealistic or peculiar interpretations of collection letters." Id. (citation and internal quotations omitted).

The Fifth Circuit, perceiving no substantial difference between the two standards, has declined to select between them.

Avila v. Rubin also rejected a defense contention that it is necessary to prove, by direct testimony or survey evidence, that someone was actually misled by a collection notice:

We also think the defendants' reliance on false advertising cases from trademark law is unavailing here. Section 43(a)(2) of the Lanham Act prohibits statements that are (1) literally false and (2) statements that, while literally not false or ambiguous, convey a false impression or are misleading in context. See, Abbott Laboratories v. Mead Johnson & Co., 971 F.2d 6, 13 (7th Cir. 1992). The general rule is that if a statement is literally false, the court may grant relief without reference to the reaction of buyers or consumers of the product. On the other hand, if a statement is not literally false, the court may find that it is impliedly misleading only if presented with evidence of actual consumer deception. Id. at 14.

Avila claims Van Ru contradicted the validation notice and that Rubin both contradicted the validation notice and improperly sent attorney form letters. These claims resemble a literally false statement more than an ambiguous but potentially misleading statement. Just as the analysis involved in evaluating a literally false statement turns on whether the statement is true or false, the language in the collection letters either contradicts the validation notice or it does not.

Under either the "least sophisticated" or "unsophisticated" consumer standard, a collection communication which can plausibly be read in two or more ways, at least one of which is misleading, violates the law.

VALIDATION OR VERIFICATION NOTICE

One of the most important rights conferred by the FDCPA is the debtor's right to "validation" or "verification" of a debt under 1692g. "This provision will eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid." Under 15 U.S.C. 1692g:

(a) 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 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.

15 U.S.C. 1692g(a). These warnings are commonly referred to as "civil Miranda warnings" by debt collectors.

It is sufficient that the collector send the notice; nonreceipt does not amount to a violation if it was sent.

Section 1692g(b) then provides that if the consumer disputes the debt in writing, the collector must cease further collection efforts until the validation procedure is complied with:

Disputed debts

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section 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 a 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.

Although the notice literally requires the debt collector to provide validation information, the Seventh Circuit has held that the debt collector does not violate the statute if it ceases all further collection activities without providing the information.

The Fourth Circuit has held that "verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed; the debt collector is not required to keep detailed files of the alleged debt."

RELATIONSHIP WITH 1692e(8)

Section 1692g is related to 1692e(8). Under 1692e(8), if a consumer disputes a debt, either orally or in writing the debt collector cannot report it as undisputed to a credit bureau. Thus, if the consumer orally disputes the debt, the debt collector cannot assume that the debt is valid or report it as undisputed to a credit bureau, but need not provide validation information to the debtor.

OVERSHADOWING

Under 1692g, is not enough for a debt collector to merely include the notice somewhere on the collection letter. The notice must be large and prominent enough to be noticed and easily read. The validation notice may not be either "overshadowed" or contradicted by other language or material in the original or subsequent collection letters. "A notice is overshadowing or contradictory if it would make the least sophisticated consumer uncertain as to her rights."

The Seventh Circuit has held that demands for "immediate" or "urgent" payment overshadow and contradict the 1692g notice unless a full explanation of the relationship between the demand and the debtor's validation rights. In Chauncey v. JDR Recovery Corp., the Seventh Circuit held that a letter insisting that the collector receive a check within 30 days in one paragraph (a demand which would require the debtor to transmit the check in less than 30 days) followed by the 1692g notice in the next, and concluding with a demand for a "prompt response" to avoid "further collection activities" violated 1692g. The text of the letter was as follows:

Dear Carl P. Chauncey,

Please be advised that we have been requested by [Bridgestone/ Firestone] to assist them in the collection of the amounts due set forth above. Unless we receive a check or money order for the balance, in full, within thirty (30) days from receipt of this letter, a decision to pursue other avenues to collect the amount due will be made.

Unless you notify this office within thirty (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 thirty (30) days from receiving this notice that you dispute the debt or any portion of it, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification. If you request this office in writing within thirty (30) 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.

This is an attempt to collect on this debt. Any information obtained will be used for that purpose.

You may contact Ms. Mackenzie at (800) 793-3369 if you have any questions or if you would like to discuss this matter further.

Please include the above JDR number on the outside of your remittance envelope to insure proper credit. We trust your prompt response will make any further collection activities unnecessary. In the event we do not hear from you within the next thirty (30) days, further collection activities will be pursued to the extent permitted by law.

The Court of Appeals agreed that "the thirty-day payment requirement set out in the [first paragraph of the] collection letter contradicts the mandatory validation notice disclosures allowing thirty days to dispute the debt." It explained:

The statement in the first paragraph of defendant's letter -- "Unless we receive a check or money order for the balance, in full, within thirty (30) days from receipt of this letter, a decision to pursue other avenues to collect the amount due will be made" -- contradicts the language in the letter explaining the plaintiff's validation rights under the FDCPA, which allows plaintiff 30 days in which to dispute the debt and request verification. We believe that the contradictions in the letter, as in Avila, would leave an unsophisticated consumer confused as to what his rights are and therefore violate the FDCPA.

Defendant argues that the letter contains no contradiction because plaintiff is given the same amount of time to pay as to contest the debt (i.e., "within thirty (30) days"). But the letter required 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. In contrast, subparagraphs (3) and (4) of 1692g(a) give the consumer thirty days after receipt of the notice to dispute the validity of a debt. It is clear that Mr. Chauncey had the full thirty days to send his notification to defendant. Nothing in Section 1692g requires, and we have found no other court decision which has required, that the debt collector must receive notice of the dispute within thirty days as defendant insists. . . .

In Bartlett v. Heibl, defendants' letter threatened legal action within the 30-day validation period by demanding that the debtor make payment within one week or other suitable arrangements. The letter also contained a paraphrase of 1692g's language. Even though the letter did not misstate either parties' legal rights, the Seventh Circuit found that the letter was confusing and violated 1692g because it contained the seemingly contradictory statements that the debtor had 30 days to verify his debt and that he could also be sued in one week.

The court concluded, by way of an exemplary "safe harbor" letter, that if a debt collector threatens suit within the 30-day validation period, it should also provide the debtor with a full explanation of the relationship between the creditor's right to sue and the debtor's right to verification. A very similar solution was endorsed by the Second Circuit in Savino v Computer Credit, Inc..

Debt collectors using the "safe harbor" letter need to adhere to it strictly. The reference to suit within 30 days may not be used without the explanation that exercise of verification rights will halt the collection process. Also, the reference to 30 days should specify "after receipt."

In Johnson v. Revenue Mgmt. Corp., the Seventh Circuit held that two letters could be found to violate 1692g, if they in fact increased consumer confusion. Both letters contained a paraphrase of the statutory notice. The letter to Lenora Johnson added:

If you fail to make prompt payment we will have no alternative but to proceed with collection, which may include referring this account for legal action or reporting this delinquency to the credit bureau.

Should you wish to discuss this matter, contact our office and ask for extension 772.

The letter to Brendt Wollert added:

The above account has been placed with our firm for payment in full.

Call our office immediately upon receipt of this letter. Our toll free number is 1-800-521-3236.

The Johnson court stated that survey or similar evidence may be necessary to establish that the quoted statements in fact increased consumer confusion as to their 1692g rights.

Any language suggesting that action within 30 days is necessary, may create a 1692g problem. Prior cases to the contrary may be invalid under Bartlett.

In Ozkaya v. Telecheck Services, the district court dealt with a letter which stated:

Telecheck has purchased the check referenced in this notice. As a result, we have entered your name in our NATIONAL COMPUTER FILES. Until this is resolved, we may not approve your checks or the opening of a checking account at over 90,000 merchants and banks who use Telecheck nationally.

We have assigned your file to our Recovery Department where it will be given to a professional collection agent. Please be aware that we may take reasonable steps to contact you and secure payment of the balance in full.

In order for us to update your file quickly, send a cashier's check or money order for the Total Amount Due in the return envelope provided.

It is our intent to resolve this as quickly and as amicably as possible for all parties concerned. Any delay, or attempt to avoid this debt, may affect your ability to use checks.

The court held that the demand for "quick" payment coupled with the suggestion that the debtor's credit could be adversely affected resulted in a valid overshadowing claim:

The Bartlett court's generous definition of overshadowing and its willingness to direct judgment for the debtor, as well as the factual congruence between this case and Russell and Swanson, convince us to allow the claim to proceed. Telecheck's warning that "any delay" in payment "may affect your ability to use checks" could confuse the unsophisticated consumer because it fails to explain how this comports with her thirty-day right to contest the debt. See Bartlett, 128 F.3d at 500 (explaining that creditor's right to sue and debtor's right to dispute the debt are "not inconsistent, but by failing to explain how they fit together the letter confuses."). Ozkaya may well have wished to assert a defense for nonpayment -- that the car repairs were not made correctly -- but feared that she did not really have thirty days to dispute the debt if doing so would be seen as "a delay" or an "attempt to avoid the debt" punishable by a sudden inability to write checks. Compl. Ex. A. Telecheck compounded the confusion by urging Ozkaya to resolve the dispute "quickly" when, in fact, she had at least thirty days.

Just as in Russell and Swanson, which involved implied threats to a debtor's credit purchasing power, Ozkaya could "readily believe" that her ability to undertake a fundamental financial transaction -- writing checks -- would be severely affected if she did not pay the debt with haste. In its first communication to Ozkaya, Telecheck stated that it had already entered her name into its "national computer files." This language creates an even greater sense of urgency than the Swanson debt collector's statement about posting the debtor's account to its "master file" after ten days should the debtor fail to pay. Telecheck's letter also presents a stronger case for overshadowing than the communications in Russell or Swanson because they involved implied threats (posting the collections to the agency's file), not explicit threats to ruin the debtor's credit. Telecheck's language is far more direct; the letter told Ozkaya that she could be prevented from writing checks or opening a checking account "at over 90,000 merchants and banks who use Telecheck nationally . . . until this is resolved." An unsophisticated consumer could interpret this to mean that until she pays, she will not be able to write checks -- anywhere -- because her name is already on some "bad check" list that has been distributed across the country. (982 F.Supp. at 583-4).

Another example of "overshadowing" is furnished by Miller v. Payco-General American Credits, Inc., where the debt collector's "screaming headlines, bright colors and huge lettering" utilizing language "IMMEDIATE FULL PAYMENT", "PHONE US TODAY" and "NOW", were held to have overshadowed the 30 day validation notice. Another letter disapproved by a court stated in type several times that of the required validation language "IF THIS ACCOUNT IS PAID WITHIN THE NEXT 10 DAYS IT WILL NOT BE RECORDED IN OUR MASTER FILE AS AN UNPAID COLLECTION ITEM. A GOOD CREDIT RATING -- IS YOUR MOST VALUABLE ASSET."

In Russell v. Equifax A.R.S., the court held:

A notice is overshadowing or contradictory if it would make the least sophisticated consumer uncertain as to her rights. It is not enough for a debt collection agency simply to include the proper debt validation notice in a mailing to a consumer -- Congress intended that such notice be clearly conveyed. See Swanson v. Southern Or. Credit Serv., Inc., 869 F. 2d 1222, 1225 (9th Cir. 1988) (per curiam). Here the initial February notice failed to convey the validation information effectively. We recognize there are many cunning ways to circumvent 1692g under cover of technical compliance, see Miller v. Payco-General Am. Credits, Inc., 943 F.2d 482, 485 (4th Cir. 1991), but purported compliance with the form of the statute should not be given sanction at the expense of the substance of the Act. Since the language on the front of the notice overshadowed and contradicted the language on the back of the notice, causing the validation notice to be ineffective, the February notice violated 1692g as a matter of law.

A collection letter from an attorney demanding payment within ten days upon the threat of suit was held to have contradicted the 30 day validation notice. Similarly, demands for an "immediate" response or "immediate payment" have been held to overshadow and contradict the validation notice. Confusing statements such as "if the above does not apply to you, we shall expect payment or arrangement for payment within ten (10) days from the date of this letter," also violate the statute.

Sending a subsequent letter demanding action prior to the expiration of the validation period violates 1692g.

In a questionable decision, Ninth Circuit held that in order to give rise to a valid overshadowing claim, the action or response which the collector must demand "immediately" is payment. The court explained:

It is particularly significant that the challenged language in this matter does not require payment "immediately." It merely requests a phone call. A demand for payment within less than the thirty-day timeframe necessarily requires the debtor to forego the statutory right to challenge the debt in writing within thirty days, or suffer the consequences. For this reason, requiring a payment that would eliminate the debt before the debtor can challenge the validity of that debt directly conflicts with the protections for debtors set forth in section 1692g. The request that the debtor telephone the collection agency does not contradict the admonition that the debtor has thirty days to contest the validity of the debt. This language simply encourages the debtor to communicate with the debt collection agency. It does not threaten or encourage the least sophisticated debtor to waive his statutory right to challenge the validity of the debt.

We are persuaded that the form and content of the additional language contained in Kaplan's initial communication did not overshadow or contradict the validation notice. . . .

However, the Seventh Circuit held to the contrary in Johnson v. Revenue Mgmt. Corp., supra.

Even where a demand for immediate payment is required, it can be implied as well as express. A letter may overshadow if the overall effect is to convey that message. In Jenkins v. Union Corp., the court considered a letter which stated:

URGENT - THIS ACCOUNT HAS BEEN ASSIGNED TO OUR AGENCY FOR IMMEDIATE COLLECTION.

PLEASE BE ADVISED THAT WE HAVE BEEN AUTHORIZED TO PURSUE COLLECTION AND ARE COMMITTED TO MAKE WHATEVER EFFORTS ARE NECESSARY AND PROPER TO EFFECT COLLECTION.

STRONGLY RECOMMEND YOU CONTACT OUR CLIENT TO MAKE PAYMENT ARRANGEMENT.

The court found this to violate 1692g, holding:

Terrafino likewise challenges the legality of his initial dunning letter, dated August 22, 1995. although this letter does not use the words "immediate payment," we conclude that, viewed as a whole, the letter creates an apparent and unexplained contradiction between message and the thirty-day validation rights discussed at the bottom of the letter.

The letter begins with the declaration "URGENT," this is followed by a statement informing Terrafino that his account has been "assigned to our agency for immediate collection." Contrary to Transworld's assertions, the unsophisticated consumer is likely to understand "immediate collection" as an effort to extract immediate payment form him, not as a reference to the collector's duties. While Bartlett, makes clear that a debt collector need not suspend collection efforts during the validation period, these efforts run afoul of the FDCPA if they create an unexplained contradiction that confuses the debtor. 128 F.3d at 500. The confusion in this letter is compounded by its last sentence, which "strongly recommends you contact our client to make payment arrangement." Read together, the reference to "immediate collection" and the "strong" recommendation to contact the creditor to arrange for payment are the substantive equivalent of the request for immediate payment in Jenkins' first letter.

A collection letter that does not expressly request immediate payment can also overshadow the validation notice by creating a confusing impression of urgency, when, in reality, the consumer has thirty days in which to decide on his course of action. See Ozkaya v. Telecheck Servs., Inc., 982 F.Supp. 578, 583-84 (N.D. Ill. 1997) (plaintiff stated valid overshadowing claim where offending letter was confusing because it "urg[ed] [plaintiff] to resolve the dispute 'quickly' when, in fact, she had at least thirty days.") Terrafino's letter begins by proclaiming that it is "URGENT"; the sense of urgency is further communicated by the "immediate collection" language and in the letter's express request for action -- a "strong" recommendation in the final paragraph that Terrafino contact the creditor to make payment arrangement. The middle paragraph sounds pressing and ominous as well: "Please be advised that we have been authorized to pursue collection and are committed to make whatever efforts are necessary and proper to effect collection." We find that this language creates an apparent contradiction with the validation notice by creating a false sense of urgency.

Accordingly, we grant Terrafino summary judgment on his overshadowing claim premised on the language in his first letter, and deny defendants' cross motion for summary judgment on this claim. We emphasize, however, that our decision to grant Terrafino summary judgment on this ground is based on the letter read as a whole, not on any one phrase scrutinized in isolation.

Requests that the consumer telephone the debt collector induce the consumer to waive his right to verification by failing to make the request in writing, as required. "A consumer calling the defendant would not be exercising her validation rights and would not be entitled to the statutory cessation of debt collection activities." On the other hand, the inclusion of a settlement offer that expired shortly before the end of the validation period has been held not to violate 1692g.

The notice should specify that the debt has 30 days after receipt of the letter to dispute the debt.

Eviction notices that are sent out by a "debt collector" and demand money in less than 30 days violates the FDCPA. However, if the landlord or servicing agent sends the notice it is not a "debt collector" subject to the FDCPA.

Recent cases hold that any contradiction of the 1692g warnings is a violation, and that it is not necessary to establish a violation that the contradiction be "threatening" or visually overshadow the required notice. In other words, anything that confuses unsophisticated consumers as to their 1692g rights, is sufficient to violate 1692g.

OTHER 1692g VIOLATIONS

Where the validation notice is placed on the back of the correspondence, without a legible and reasonably prominent reference on the front, 1692g is violated. However, the enclosure of a separate 8-1/2 x 11" validation notice in the same envelope has been found to be acceptable.

The FTC staff has stated that a debt collector may not charge for furnishing validation information. One decision held that such a charge did not violate 1692g per se, but found it unlawful under 1692f on the ground that it was not authorized by contract or law.

A debt collector violates 1692g by failing to provide its address so that the debtor can exercise his right to validate the debt. Failure to include the collector's address violates 1692g even if the complete text of the 1692g notice is provided and nothing requires action in less than 30 days.

Directing the consumer to contact the creditor rather than the debt collector if he disputes the debt violates 1692g. Contacting the creditor does not preserve the consumer's rights.

DEBT COLLECTION WARNING: 15 U.S.C. 1692e(11)

Effective December 30, 1996, 15 U.S.C. 1692e(11) was amended to prohibit:

The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.

Section 1692e(11) formerly required that the debt collector "disclose clearly in all communications made to collect a debt or to obtain information about a consumer, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose." 15 U.S.C. 1692e(11).

Prior to the enactment of the FDCPA, debt collectors would send people mail purporting to seek employment references, inviting the recipient to collect a prize, or otherwise disguising its true purpose. One enterprising pair of debt collectors operated under such names as "National Research Company," "National Marketing Service," "United States Credit Control Bureau," "Claims Office," "Bureau of Verification," "Bureau of Reclassification," "Reverification Office" and "Disbursements Office". They would disseminate -- at the rate of 700,000 every six months -- forms with titles such as "Current Employment Records" and "Change of Address" and requesting address, employment, banking, and similar information. They also sent out "Claimants Information Questionnaires" asking the recipient to verify that he or she was the party entitled to receive unclaimed money. Other debt collectors used notices representing that the sender had correspondence or packages for delivery to a debtor; these would be sent to references used by a debtor.

In re London Credit & Discount Corp., debt collectors sent letters purporting to be connected with auditing procedures. The collectors were enjoined from "Representing, directly or by implication, that any letter, demand, inquiry or other communication originated by respondents was originated by an independent auditing or any other person, firm or corporation."

Another such consent order was entered in In re Marjorie P. Ingram, where the collectors were enjoined from falsely "representing, directly or by implication, that the respondents are engaged in the business of auditing the accounts and records of others." See also, Opinion of the Attorney General of the State of Arizona, 77-174, finding it improper for a collection agency to send out documents entitled "Audit Verification."

Yet other collectors called themselves "State Credit Control Board", "Business Research" and "Affiliated Credit Exchange," "Manpower Classification Bureau" and "American Deposit System," "General Forwarding System," "National Retail Board of Trade" and "National Liquidators, Inc.", "Retail Board of Trade," "Allied Information Service" and "National Deposit System," "Cavalier Reserve Fund" and "Liberty Reserve Fund," and "National Clearance Bureau."

Another collection agency called itself the "United States Association of Credit Bureaus." The use of this name was held to violate 5 of the FTC Act on the ground that it was not an "association," or a "credit bureau," nor connected with the "United States."

Under the original version of 1692e(11), five appellate courts held that the debt collection warning must be included in all communications, while an early decision from the Ninth Circuit held that this warning was not required in "follow up letters," whatever that means.

The only courts to have addressed the effect of the 1996 amendment stated that it was intended to adopt Pressley and that use of the precise language is not required.

MISLEADING NOTICES OF RIGHTS

Certain states (Colorado, Massachusetts) require that additional notice of rights be furnished to consumer. These notices are sometimes (1) included in collection notices sent to other states (for the convenience of the debt collector) and (2) provided in a manner that suggests that consumers in other states do not have these rights, when they do. In Jenkins v. Union Corp., supra, the court held that such misleading notices violate the FDCPA:

Plaintiffs next take issue with the contents of -- rather, omissions from -- the reverse side of Transworld's dunning letter. On the back of each letter that Transworld sent the plaintiffs are selected state collection law provisions. One paragraph under the heading "COLORADO" explains that the state's law prohibits a debt collector from contacting the debtor at home or work if the debtor requests cessation of contact. n11 Plaintiffs claim that this notice is misleading under 15 U.S.C. 1692e, as well as unfair and unconscionable under 1692f, because it is not printed in conjunction with the FDCPA's analogous provisions. See 15 U.S.C. 1692c(c). Printing these consumers protections only under the "Colorado" heading, plaintiffs argue, deceives the debtor into believing that only Colorado residents are entitled to end collection agency contact when, in fact, this right is extended to all consumers, regardless of their residence, under the FDCPA.

The Colorado and federal statutes differ in an important way, however. Colorado law requires collection agencies to notify Colorado consumers about these cessation rights, in writing, along with their initial collection communications. See Colorado Rev. Stat. 12-14-105(3)(c). The FDCPA, on the other hand, does not require debt collectors to disclose the analogous federal rights in any debt collection letter.

The plaintiffs retort that the Colorado statute does not require this information to be accompanied by the "Colorado" heading. They argue this heading, which appears in letters sent across the country, misleads unsophisticated consumers from other states into believing that the right to end debt collection communications belongs exclusively to Colorado residents. Unaware of their parallel federal section 1692c(c) rights, these consumers will likely continue to receive unwanted contact. The plaintiffs go on to suggest a number of alternative ways that Transworld's letters could provide the information from both statutes.

Transworld responds that this Court should follow the ruling in Brown v. ACB Business Servs., Inc., 1996 U.S. Dist. LEXIS 11826, 1996 WL 469588, at *3 (S.D.N.Y. Aug. 16, 1996), which rejected an identical section 1692e claim challenging the omission of section 1692c disclosures from letters that printed analogous state provisions. The Brown court admitted that consumers "could be misled as to the scope of his or her rights by the state disclosures" but explained that "this court is constrained by