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Tocco v. Real Time Resolutions

The fair Debt Collection Practices Act requires subsequent debt collectors to notify consumers in writing, even if the prior holder or debt collector had already given notice, a federal judge has ruled.

Deciding an issue that has divided courts, Southern District Judge William Pauley III said secondary collectors still must send a validation notice to avoid confusion by consumers over who holds the debt and whether they have the right to contest it.

In Tocco v. Real Time Resolutions, 14-cv-810, Pauley said the requirement of a validation notice in 15 U.S.C. §1692g “applies to initial communications from each successive debt collector.”

Under §1692g, once a debt collector has initially contacted the consumer, it must send, within five days, a notice stating the amount of the debt, the name of the creditor and a statement that the debt will be assumed valid if the consumer does not dispute it within 30 days of receiving it.

If any portion of the debt is disputed, the collector has to send verification of the debt to the consumer as well as a statement that, at the consumer’s written request, the collector will send the name and address of the original creditor if it is different from the current creditor.

Plaintiff Angelique Tocco filed a putative class action in the Southern District in 2014 against Real Time Resolutions, a debt collector that sent her a form letter on July 31, 2013 informing her that the servicing of her mortgage had been transferred to Real Time.

Tocco’s complaint alleged that the form letter failed to disclose the current owner of the debt and lacked the required notice of dispute.

Tocco also alleged that a second letter she received on Oct. 1, 2013, one that advised her of options to resolve her past due account, did not disclose the amount of the debt, identify the creditor, or inform her of her right to dispute the debt.

Real Time made an offer of judgment for $1,100 plus reasonable costs and attorney fees, but Tocco rejected it.

Real Time then moved to dismiss the complaint, arguing before Pauley that neither the July 31 nor the Oct. 1 letters were “initial communications” under the FDCPA because Tocco had already engaged in litigation over the same debt with the Real Time’s predecessor-in-interest, Solace Financial.

Pauley, noting a division among courts that have considered the issue, rejected that argument in an opinion issued Wednesday.

“Reading the text broadly to effect the FDCPA’s consumer-protective purpose, this court holds that a debt collector must send a validation notice under section 1692(a) even if a prior debt collector already sent a notice regarding the same debt,” he said. “This interpretation is consistent with the recommendations of the Federal Trade Commission and forecloses some confusion a consumer might experience when faced with a successive debt collector.”

As an example, Pauley said, “a consumer who has challenged an initial debt collector to verify a debt may not realize she has the same right with respect to a subsequent collector.”

Real Time also contended that the July letter did not require FDCPA notice because it was already required to give notice under another law—the Real Estate Settlement Procedures Act.

The company said its July 31 letter was informational only and did not explicitly demand payment, and therefore falls outside the FDCPA’s notice requirements for any communications “in connection with the collection of any debt.”

Pauley said, “Several courts have embraced this distinction between informational letters and attempting to collect a debt,” but the U.S. Court of Appeals for the Second Circuit has yet to weigh in. Pauley read the statute differently from the courts that have made the distinction.

“The fact that a letter may have been a required informational notice under a separate statute does not prevent it from being an initial communication ‘in connection with the collection of [a] debt’ under the FDCPA,” he said. “‘In connection with’ is synonymous with the phrases ‘related to,’ ‘associated with,’ and ‘with respect to.'”

The phrase is “expansive,” he said. “And it is broad enough to encompass a letter identifying a new debt collector, providing an address for future payments and warning ‘[t]his is an attempt to collect on a debt and any information obtained will be used for that purpose.'”

Real Time had argued that reading the requirements that broadly would bring every communication between a debt collector and a debtor under the act. Pauley disagreed.

“[I]t is not burdensome for a debt collector contacting a debtor in ‘an attempt to collect a debt’ to, at least that first time, include the full set of section 1692 notices or follow up with them in five days,” he said. “To do otherwise risks confusing the debtor.”

Pauley also resolved another question that has split the courts on Federal Rule of Civil Procedure 68, which permits a defendant to “serve on an opposing party an offer to allow judgment on specific terms.”

Under the rule, a plaintiffs claim is rendered moot when an offer of the judgment exceeds what the plaintiff could recover.

Pauley said neither the U.S. Supreme Court nor the Second Circuit has addressed the effect a Rule 68 offer has before a court has had the opportunity to resolve a motion for class certification under Rule 23, but some courts have held that Rule 68 cannot be enforced prior to a decision on certification because it would allow defendants to “pick off” individual name plaintiffs until the certification decision is made by a different, perhaps more favorable judge.

Here, he said, Tocco asked permission to file for certification, and Pauley treated the request as a motion for such.

“If a Rule 68 offer made before a plaintiff had a reasonable time to move for class certification would not moot a claim, then by extension a Rule 68 offer made after the plaintiff has moved for class certification should not do so,” he wrote.

Abraham Kleinman, of Kleinman LLC in Uniondale and Tiffany Nicole Hardy of Edelman, Combs, Latturner & Goodwin in Chicago represent the plaintiffs.

Kleinman said Thursday the judge got it right.

“The original Tocco case versus Solace Financial—that was a case that listed Lehman Brothers as the current creditor and, at that date, Lehman Brothers was defunct, it was gone,” he said. “So who owns this lady’s mortgage?”

Geoffrey Garrett Young and Casey Devin Laffey of Reed Smith represented the defendants.