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Second Circuit Holds Failure to Disclose Fees and Interest Accrual on Debt Violates the FDCPA

Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2nd Cir. 2016).

According to a recent Second Circuit opinion (in line with a past Seventh Circuit opinion), the FDCPA requires debt collectors to disclose to consumers if account balances will increase due to interest or other fees.

In Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2nd Cir. 2016), the Court found collection notices sent to consumers, without expressly stating the balances were subject to increase, violate the FDCPA. In Avila, consumers were sent collection notices with the amount due identified as “Current Balance.” Relying on the FDCPA’s purpose of protecting consumers, the Court held this was a deceptive practice because, “[a] reasonable consumer could read the notice and be misled into believing that she could pay her debt in full by paying the amount listed on the notice.  In fact, however, if interest is accruing daily, or if there are undisclosed late fees, a consumer who pays the ‘current balance’ stated on the notice will not know if the debt is paid in full.” Id. at 76.

The holding is in accord with the Seventh Circuit’s opinion in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, LLC, 214 F.3d 872 (7th Cir. 2000). Although there is not consensus across all Federal Circuits on this issue, we recommend collectors use language similar to the safe-harbor provision outlined in Miller in any collection notice sent for an account where the balance is subject to increase. Contact us if you need additional information on the safe harbor language outlined in Miller and buttressed by Avila.