New Case Impacts Validation Process

New Case Impacts Validation Process

Collectors may be required to provide consumer additional proof of debt information than is currently customary.

Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 13-2026, 2014 WL 3440174 (6th Cir. July 16, 2014).

On July 16, 2014, the United States Court of Appeals in the Sixth Circuit found, pursuant to the FDCPA, “verification of a debt requires a debt collector to provide the consumer with notice of how and when the debt was originally incurred or other sufficient notice from which the consumer could sufficiently dispute the payment obligation.”

The plaintiff, a condominium owner, brought action against the collector law firm, alleging violations of the FDCPA and Michigan Collection Practices Act.  On behalf of condominium homeowner association (“HOA”), the collector attempted to collect unpaid HOA assessments/fines from the plaintiff.  The plaintiff disputed the debt within the 30 day period pursuant to FDCPA § 1692g and the collector provided him a recent copy of his HOA account ledger (the “POD”).  The plaintiff contacted the collector again and disputed the POD and requested more information regarding at least one line-item appearing on the account ledger.  The collector responded a second time to the plaintiff and provided another account ledger evidencing the HOA debt.

The plaintiff argued the collector did not adequately verify the debt as required in § 1692g(b).

The FDCPA does not specify what the process of “verification” requires.  As a matter of first impression, the Sixth Circuit took on the question in Haddad.  The court found that the POD information provided to Haddad was inadequate for the plaintiff to “sufficiently dispute the payment obligation.”  The court explained that the FDCPA’s verification provision “must be interpreted to provide the consumer with notice of how and when the debt was originally incurred or other sufficient notice from which the consumer could sufficiently dispute the payment obligation. This information does not have to be extensive. It should provide the date and nature of the transaction that led to the debt, such as a purchase on a particular date, a missed rental payment for a specific month, a fee for a particular service provided at a specified time, or a fine for a particular offense assessed on a certain date.”

This development is especially relevant for our clients collecting medical and higher education obligations in that the POD is often presented in a way that could be confusing for the least sophisticated consumer.

The Fifth Circuit Court of Appeals oversees the federal courts in Kentucky, Michigan, Ohio, and Tennessee.

Please contact the firm if you have additional questions regarding the impact of this case.

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