4th Cir. Says FDCPA Plaintiff Need Not Dispute Debt First in Order to Sue; Debt Collector Can’t Wait for Creditor to Tell Debt Collector that Debtor Paid if Debtor Says He Paid the Creditor Instead of the Debt Collector

In Russell v. Absolute Collection Services, Inc., — F.3d —-, 2014 WL 3973792 (4th Cir. 2014), the Court of Appeals for the Fourth Circuit held that a debtor need not first dispute the debt before he can sue under 15 USC 1692e. The Fourth Circuit also held that a debt collector needs to follow up with the creditor if the debtor tells the debt collector that he paid the creditor instead of the debt collector.

Further, allowing debtors to raise claims under § 1692e without first contesting the debt best promotes the remedial nature of the FDCPA because it preserves debtors’ abilities to obtain a remedy for violations of the statute. See Atchison, Topeka & Santa Fe Ry. Co. v. Buell, 480 U.S. 557, 561–62 (1987) (recognizing the canon of statutory interpretation that remedial statutes are to be construed liberally). Although the statute authorizes enforcement of the FDCPA through the Federal Trade Commission, it also facilitates private enforcement by allowing aggrieved consumers to bring suit. 15 U.S.C. §§ 1692k(a), 1692 l. By providing prevailing plaintiffs statutory and actual damages, as well as reasonable attorney’s fees, Congress plainly intended to regulate unscrupulous conduct by encouraging consumers who were the target of unlawful collection efforts to bring civil actions. See id. § 1692k(a); Tolentino v. Friedman, 46 F.3d 645, 651 (7th Cir.1995) ( “The reason for mandatory fees is that congress chose a ‘private attorney general’ approach to assume enforcement of the FDCPA.”). To require debtors to dispute their debts under § 1692g before bringing suit, absent an explicit statutory directive requiring them to undertake such action, would frustrate debtors’ abilities to vindicate their statutory rights and “undermine the FDCPA’s protection of unsophisticated debtors, who would have no reason to suspect that they would be prevented from filing suit concerning deceptive communications as a consequence of failing to invoke the optional statutory validation procedure.” McLaughlin, 2014 WL 2883891, at *4. The incongruity of Absolute Collection’s interpretation is evident in this case: Russell had no reason to challenge the validity of the debt within the first thirty days of receiving the initial collection letter because the debt was indeed valid. Instead, she paid the bill and notified Absolute Collection of her payment. It would be in-consistent with the FDCPA’s remedial scheme to hold that a plaintiff’s ability to state a claim under the FDCPA is extinguished because the plaintiff failed to dispute the validity of the debt when he or she had no reason to seek validation in the first place.

The Fourth Circuit then held that the Debt Collector falsely threatened to report the Plaintiff’s credit, when the Debt Collector knew or should have known that the Plaintiff had paid the creditor instead of the Debt Collector because the Plaintiff had said so.

Here, we believe that the collection notices are so plainly false and misleading that the district court was justified in concluding, as a matter of law, that the communications violated § 1692e. The March 31 dunning letter represents that “your account with Sandhills Emergency Physicians has not been satisfied.” Upon receiving the collection letter, the hypothetical least sophisticated consumer undoubtedly would interpret this statement to mean that the debt remains legally due and owing. Yet, it is undisputed that Russell had fully paid her debt with Sandhills at the time Absolute Collection sent the demand letter. A debt collector’s false representation of the character or legal status of a debt violates the FDCPA. See 15 U.S.C. § 1692e(2)(A). Because the statement that Russell’s debt “has not been satisfied” is false on its face and misrepresents “the character, amount, [and] legal status of [the] debt,” the district court correctly concluded that Russell was entitled to judgment as a matter of law for her claim under § 1692e (2)(A). We further agree with the district court’s de-termination that the March 31 dunning letter threat-ened to communicate “credit information which is known or which should be known to be false,” in violation of § 1692e(8), and that in doing so, Absolute Collection engaged in a “deceptive means to collect or attempt to collect any debt,” in violation of § 1692e (10). The collection letter expresses Absolute Collection’s intent to “report[ ][the] past due account to national credit bureaus.” The only reasonable interpretation that the least sophisticated consumer could reach after reading this statement is that Absolute Collection was threatening to refer the debt to credit bureaus as delinquent if it did not receive payment from Russell. At the time Absolute Collection sent the letter, however, it had in its files documentation of Russell’s oral reports that she paid the debt and that the check had cleared the bank. Based upon Russell’s representations to collection agents, Absolute Collection knew or should have known that the information contained in the letter was false. See Clark, 741 F.3d at 491 (explaining that § 1692e(8)’ s protections are triggered upon a debtor’s oral dispute of the debt). Thus, the district court correctly determined that, as a matter of law, the March 31 collection letter constitutes a “threat[ ] to communicate … credit information which is known or which should be known to be false,” id. § 1692e(8), and a “false representation or deceptive means to collect or attempt to collect any debt,” id. § 1692e(10).