Second Circuit Says Can State an FDCPA Claim Before Engaging Validation Process

Second Round argues that it is evident from this statutory scheme—which affords consumers the right to dispute debts, precludes efforts to collect disputed debts until verified, and affords a presumption of validity to undisputed debts—that the FDCPA does not obligate debt collectors to verify debts prior to sending initial communications to consumers. It therefore follows that there can be no FDCPA liability for an initial debt misrepresentation that is accompanied by a § 1692g notice of the right to dispute.   Like the Third and Fourth Circuits, we reject this argument because nothing in the text of the FDCPA suggests that a debtor’s ability to state a § 1692e or § 1692f claim “is dependent upon the debtor first disputing the validity of the debt in accordance with § 1692g.” Russell v. Absolute Collection Servs., Inc., 763 F.3d at 392 [4th Cir.]; see McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d at 247–48 [3d Cir.] (holding that “statute’s text provides no indication that Congress intended to require debtors to dispute their debts under § 1692g before filing suit under § 1692e”). The language of § 1692g is conditional, identifying a debt collector’s obligations “[i]f” the consumer disputes a debt. 15 U.S.C. § 1692g(b) (emphasis added). The Third Circuit has observed that such language suggests that “disputing a debt” pursuant to § 1692g is an “option[ ]” available to consumers, not a condition precedent to the consumer bringing a § 1692e or § 1692f action. McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d at 247. If, instead, Congress had “intended for a debt collector’s liability under the FDCPA to hinge upon a debtor’s” first disputing the debt pursuant to § 1692g, one might expect “it would have so indicated with conspicuous language to that effect.” Russell v. Absolute Collection Servs., Inc., 763 F.3d at 392. This conclusion comports with the remedial nature of the statute and its solicitude for the least sophisticated consumer. See McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d at 248 (“Imposing a § 1692g dispute prerequisite in the absence of any statutory language requiring it would 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.”); see generally Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996) (holding that FDCPA claims should be reviewed by considering “how the least sophisticated consumer”—not “average, everyday, common consumer—understands the notice”).   In urging otherwise, Second Round points to the FDCPA’s “specific presumption that a debt is valid, subject to a properly conveyed dispute of its validation.” Appellee Br. 14. In fact, what the relevant text does is impose a notice obligation on the debt collector to inform the consumer that, if the consumer does not dispute the debt, it “will be assumed to be valid by the debt collector.” 15 U.S.C. § 1692g(a)(3). We do not think such a notice requirement can reasonably be construed to require extension of the presumption to other sections of the FDCPA—such as § 1692e and § 1692f—that make no mention of it.  Cf. Loughrin v. United States, ––– U.S. ––––, 134 S.Ct. 2384, 2390, 189 L.Ed.2d 411 (2014) (observing that “when Congress includes particular language in one section of statute but omits it in another … this Court presumes that Congress intended a difference in meaning” (internal quotation marks and alterations omitted) ).  In any event, Second Round’s argument is undermined by language in the FDCPA stating that a consumer’s “failure … to dispute the validity of a debt under [§ 1692g] may not be construed by any court as an admission of liability by the consumer.” 15 U.S.C. § 1692g(c). Given this explicit protection of consumers who do not dispute their debts, “it would be anomalous to conclude that the debtor forfeits his or her ability to bring a lawsuit under the FDCPA simply because the debtor failed to invoke § 1692g’s discretionary validation procedures.” Russell v. Absolute Collection Servs., Inc., 763 F.3d at 393. Indeed, to conclude otherwise would have the perverse effect of “immunizing” a debt collector’s false statements after 30 days if a consumer does not dispute the debt within that time frame. McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d at 248; see generally 15 U.S.C. § 1692k(d) (establishing one-year statute of limitations for § 1692e and § 1692f claims).