Ninth Circuit Resolves Several Issues of First Impression Concerning Federal Fair Debt Collection Practices Act (FDCPA), Holding Debtor Can Waive “Cease Communication” Directive, Debt Collectors May Rely on Information Provided by Creditors to Verify Debt, FDCPA is a Strict Liability Statute, and One Act Can Support Multiple Violations
Debtors filed suit against a debt collection agency, its employee and its outside counsel alleging various violations of the federal Fair Debt Collection Practices Act (FDCPA) and Oregon’s Unfair Debt Collection Practices Act. The defense and debtors filed cross-motions for summary judgment; the district court granted the motion brought by the attorney, partially granted the motion brought by the debt collector, and denied the motion brought by the debtors. The Ninth Circuit affirmed in part and reversed in part. Clark v. Capital Credit & Collection Services, Inc., ___ F.3d ___, 2006 WL 2441705 (9th Cir. August 24, 2006). We provide a brief summary of the case, which the Ninth Circuit characterized as “present[ing] a complicated web of problems that has required us to address a litany of issues for which there is a dearth of applicable precedent” and for which it “endeavored to adopt a construction of the FDCPA that recognizes ‘there is room within the [FDCPA] for ethical debt collectors to make occasional unavoidable errors,” Slip Opn., at 10165 (citation omitted).
In an effort to collect a debt, a debt collector sent the debtor a collection notice letter. The debtor disputed the debt and detailed billing problems with the creditor. The debt collector sent a second notice, enclosing an itemized statement from the creditor and claiming that the statement adequately verified the debt. The debtor requested “proper verification” and instructed the debt collector to cease making telephone calls. Slip Opn., at 10143. The debt collector then retained counsel who, in response to a demand for verification of the debt and an end to telephone communications, responded with the same itemized statement previously provided to the debtor. The debtor subsequently called the attorney to discuss the debt, but received a return call from the debt collection agency that “so upset [her] that she was required to obtain therapy.” Id., at 10144. The debtors filed suit.
The Circuit Court noted that it reviews de novo the district court’s interpretation of the FDCPA, Slip Opn., at 10145, and addressed first the debtors’ § 1692c(c) violations based on their claim that their “cease communication” letter prohibited the collection agency from telephoning, even in response to their inquiry, id.. The district court held that the telephone call constituted a waiver with respect to any return call; the Ninth Circuit noted, “Whether a consumer may waive a so-called ‘cease communication directive’ appears to be an issue of first impression in this and other circuits,” id., at 10146. In holding that a debtor may waive this directive, the Court explained, “to hold that a debt collector may not respond to a debtor’s telephone call regarding his or her debt would, in many cases, ‘force honest debt collectors seeking a peaceful resolution of the debt to file suit in order to resolve the debt-something that is clearly at odds with the language and purpose of the FDCPA.’” Id., at 10149 (citation omitted).
The Ninth Circuit held “a debtor may waive the rights created by a cease communication directive,” but that “a heightened standard of voluntariness is appropriate” because the statute FDCPA “measures the behavior of debt collectors under the rubric of the ‘least sophisticated debtor.’” Slip Opn., at 10150. Thus measured, the Court concluded that a waiver clearly existed as to a return call from the attorney, id., at 10152, but not as to the debt collection agency, as to which there remained a triable issue of fact, id., at 10153. The Court explained, “we decline to create a rule that by waiving the protection of § 1692c(c) as to one debt collector, a debtor waives that protection with regard to any other debt collector with which that debt collector may be collaborating to collect the same debt.” Id., at 10152 (footnote omitted).
With respect to the debtors’ § 1692g violation claims, alleging the failure to properly verify the alleged debt, the Ninth Circuit clarified that its opinion in Mahon v. Credit Bureau of Placer County, Inc., 171 F.3d 1197 (9th Cir. 1999), did not “set a standard below which a debt collector’s verification efforts must not fall.” Slip Opn., at 10155. Rather, the Court adopted the standard applicable in the Fourth Circuit: “At the minimum, ‘verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed.’” Id. (quoting Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999). In this regard, both the debt collection agency and its outside counsel relied on the information provided by the creditor, and forwarded that statement to the debtors. Id. The Court held, “Within reasonable limits, [they] were entitled to rely on their client’s statements to verify the debt.” Id., at 10156. Specifically, “the FDCPA did not impose upon them any duty to investigate independently the claims presented by [the creditor].” Id. Summary judgment was therefore proper as to these claims.
The Circuit Court turned next to a claim that defendants knew the debt was invalid, and thus violated § 1692e(2)(a). Slip Opn., at 10156. Here, too, the Court was confronted with an issue of first impression – viz., “[w]hether a violation of § 1692e may be predicated upon conduct that is neither knowing nor intentional,” id. The Court noted that the statute used words “that connote volition,” id., at 10157, but that sister circuits have held that “the FDCPA is a strict liability statute,” id., at 10159 (citations omitted). The Ninth Circuit adopted the “strict liability” interpretations given by the Second and Seventh Circuits because “[r]equiring a violation of § 1692e to be knowing or intentional needlessly renders superfluous § 1692k(c).” Id. Accordingly, the Court held that “intent is only relevant to the determination of damages.” Id., at 10160.
In examining the judgment in light of its holdings, the Ninth Circuit observed that a debt collector’s § 1692k(c) bona fide error defense to FDCPA violations is an affirmative defense, but that neither the debt collection agency nor its outside counsel had introduced any evidence concerning the reasonableness of their reliance on the creditor’s representations. Accordingly, summary judgment was inappropriate as to these claims. Slip Opn., at 10161-62.
Finally, we jump to the Ninth Circuit’s consideration of another issue of first impression – or least an issue “never squarely addressed” in the circuit: “the issue of overlapping liability under the FDCPA,” Slip Opn., at 10162. The Circuit Court held that “one action can give rise to multiple violations of the Act,” id.
NOTE: In a concurring and dissenting opinion, Judge O’Scannlain argued that the debt collector “did not violate 1692c(c) by returning [the debtor’s] call,” Slip Opn., at 10166.