Consumer Finance Litigation

In Marquez v. Weinstein, Pinson & Riley, P.S., No. 15-3273, - F.3d -, 2016 WL 4651403 (7th Cir. Sept. 7, 2016), the Seventh Circuit Court of Appeals held that a validation notice in a complaint to collect a debt violated the Fair Debt Collection Practices Act ("FDCPA"). The ruling interpreted § 1692e of the FDCPA, which prohibits debt collectors from using "any false, deceptive, or misleading representations or means in connection with the collection of any debt." 15 U.S.C. § 1692e. The Seventh Circuit found that the validation notice violated § 1692e because the validation notice was misleading to an unsophisticated consumer as to the appropriate time and manner for responding to the complaint. Marquez, 2016 WL 4651403, at *4.

Marquez and others filed a putative class action alleging that the law firm Weinstein, Pinson & Riley, P.S. ("Weinstein") violated the FDCPA by filing a debt-collection complaint that included a validation notice paragraph ("the validation notice") stating in pertinent part that "Defendants are informed . . . that the debt . . . will be assumed to be valid and correct if not disputed . . . within thirty (30) days . . . ." Marquez, 2016 WL 4651403, at *1. Marquez claimed that the validation notice was misleading and deceptive and, therefore, violated § 1692e. See id. Weinstein moved to dismiss the complaint for failure to state a claim, which the district court granted. See id.

On appeal, the Seventh Circuit reversed and joined other circuits[1] in holding that legal pleadings and filings are subject to the requirements of § 1692e, except § 1692e(11), which expressly excludes formal legal pleadings from its purview. The Seventh Circuit also held that the validation notice violated § 1692e because it was "misleading to the unsophisticated consumer both as to the proper timing to respond to the complaint and as to the manner of response." See id. at *3-4. The Court explained that the validation notice would mislead an unsophisticated consumer to believe that he could only dispute the debt within the thirty-day period, even though the thirty-day period expired before the answer to the complaint was due. See id. at *4. Thus, the validation notice "effectively shortened the time period for the consumer to answer the complaint" by leading the unsophisticated consumer to believe that once the thirty-day period had passed, he could no longer dispute the debt in his answer. See id.

The Court also determined that the validation notice would mislead an unsophisticated consumer as to the manner in which the consumer should respond. See id. The Seventh Circuit explained that the validation notice was misleading because it did not specify who would consider the debt valid at the expiration of the thirty-day period. See id. The validation notice materially differed from the requirements of § 1692g(a)(3) because it stated that "the debt will be considered valid" instead of stating "that the debt will be considered valid by the debt collector." See id. Thus, the validation notice would lead an unsophisticated consumer to believe that the court would consider the debt valid if not disputed within thirty days. See id. However, under § 1692g(a)(3) of the FDCPA, a debt collector, not the court, may assume a debt is valid if not disputed within 30 days. See id. Additionally, the validation notice "mirrored [an] earlier demand letter to the consumers," which the Seventh Circuit found "would lead an unsophisticated consumer to believe that she must dispute the debt through the procedures outlined in the earlier letter, rather than in an answer in court." See id. Unsophisticated consumers, therefore, would be misled about the procedures for disputing debts and they would be "at risk of losing their rights in court if they disputed the debt through contact with the debt collectors rather than in the form of an answer." See id.

The Seventh Circuit therefore concluded that the language of the validation notice was "misleading and deceptive as a matter of law" Id. The Court's ruling is another good example of why debt collectors should not deviate from the language provided in § 1692g.

[1] Other circuits addressing the issue have similarly determined that pleadings and filings may be subject to the FDCPA. See, e.g., Kaymark v. Bank of Am., N.A., 783 F.3d 168 (3d Cir. 2015); Miljkovic v. Shafritz & Dinkin, P.A., 791 F.3d 1291 (11th Cir. 2015); James v. Wadas, 724 F.3d 1312 (10th Cir. 2013); Sayyed v. Wolpoff & Abramson, 485 F.3d 226 (4th Cir. 2007); Goldman v. Cohen, 445 F.3d 152 (2d Cir. 2006).