Consumer Finance Litigation

In matter of first impression, the U.S. Court of Appeals for the Second Circuit recently held that section 1692g(a)(3) does not require a debtor to dispute a debt in writing. The court noted the circuit split on this issue and acknowledged that the Third Circuit has held that a notice requiring the debtor to dispute the debt in writing does not violate the FDCPA. See Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991). Conversely, the Ninth Circuit has held that it does. See Camacho v. Bridgeport Financial, Inc., 430 F.3d 1078 (9th Cir. 2005). In Hooks v. Forman, Holt, Eliades & Ravin, LLC, debtors sued a debt collection firm alleging that the collection notice requiring them to dispute the debt in writing violated section 1692g(a)(3) of the FDCPA. --- F.3d ---, 2013 WL 2321409 (2d Cir. May 29, 2013). The debt collection firm moved to dismiss the debtors' complaint for failure to state a claim, and the district court granted their motion. The debtors appealed. Addressing the debtors' claims, the court first looked to the reasoning of the Third Circuit. Under the Third Circuit's rationale, reading a writing requirement into section 1692g(a)(3) was not "incoherent" because sections 1692g(a)(4), (a)(5), and (b) also impose writing requirements on the debtor. The Third Circuit explained its reasoning stating "upon the debtor's non-written dispute, the debt collector would be without any statutory ground for assuming that the debt was valid, but nevertheless would not be required to verify the debt or to advise the debtor of the identity of the original creditor and would be permitted to continue debt collection efforts." See Graziano, 950 F.2d at 112. However, the court adopted the Ninth Circuit's reasoning, which primarily relied on the express language of the statute. Because section 1692g(a)(3) does not explicitly state that the debtor must dispute the debt in writing, while sections 1692g(a)(4) and (a)(5) do, the court determined that Congress did not intend to impose a writing requirement in section 1692g(a)(3). In addition, the court found that the right to dispute a debt was fundamental and imposing a writing requirement would conflict with the legislative purpose of the FDCPA. The court further reasoned that 1692g(a)(3) triggers less of a burden on debt collectors than those defined by sections 1692g(a)(4), (a)(5), and (b), and that imposing a writing requirement in those sections was consistent with the statutory language. Finally, the court rejected the debt collection firm's argument that its interpretation of the FDCPA constituted a "new legal rule" as its interpretation did not conflict with any prior holding of the court. Accordingly, the court vacated the district court's judgment and remanded the case. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.