Fair Debt Collection Practices Presuit Verification

Many consumers…and those in foreclosure, are familiar with seeing the phrase on debt validation letters:

THIS IS AN ATTEMPT TO COLLECT A DEBT AND ANY INFORMATION RECEIVED WILL BE USED FOR THAT PURPOSE

Bur hardly anyone realizes just how important this letter is…and what important rights and protections this letter advises you of. A new opinion out of a federal court helps to make this issue very clear. The opinion is called Haddad v. Alexander, Zelmanski, Danner & Fioritto and it comes to us out of the United States Court of Appeals, Sixth Circuit. The opinion makes it clear that when a consumer, “disputes the validity of the debt”, the creditor is required to make very clear, very specific and very detailed reporting back to that consumer about all matters related to the debt. The key take away in the consumer defense and foreclosure context is

ALL DEBT COLLECTION ACTIVITIES MUST STOP WHEN THIS DEBT VALIDATION EFFORT IS INITIATED BY THE CONSUMER!

In this current era of multiple servicer transfers, and one shady debt collector after another picking up debts and selling them, one right after the other, adding on charges and violating all kinds of rights and laws, this validation is critical. Here are the key passages:

Under 15 U.S.C. § 1692g(b), “[i]f the consumer notifies the debt collector in writing” within thirty days of receiving “communication ․ in connection with the collection of any debt,” that he disputes any portion of the debt, “the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt ․” 15 U.S.C. § 1692g. –

The verification provision must be interpreted to provide the consumer with notice of how and when the debt was originally incurred or other sufficient notice from which the consumer could sufficiently dispute the payment obligation. This information does not have to be extensive. It should provide the date and nature of the transaction that led to the debt, such as a purchase on a particular date, a missed rental payment for a specific month, a fee for a particular service provided at a specified time, or a fine for a particular offense assessed on a certain date.

We are already rolling this defense out in all our collection cases…and we’ll be doing so much more of it in the future. We continue to hold the banks accountable, and this fight will continue.