In Jacobson v Healthcare Financial Services Inc. No. 06-3147-cv, the US Court of Appeals for the Second Circuit held that a letter sent by a debt collector to a debtor stating, “IF YOUR PAYMENT OR NOTICE OF DISPUTE IS NOT RECEIVED IN THIS OFFICE WITHIN 30 DAYS, WE SHALL RECOMMEND FURTHER ACTION BE TAKEN AGAINST YOU TO COLLECT THIS OUTSTANDING BALANCE,” violated the federal Fair Debt Collection Practices Act (“the Act”). The Court held that the recipient of a debt collection letter covered by the Act validly invokes the right to have the debt verified whenever she mails a notice of dispute within 30 days of receiving a communication from the debt collector. Contrary to the debt collector’s letter, the debtor’s notice of dispute need not be received by the debt collector within 30 days.
The Act requires a debt collector to provide the debtor with a “validation notice” informing the debtor of his or her right to request verification of the debt. The debt collector’s duty is not merely to convey information, but to convey it so it will be clear to the “least sophisticated consumer.” The Court has “held repeatedly that a debt collector violates [the Act], even if the collector includes an accurate validation notice, if that notice is overshadowed or contradicted by other language in communications to the debtor.”
In addition to the language quoted above, the letter at issue in Jacobson included a validation notice, which the plaintiff conceded was sufficient under the Act when viewed in isolation. Plaintiff argued, and the Court agreed, that the above-quoted language contradicted the validation notice, and thus violated the Act. The Court reached that conclusion after construing the relevant provisions of the Act as giving the debtor 30 days to send a request to have the debt verified. The Court looked past the text of the statute because it is ambiguous (it could be read to be consistent with the above-quoted language or inconsistent with it). The legislative history provided no help. So the Court focused on the underlying purposes of the statute – providing the debtor with a period to decide what to do and establishing a clear time period so the debtor does not have to guess when his response is required.
The Court’s holding and explanation raise an interesting question: According to the Court, the Act requires the debt collector to convey information clearly. But the Act is not clear – it is ambiguous according to the Court – on the question of when the debtor must act to meet the 30-day deadline. So does a validation notice that merely repeats the relevant language of the Act violate the Act by failing to communicate clearly? The plaintiff in Jacobson conceded that the validation notice standing alone – which mirrored the language of the Act – complied with the Act. Thus, the Court did not address this issue. The Court focused on the effect of “other language” in communications to the debtor that overshadows or contradicts an “accurate” validation notice. If a so-called “accurate” validation notice is itself ambiguous – as the Court appears to be saying – should the careful debt collector explicitly incorporate the Court’s holding in communications with the debtor so the debtor will clearly understand the deadline for responding to the notice? That is, should a careful debt collector inform the debtor that the debtor may provide notice of dispute by mailing it within 30 days of the debtor’s receipt of the communication containing the validation notice?
