Disputing Debts: What are your rights? Well it may depend on where your lawsuit was filed...

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Can debt collectors require consumers who wish to dispute a debt to provide the debt collector a written dispute so that consumers who dispute verbally cannot enforce their rights?  The answer might depend upon where the consumer files their lawsuit.

In Hooks v. Forman, Holt, Eliades & Ravin, LLC, the United States Circuit Court of Appeals for the Second Circuit recently held that the defendant debt collector’s letters which required consumers to notify the debt collector in writing if they disputed the debt violated the Fair Debt Collection Practices Act (FDCPA).

The two federal circuit courts of appeals which previously ruled whether similar initial letters violated the FDCPA reached opposite conclusions with far reaching consequences for consumers.

In Graziano v. Harrison, the United States Court of Appeals for the Third Circuit held that consumers who wish to dispute the debt must send a written dispute to the debt collector in order to preserve their rights under the FDCPA.   The Graziano court reasoned that not imposing a written requirement would result in an incoherent system because other sections of the FDCPA explicitly require writings in order for the consumer to exercise their rights.

The Graziano Court observed that Congress explicitly required consumers to exercise their rights in writing in three parts of the FDCPA.  First, the FDCPA allows consumers thirty (30) days after they receive the initial letter from the debt collector to send their written request that the debt collector validate the debt.   15 U.S.C. Sect. 1692g(a)(4).   Second, consumers also have thirty (30) days to request the debt collector identify the original creditor if it is different than the creditor identified in the debt collector’s letter.   15 U.S.C. Sect. 1692g(a)(5).   Finally, if within thirty days after receiving the initial collection letter, the consumer sends the debt collector a written communication disputing all or part of the debt or requesting that the debt collector validate the debt, the debt collector must suspend collection activities until the debt collector has mailed a letter to the consumer which validates the debt.  15 U.S.C. Sect. 1692g(b).   The Graziano court imputed the in writing requirement into Section 1692g(a)(3) based largely upon the inconsistency that the court perceived.

Consumers often do not dispute a debt within thirty days after they receive the initial letter from the debt collector.   These consumers have waived their right to invoke their right to require the debt collector to validate the debt and exercise their other rights under Sections 1692g(a)(4), 1692g(a)(5) and 1692g(b).   In jurisdictions which follow Graziano, the debt collector may require consumers to furnish a written dispute in order to receive additional protections afforded by the FDCPA.

In Camacho v. Bridgeport Financial, Inc., the United States Circuit Court of Appeals for the Ninth Circuit ruled that consumers do not need to send a written dispute in order to exercise their right to dispute the debt.

As the Camacho and Hooks courts have pointed out, if Congress had intended to require consumers to provide debt collectors with a writing in order to dispute the debt, Congress would have included the terms in writing as Congress included in Sections 1692g(a)(4) and (a)(5).

The Camacho court pointed out that consumers who dispute a debt even after the initial thirty day period still have important rights that arise once the debt collector knows the consumer disputes the debt without requiring that the dispute be in writing.   For example, Section 1692e(8) of the FDCPA provides that once a consumer disputes a debt, the debt collector cannot communicate the consumer’s credit information without also noting that the debt is disputed.   Furthermore, Section 1692h of the FDCPA prohibits debt collectors who are attempting to collect more than one debt from a consumer to apply any funds they receive to debts that the consumer has disputed.

In Hooks, the Second Circuit found the Ninth Circuit’s reasoning in Camacho more persuasive.

The Second Circuit court relied primarily on the plain language of Section 1692g(a)(3) in ruling that consumers are not required to dispute in writing in order to invoke the protections of 1692g(a)(3).   The Second Circuit reasoned that differentiating between FDCPA sections which required written disputes and those which did not creates a sensible bifurcated scheme.   The Hooks court recognized that :

 The right to dispute a debt is the most fundamental of those set forth in [Section] 1692g(a), and it was reasonable to ensure that it could be exercised by consumer debtors who may have some difficulty with making a timely written challenge.  Such debtor consumers would also undoubtedly benefit from having their payments applied to the undisputed portion of their debts, in accordance with [Section] 1692h, or having the fact of the dispute reported whenever the debt collector communicates with others about the debt , in accordance with [Section]1691e(8).  But such debtor consumers are less likely to benefit from further written notices validating the debt, per [Section] 1692g(a)(4), or naming the original creditor, per [Section 1692g(a)(5).

Consumers who fail to send the debt collector a written dispute within thirty days likely forfeit their right to request that the debt collector validate the debt and, therefore, that the debt collector suspends its collection attempts until it validates the debt.  But, in jurisdictions that follow Camacho and Hooks, such consumers clearly still have the right to dispute the account verbally without the debt collector being able to assume the debt is valid.  This right is important especially when many debt collectors rely heavily on reporting the collection account in order to coerce the consumer into paying.

Many consumers do not realize that they may even have a compelling reason to dispute the account until after their right to request validation has expired.   Sadly, debt collectors attempt to collect accounts where the consumer paid a previous debt collector or even the original creditor the account balance or an agreed to compromised amount with surprising frequency.   Misidentification of consumers due to the collection industry’s over reliance on computer databases often confuses consumers who should not be associated with the account.   Nor are consumers well informed to evaluate whether the account that the debt collector is attempting to collect is beyond the applicable statute of limitations.

Graziano remains binding law on the trial courts in the states which comprise the third circuit --- Delaware, New Jersey, and Pennsylvania.   Consumers who receive letters from debt collectors who purport to require that the consumer dispute the account in writing should do so in order to protect their rights which arise when they dispute a debt.

Consumers who live in the Second Circuit --- Connecticut, New York, and Vermont or the Ninth Circuit ---  Alaska, Arizona, California, Hawaii, Idaho, Montana, Oregon, and Washington --- are not required to dispute in writing in order to prevent the debt collector from assuming that the debt is valid.   Even in these states, consumers who wish to exercise their right to require the debt collector to validate the debt must still do so in writing.

Although most federal trial courts that have interpreted 1692a(3) have held that the debt collector may not require consumers to make any and all disputes in writing, at least several federal trial courts have adopted the minority view and followed Graziano.   Consumers who live in jurisdictions which are located outside the Second, Third, and Ninth Circuits should consult with a local consumer rights lawyer to evaluate their rights.   To find a local consumer rights lawyer visit http://www.naca.net/find-attorney

About the Author:

Donald E. Petersen is an Orlando, Florida consumer lawyer whose practice is limited to representing consumers in Fair Debt Collection Practices Act (FDCPA), Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), bankruptcy discharge violation, and other consumer rights cases.  Mr. Petersen also defends consumers against collection lawsuits.   Mr. Petersen frequently comments about consumer issues on www.FDCPA.me and has been a NACA member since 2001.