By Joe Patry

A recent opinion from the United States District Court for the Eastern District of Virginia, Claudio Fariasantos v. Rosenberg & Associates, LLC, 2014 WL 928206, case number 3:13CV543 (E.D. Va. Mar. 10, 2014), where the court denied a motion to dismiss a putative class action, highlights the potential danger in using form demand letters that are not changed to match each state’s specific foreclosure statutes and practices.  Lenders must also look at the plain language of the federal Fair Debt Collections Practices Act (“FDCPA”) to ensure that their communications to borrowers are do not violate the FDCPA’s requirements that communications to borrowers are accurate and fully inform the borrower of all needed disclosures which the FDCPA requires.

In Fariasantos, the borrowers received a form demand letter from a collections law firm which stated that their lender had referred their case to an attorney’s office for the purpose of taking “legal action.“  However, the borrowers live in Virginia, which is a non-judicial foreclosure state – and the court noted that the lender never actually intended to file a lawsuit.  Fariasantos, 2014 WL 928206, at *1.  As a result, the court found that the statement in the demand letter was deceptive and could violate the FDCPA.  Under the “least sophisticated consumer” standard, which is the standard that the Fourth Circuit applies in evaluating FDCPA claims, “a statement is false or misleading if ‘it can be reasonably read to have two or more meanings, one of which is inaccurate.”  Id. at *4 (citing Goodrow v. Friedman & MacFadyen, P.A., 788 F.Supp.2d 464, 472 (E.D.Va.2011)).  Using this standard, the court found that the consumer could be misled into thinking that a lawsuit would be filed due to the use of the terms “legal action,” and this might impact the consumer’s, “ability to make intelligent decisions with respect to the alleged debt.”  Id. at *6.   

Additionally, the demand letter contained a statement that unless the consumer disputed the validity of the debt, the “debt collector“will assume that the debt is valid.  Id. at *7.  The court noted that the letter may violate the FDCPA because it failed to specify who, exactly, the debt collector is – i.e., the letter did not state that the law firm would assume that the debt is valid, and thus the letter, “simply does not convey who will be doing the assuming.”  Id. at *8.  As a result, the court found that this statement could violate the FDCPA and the court denied the motion to dismiss on this ground as well.  Id. at *9.