Jonathan M. Robbin, Diana M. Eng, and Namrata Loomba
In Kolbasyuk v. Capital Management Services, LP, No. 18-1260 (2d Cir. 2019), the Second Circuit recently held that a debt collector’s letters informing a consumer of the total present amount of debt owed satisfies Fair Debt Collection Practices Act (“FDCPA”) requirements. The Second Circuit’s decision clarified that, under the FDCPA, collection letters are not required to inform consumers of the debt’s constituent components, or the rates by which the debt may later increase.
Summary of Facts and Background
In July 27, 2017, Capital Management Services, LP (“CMS”) sent Plaintiff a collection letter stating “[a]s of the date of this letter, you owe $5918.69.” The letter further stated, “[b]ecause of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater.”
Plaintiff filed a putative class action in the United States District Court for the Eastern District of New York alleging CMS’s letter violated the FDCPA because (1) the amount of debt failed to inform Plaintiff what portion of the debt was principal versus interest, the applicable interest rate, and when the interest rate would apply; and (2) the letter violated Section 1692(e) because a least sophisticated consumer would think that the entire debt could be satisfied by paying off the amount listed in CMS’s letter without any further potential charges.
The District Court dismissed Plaintiff’s complaint and held that CMS’s letter did not violate the FDCPA. Specifically, the Court held that CMS’s letter violated neither Sections 1692(e) nor 1692(g) of the FDCPA. In addition, the Court held the letter accurately stated the amount Plaintiff owed as of the date of the letter, and the letter provided the appropriate safe harbor provision to indicate that the amount owed may increase in the future. Plaintiff appealed the District Court’s decision to the United States Court of Appeals for the Second Circuit.
The Second Circuit’s Decision
In affirming the District Court’s dismissal, the Second Circuit held that a debt collector’s letter informing the consumer of the total present quantity of his or her debt satisfies the requirements mandated by the FDCPA, and no requirement exists for the collection letter to inform the consumer of the debt’s constituent components or the precise rates by which it might later increase. The Second Circuit distinguished Carlin v. Davidson Fink LLP, holding that Section 1692(g) expressly required CMS to only inform the Plaintiff of the “amount of the debt.” 852 F. 3d 207 (2d Cir. 2017). In Carlin, the payoff letter provided to the consumer violated the FDCPA, because it was an “estimated” amount the consumer might owe, rather than the total amount the consumer actually owed as of the date of the letter. Thus, the Carlin court held the payoff letter there should have broken down the components of the estimated amount owed. Here, the CMS letter provided the exact “amount of the debt,” so there was no requirement to further break it down.
Next, the Court reaffirmed its holding in Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016), that the use of the Miller v. McCalla “safe harbor” language immunizes a debt collector from liability. Distinguishing the Plaintiff’s case from Avila, the Second Circuit held whereas in Avila there was no “safe harbor” disclosure, CMS’s letter identically tracked the “safe harbor” language adopted in McCalla. As a result, the Court held CMS did not violate Section 1692(e).
In identifying the correct way to inform the consumer of the “amount of debt,” the Second Circuit held that (1) there is no requirement in Section 1692(g) of the FDCPA to break down the components of that debt or the precise rate by which it might later increase and (2) the use of the “McCalla Raymer” safe harbor language, where appropriate, protects debt collectors from violating Section 1692(e). Debt collectors must still be careful to break out the components of the debt if they are only providing an estimate and not the actual amount owed and should not use the “safe harbor” language where the debt will not increase.