United States: Fourth Circuit Lets Consumers Orally Dispute Validity Of Debts

In a per curiam decision which vacated the lower court's dismissal of a consumer class action under the federal Fair Debt Collection Practices Act (FDCPA), the U.S. Court of Appeals for the Fourth Circuit, in a case of first impression in that circuit, found that debt collection notices violate the FDCPA if they require consumers' disputes of the validity of debts to be in writing. In Clark v. Absolute Collection Service, Incorporated, No. 13-1151, ___ F.3d ___ (4th Cir., Jan. 31, 2014), the court held that section 1692g(a)(3) of the FDCPA does not explicitly or implicitly require consumer's disputes to be in writing.

Section 1692g(a)(3) of the FDCPA requires that debt collectors send written notices to consumer debtors containing "...a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector...." However, pursuant to section 1692g(b) of the FDCPA, when a consumer "notifies the debt collector in writing" (emphasis added) that he or she disputes a debt, the debt collector must cease collection activity until verification of the debt is obtained and mailed to the consumer.

In this case, the debt collector issued collection notices stating, among other things, that "ALL PORTIONS OF THIS CLAIM SHALL BE ASSUMED VALID UNLESS DISPUTED IN WRITING WITHIN THIRTY (30) DAYS...." (Emphasis added). The debt collector argued that its collection notices comply with section 1692g(a)(3) of the FDCPA because it imposes "an inherent writing requirement" because consumers' oral notices would waive important protections under sections 1692g(a)(4), 1692g(a)(5) and 1692g(b), producing what the debt collector contended was an absurd result. This position has been adopted by the U.S. Court of Appeals for the Third Circuit (Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991)) but rejected by the Second and Ninth Circuits (Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282 (2d Cir. 2013); Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078 (9th Cir. 2005)).

In adopting the position of the Second and Ninth Circuits, the Fourth Circuit found that the plain meaning of FDCPA section 1692g(a)(3) should be enforced as written–without a requirement that disputes be in writing–and does not produce absurd results. The court noted that oral disputes under section 1692g(a)(3) trigger statutory protections for consumers which are independent of those under sections 1692g(a)(4), 1692g(a)(5) and 1692g(b).

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