United States: Ninth Circuit Holds That Fair Debt Collection Practices Act Requires Subsequent Collectors To Issue Rights Notices

In a case of first impression, the Ninth Circuit Court of Appeals held that the Fair Debt Collection Practices Act ("FDCPA") requires a debt collector to send notice to consumers containing specified disclosures, even if a previous collector has already given such notice.

In Hernandez v. Williams Zinman Parham PC, Case No. 14-15672, 2016 U.S. App. LEXIS 13242 (U.S. Court of Appeals for the 9th Circuit, filed July 20, 2016), Ms. Hernandez, who stopped making payments on a car loan, was subsequently contacted by multiple debt collectors. Thunderbird Collection Specialists, Inc. ("Thunderbird"), a debt collector, sent her a letter seeking to collect the debt. Hernandez did not respond. Thunderbird then retained the law firm Williams Zinman Parham ("WZP") to assist in its collection efforts. WZP sent an initial communication collection letter to Hernandez.

Hernandez filed a putative class action lawsuit against WZP in the U.S. District Court for the District of Arizona, alleging that WZP violated the FDCPA by sending a debt collection letter that lacked specific disclosures required under §1692g(a) of the FDCPA. WZP argued that it was not required to comply with that provision because Thunderbird's earlier letter was the initial communication with respect to the debt at issue and therefore the sole communication triggering the FDCPA requirements. The District Court agreed and granted summary judgment in favor of WZP.

Hernandez appealed, contending that the FDCPA, 15 U.S.C. §1692g(a), requires each and every debt collector to send the specific verification notice on each and every debt.

The sole issue decided was the phrase "the initial communication" as used in §1692g(a), and whether it refers only to the very first communication sent about a debt instead of the first communication sent by each and every debt collector that seeks to collect, including those collectors that take over collection efforts from a prior debt collector. The Ninth Circuit noted that, although the question had divided district courts, it was an issue of first impression before the Ninth Circuit.

The Ninth Circuit reversed and remanded the Arizona Federal Court decision and held that it is necessary for every collector who handles a debt to send the verification notice, noting that WZP's interpretation of the law was too restrictive and creates an unnecessary loophole that undermines consumers' efforts to verify their debt. The Ninth Circuit held that, contrary to WZP's arguments, the remedial purpose of the FDCPA is furthered by giving consumers updated information about their debts and renewed opportunities to verify them as the debts change hands. Restricting the validation notice obligation to the first communication by the first debt collector would also restrict a consumer's ability to dispute the validity of their debts, obtain information to verify them, and protect themselves against the collection of invalid debts.

The Ninth Circuit, in reversing and remanding the case, applied the tools of statutory construction and held that the FDCPA unambiguously requires any debt collector, whether first or subsequent, to send a §1692g(a) validation notice within five days of its first communication with the consumer in connection with the collection of any debt.

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