On October 31, the United States District Court in the Eastern District of New York held that a debt collector violated the Fair Debt Collection Practices Act by failing to disclose whether interest and fees may accrue on an account. Specifically, the Court denied a debt collector's summary judgment motion, stating that a collection letter showing the "current" balance, without further explanation, created confusion with the "least sophisticated consumer" as to whether the balance would increase in the future if the consumer did not pay the account immediately.
In Islam v. ARSI, a debt collector sent plaintiff Fatema Islam a collection letter which stated, "As of the date above you owe $14413.78" and "[t]he balance owed above reflects the total balance due as of the date of this letter." The collector also sent Islam subsequent collection letters that stated the same balance. Islam alleged that the first collection letter was false and misleading because the least sophisticated consumer could not determine whether the balance of the debt was subject to additional interests and fees. Following discovery, the parties filed cross-motions for summary judgment.
The Court begins its opinion with a discussion of the Second Circuit's decision in Avila v. Riexinger & Associates. The Court concluded that Avila "applied the 'liberal construction' and 'least-sophisticated consumer' principles so broadly, to such a harmless, technical violation, that [the Second Circuit] effectively changed the words 'deceptive' and 'misleading' in the . . . [FDCPA] to 'ambiguous.'" As such, the Court reasoned, any language in a collection letter that is "ambiguous" from the perspective of the least sophisticated consumer constitutes a violation of § 1692e.
Reluctantly, the Court found that the phrase "as of the date of this letter" is ambiguous because it suggests the balance could be different on a different date and, therefore, that the debt is dynamic rather than static. This ambiguity is material because it could convince the least sophisticated consumer to make a payment towards the debt to avoid additional interest or fees when in, actuality, no such interest or fees were accruing.
Interestingly, the decision does not discuss the Eastern District's other recent current balance decision in Derosa v. CAC Financial Corp. Neither the debt collector nor the Court cited Derosa or the Southern District's decision in Taylor v. FRS, Inc., even though there were multiple collection letters in evidence.
The Court made very clear that its decision was compulsory under the framework of Avila. The Court's not-so-subtle displeasure with its own decision is evidenced by its own observation that "[w]e have drifted quite far from the truly awful collection practices . . . that prompted Congress to enact the FDCPA. We are no longer deterring collection companies from abusing, tricking and misleading debtors into making payments that they do not have to or would not want to make if they had the relevant facts. The courts are to some extent simply burdening the collection industry with a continuing portfolio of litigation that potentially raises the cost of credit for all consumers." The Court's remarks may indicate that this case was decided with the likelihood of appeal to the Second Circuit in mind. We will continue to monitor the outcome of this case.
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