Baker v. G. C. Services Corp.

• Decision Date: 19 May 1982
• Docket Number: No. 81-3235,81-3235
• Citation: 677 F.2d 775
• Parties: Ken BAKER, Plaintiff-Appellee, v. G. C. SERVICES CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 775

677 F.2d 775

Ken BAKER, Plaintiff-Appellee, v. G. C. SERVICES CORPORATION, Defendant-Appellant.

No. 81-3235.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted April 5, 1982.

Decided May 19, 1982.

E. Walter Van Valkenburg, Davies, Biggs, Strayer, Stoell, Boley & Fraser, Portland, Or., for defendant-appellant.

Mary Kay Gaffney, Marva Fabien, Northwestern Legal Clinic, Portland, Or., argued, for plaintiff-appellee; Richard A. Slotte, Northwestern Legal Clinic, Portland, Or., on brief.

Appeal from the United States District Court for the District of Oregon.

Before KILKENNY, HUG and SKOPIL, Circuit Judges.

SKOPIL, Circuit Judge:

Appellant G. C. Services Corp., a debt collection company, appeals from a district court judgment holding that appellant violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, by falsely threatening legal action and by failing to inform the debtor that he could dispute a portion of the debt. We affirm.

I.

Appellee Ken Baker was indebted on credit card accounts to Shell Oil Co. and to Chevron U. S. A., Inc. Both accounts were assigned to appellant G. C. Services Corporation for collection. Appellant attempted to collect the amounts owed by Baker by sending three letters and by making several phone calls. One letter stated that:

"It is our policy to attempt to settle these matters out of court before making any decision whether to refer them to an attorney for collection ... Unless we receive your check or money order, we will proceed with collection procedures."

The letter also stated that:

"Verification of this debt, a copy of judgment or the name and address of the original creditor, if different from the current creditor, will be provided if requested in writing within 30 days. Otherwise the debt will be assumed to be valid."

These letters were preprinted form letters regularly used by appellant to solicit payments. Appellant stipulated that its normal procedure for collection of debts of this type is only additional telephone or mail solicitations, and that any legal action would be taken only by the original creditor and not by appellant. The parties stipulated that:

"Defendant obtained the advice and assistance of counsel on the meaning of and compliance with the Fair Debt Collection Practices Act and the correctness of the contents of the (disputed letter). Defendant's attorneys have, from time to time, met with the staff of the Federal Trade Commission to discuss compliance with the Act."

Baker filed suit for money damages, claiming violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 ("the Act"). Both parties filed cross-motions for summary judgment. The district court rejected most of Baker's claims, but held that appellant had violated the Act by (1) failing to inform Baker that he could dispute any portion of the debt, as well as the entire debt, in violation of 15 U.S.C. § 1692g(a)(3); and (2) by falsely threatening legal action which appellant did not in fact intend to take, in violation of 15 U.S.C. § 1692e(5). The court did not find that Baker had suffered any actual damage. The district court held that a successful plaintiff is entitled to recover statutory damages under the Act even absent proof of actual damages, and awarded Baker $100 in statutory damages as well as $800 in attorney fees.

II.

The issues on appeal are:

(1) Whether Baker, who admitted that he owed the full amount of the debt, had standing to sue under section 1692g of the Act;

(2) Whether the district court erred in holding that appellant had violated section 1692g of the Act, based upon the fact that appellant's notice did not advise the debtor that he could dispute any portion of the debt, as well as the entire debt;

(3) Whether the district court erred in holding that appellant had violated section 1692e of the Act, by threatening to take legal action that it did not intend to take;

(4) Whether the district court erred in rejecting appellant's "bona fide error defense"; and

(5) Whether a debtor is entitled to recover statutory damages and attorney fees absent proof of actual damages.

III.

Appellant argues that the purpose of section 1692g's disclosure requirements is to protect debtors who believe that a debt assigned for collection is improper, and that a debtor who owes all the amounts billed has no standing to assert a violation of section 1692g.

The Act is designed to protect consumers who have been victimized by unscrupulous debt collectors, regardless of whether a valid debt actually exists. 1977 U.S.Code Cong. & Adm.News, 1695, 1696. Section 1692k, which governs a debt collector's civil liability under the Act, provides in pertinent part that "any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person." 15 U.S.C. § 1692k(a). The statute does not make an exception for liability under section 1692g when the debtor does in fact owe the entire debt.

Further, the legislative history supports the contention that a debtor has standing to complain of violations of the Act, regardless of whether a valid debt exists. Representative Frank Annunzio, chairman of the subcommittee that reported out the bill, stated during debate "(t)hat every individual, whether or not he owes the debt, has a right to be treated in a reasonable and civil manner." 123 Cong.Rec. 10241 (1977) (emphasis added).

Therefore Baker, even though he stated that he did owe the entire debt, has standing to assert any violations of the Act, including a violation of section 1692g.

IV.

Section 1692g(a) of the Act provides that a debt collector must send the debtor a written notice containing, among other things,

"a statement that unless the consumer, within 30 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."

15 U.S.C. § 1692g(a)(3). The written notice must also contain

"a statement that if the consumer notifies the debt collector in writing ... that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt ... and a copy of such verification ... will be mailed to the consumer."

15 U.S.C. § 1692g(a)(4).

The clear language of the statute explicitly requires that a debtor shall be given notice that he may "dispute the validity of the debt, or any portion thereof...." 15 U.S.C. § 1692g(a)(3). "In construing a statute we are obliged to give effect, if possible, to every word Congress used." Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 2331, 60 L.Ed.2d 931 (1979). Congress clearly required the notice to inform the debtor that he could dispute any portion of the debt.

The letters sent by appellant to Baker contained the following statement:

"Verification of this debt, a copy of judgment or the name and address of the original creditor, if different from the current creditor, will be provided if requested in writing within 30 days. Otherwise, the debt will be assumed to be valid."

The district court found that the notice "does not inform (the debtor) that he may dispute only a portion of the debt," and thus violated § 1692g(a)(3). This determination is factual, and it must be upheld on appeal unless it is clearly erroneous. ¹ Fed.R.Civ.P. 52(a).

The notice sent by appellant barely informs the debtor that he may even dispute the entire debt. Appellant's notice does contain a statement that verification of the debt will be provided if requested in writing, as required by 15 U.S.C. § 1692g(a)(4). However, the only statement referring to a dispute regarding the validity of the debt, as required by 15 U.S.C. § 1692g(a)(3), is the sentence "(o)therwise the debt will be assumed to be valid." "In evaluating the tendency of language to deceive, the Commission should look not to the most sophisticated readers but to the least." Exposition Press, Inc. v. F. T. C., 295 F.2d 869, 873 (2d Cir. 1961), cert. denied, 370 U.S. 917, 82 S.Ct. 1554, 8 L.Ed.2d 497 (1962). Here, the court should follow the same directive. The language of the notice is simply not sufficient to put a debtor on notice that he could dispute a portion of the debt. A debtor who does owe a valid obligation to the creditor but could dispute finance charges, interest, or have some valid defense, might not be put on notice that he could dispute these additional charges. The district court's finding is not clearly erroneous. Therefore, we affirm the district court's holding that appellant violated section 1692g(a)(3) of the Act.

V.

The Act prohibits a debt collector from using "any false, deceptive, or misleading representation or means" to collect a debt. 15 U.S.C. § 1692e. Among the specific types of conduct prohibited by section 1692e is

"(5) The threat to take any action that cannot legally be taken or that is not intended to be taken."

15 U.S.C. § 1692e(5).

Appellant's second letter stated, in pertinent part:

"It is our policy to attempt to settle these matters out of court before making any decision whether to refer them to an attorney for collection ... Unless we receive your check or money order, we will proceed with collection procedures."

Appellant's policy, as stipulated in the pretrial order, was not to take legal action in these types of cases, but only to proceed with further telephone and mail solicitation.

The district court found that the language of the notice "create(d) the impression that legal action by defendant is a real possibility ... (and) a consumer could legitimately believe that 'further collection procedures' meant court action when defendant had no intention of pursuing such a course of action." This determination, that appellant threatened to take action that it did not intend to take, is factual and can be overturned on appeal only if clearly erroneous. Fed.R.Civ.P. 52(a). We cannot say this finding is clearly erroneous, and therefore we affi...