Russell v. Equifax A.R.S.

• Decision Date: 16 January 1996
• Docket Number: No. 48,D,48
• Citation: 74 F.3d 30
• Parties: Donna M. RUSSELL, Plaintiff-Appellant, v. EQUIFAX A.R.S., and CBI Collections, Defendants-Appellees. ocket 95-7007.
• Court: U.S. Court of Appeals — Second Circuit

Page 30

74 F.3d 30

Donna M. RUSSELL, Plaintiff-Appellant, v. EQUIFAX A.R.S., and CBI Collections, Defendants-Appellees.

No. 48, Docket 95-7007.

United States Court of Appeals, Second Circuit.

Argued Aug. 30, 1995.

Decided Jan. 16, 1996.

Louis Rosenberg, UAW Legal Services Plan, Indianapolis, Indiana (Kathleen Stevenson, UAW Legal Services Plan, Syracuse,

New York; Fred Miller, UAW Legal Services Plan, Detroit, Michigan, of counsel), for Plaintiff-Appellant

Deborah H. Karalunas, Syracuse, New York (Bond, Schoeneck & King, Syracuse, New York, of counsel), for Defendants-Appellees.

Before: CARDAMONE, MINER, and CALABRESI, Circuit Judges.

CARDAMONE, Circuit Judge:

This appeal involves the application of the Fair Debt Collection Practices Act of 1977 (Act), 15 U.S.C. Secs. 1692 to 1692o (1994). Plaintiff Donna M. Russell (plaintiff or consumer) appeals from a judgment of the United States District Court for the Northern District of New York (Scullin, J.) entered November 28, 1994 granting summary judgment to defendant Equifax A.R.S. (formerly CBI Collections) (Equifax or defendant). Russell contends that the district court's construction of the Act was wrong as a matter of law and should be reversed.

What happens to a consumer who is unable to pay her creditors has changed greatly from those days when a debtor like Wilkins Micawber was sent to King's Bench Prison because he had no money or property available to pay his debts. See Charles Dickens, David Copperfield (Part One) 201 (Peter Fenelon Collier & Son ed. 1900). While debt collectors are, of course, charged with the duty of collecting debts that are owed, they may not do so today in a manner that prevents consumers from exercising their legal rights. In enacting the Fair Debt Collection Practices Act Congress pointed out that "[m]eans other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts." 15 U.S.C. Sec. 1692(c). As a consequence of its concern, the legislature armed consumers with a shield against the overly zealous debt collector; this shield is particularly important in our modern computer-driven world. Because we hold that Russell in this case was entitled to its protection, we reverse the district court's grant of summary judgment for defendant and remand the case for further proceedings.

BACKGROUND

Russell owed a debt amounting to $1,367.36 to the J.C. Penney's department store, and received two collection notices from Equifax regarding it. Equifax is a debt collection agency governed by the Act. See 15 U.S.C. Sec. 1692a(6). The first notice was dated February 26, 1992. It was captioned "IMMEDIATE COLLECTION NOTICE" and stated in relevant part:

YOUR ACCOUNT, AS INDICATED BELOW, HAS BEEN PLACED WITH OUR COMPANY FOR IMMEDIATE COLLECTION. IT IS OUR PRACTICE TO POST UNPAID COLLECTIONS IN THE AMOUNT OF $25 OR MORE TO INDIVIDUAL CREDIT RECORDS. IF YOU DO NOT DISPUTE THIS CLAIM (SEE REVERSE SIDE) AND WISH TO PAY IT WITHIN THE NEXT 10 DAYS WE WILL NOT POST THIS COLLECTION TO YOUR FILE.

....

SEE IMPORTANT INFORMATION ON REVERSE SIDE.

The back of the notice provided the information required by Sec. 1692g(a) of the Act.

UNLESS YOU NOTIFY US WITHIN 30 DAYS AFTER RECEIVING THIS NOTICE THAT YOU DISPUTE THE VALIDITY OF THE DEBT, OR ANY PORTION THEREOF, WE SHALL ASSUME THIS DEBT IS VALID. IF YOU NOTIFY US IN WRITING WITHIN 30 DAYS AFTER RECEIVING THIS NOTICE: (1) THAT THIS DEBT OR ANY PORTION THEREOF, IS DISPUTED, OR (2) THAT YOU REQUEST THE NAME AND ADDRESS OF THE ORIGINAL CREDITOR, WE WILL OBTAIN VERIFICATION OF THIS DEBT, A COPY OF ANY JUDGMENT (IF A JUDGMENT IS INVOLVED), OR THE NAME AND ADDRESS OF THE ORIGINAL CREDITOR, IF DIFFERENT FROM THE CURRENT CREDITOR, AND MAIL A COPY AND/OR PROVIDE THE NAME OF THE CREDITOR TO YOU.

The cited language, commonly referred to as a "validation notice," gives the consumer the Equifax sent a second notice dated March 17, 1992 to Russell. It was captioned "CONTACT THIS OFFICE AT ONCE" and stated:

information necessary to challenge the debt allegedly owed before making payment to the independent collection agency.

FURTHER DELAY ON YOUR PART COULD BE COSTLY. AT THIS POINT ONLY YOUR ACTION WILL DETERMINE FUTURE HANDLING. WE URGE YOUR COOPERATION FOR YOUR OWN SAKE. PAYMENT IN FULL WITHIN 5 DAYS IS NOW DEMANDED. WHAT WILL YOUR ANSWER BE?

Based on the receipt of these two notices, plaintiff commenced an action against defendant in November 1992. Her complaint alleged that the February and March notices violated two provisions of the Act. First, she contended that the notices' contradictory language violated Sec. 1692g. Second, she asserted that defendant made false representations in the notices in violation of Sec. 1692e(10). Russell asked for an award of costs and attorneys' fees pursuant to Sec. 1692k. Equifax moved for summary judgment and also sought attorneys' fees, contending that plaintiff had brought her action in bad faith. See Sec. 1692k(a)(3). Russell cross-moved for summary judgment with respect to liability.

The district court granted summary judgment to defendant Equifax. It found that the language of the notices did not rise to the level of being a "threatening contradiction," nor, it held, did the language overshadow the validation notice displayed on the reverse side of the initial or February notice. Thus, the district court ruled that defendant had not contravened Sec. 1692g. It further determined that defendant did not make intentional false representations in order to deceive the plaintiff and, therefore, found no violation of Sec. 1692e(10). Judgment was accordingly entered for defendant on November 28, 1994. From this judgment, Russell appeals.

DISCUSSION

Both parties moved for summary judgment and there is no genuinely disputed material issue of fact. Only legal issues, which we review de novo, are contested.

Before entering a discussion of the merits of those issues, it is helpful to trace a brief outline of the most salient features of the Fair Debt Collection Practices Act. The Act, consisting of 16 succinct sections, is based on Congress' findings that debt collection abuses are serious and widespread, and a finding by the National Commission on Consumer Finance, referred to in the legislative history, which showed that the "vast majority of consumers who obtain credit fully intend to repay their debts." S.Rep. No. 95-382, 95th Cong., 1st Sess. 3 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1697 (Legis.History). Congress explained that although unscrupulous collectors comprise only a small portion of the industry, the less ethical debt collectors threaten consumers with violence, use profane or obscene language, make telephone calls at unreasonable hours, impersonate public officials and lawyers, disclose debtors' personal affairs to employers and engage in other sorts of unscrupulous practices. Id. at 1696.

The Act's purpose is to eliminate such practices. See Sec. 1692(e); Legis.History at 1696. Some enumerated actions--for example, threats of violence and repeated telephone calls intended to harass--are expressly forbidden. Sec. 1692d. The Act also bars the general use of any "false, deceptive, or misleading representation or means in connection with the collection of any debt." Sec. 1692e. Section 1692e, without limiting the general applicability of the bar against false and deceptive methods of debt collecting, then sets forth in 16 subdivisions specific examples of false, deceitful or misleading conduct that violates the Act.

Further, a debt collector violating the Act is liable for actual damages, plus costs and reasonable attorney's fees, as well as any other damages not exceeding $1,000 found appropriate by a trial court. See Sec. 1692k(a). Because the Act imposes strict liability, a consumer need not show intentional conduct by the debt collector to be entitled to damages. However, a debt collector may escape liability if it can demonstrate by a preponderance of the evidence that its "violation

[of the Act] was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." Sec. 1692k(c). With this overview of the Act in mind, we pass to the merits.

I The February Notice

Section 1692g of the Act states that when an independent debt collector solicits payment it must provide the consumer with a detailed validation notice. The notice must include the amount of the debt, the name of the creditor, a statement that the debt's validity will be assumed unless disputed by the consumer within 30 days, and an offer to verify the debt and provide the name and address of the original creditor, if the consumer so requests. Sec. 1692g(a). And, as already noted, the Act further prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." Sec. 1692e. An example of such illegal conduct is the "use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." Sec. 1692e(10). The plaintiff in the case at hand alleged violations of Secs. 1692g and 1692e(10).

When determining whether Sec. 1692g has been violated, an objective standard, measured by how the "least sophisticated consumer" would interpret the notice received from the debt collector, is applied. See Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir.1993) (adopting test for Sec. 1692e); see also Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 62 (2d Cir.1993). The Act is aimed at protecting consumers in general from abusive debt collection practices and the test is how the least sophisticated consumer--one not having the astuteness of a "Philadelphia lawyer" or even the sophistication of the average, everyday, common consumer--understands the notice he or she receives. This least-sophisticated-consumer standard best...