999 F.3d 151
2d Cir.2021Background
- Cortez incurred credit-card debt to Discover; Forster & Garbus was retained to collect and obtained a default judgment in state court.
- Forster & Garbus mailed multiple collection letters; a February 2, 2017 letter listed a “current balance” of $13,457.65 and offered three discounted settlement options with payment deadlines.
- The letter did not state whether interest or fees would continue to accrue on the account.
- Cortez sued under the FDCPA, relying on Avila v. Riexinger (which requires disclosure that balances may increase due to interest/fees when a balance is stated).
- The district court denied defendant’s summary judgment, concluded the notice might be misleading (finding it debatable whether it clearly offered full satisfaction), and entered summary judgment for Cortez.
- Forster & Garbus appealed; the Second Circuit reversed and directed entry of judgment for the defendant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Avila’s disclosure requirement (disclosing that balances may increase due to interest/fees) applies to collection notices that offer to settle the debt for a specified amount if paid by a specified date. | Cortez: Avila requires disclosure whether interest continues to accrue even where a settlement offer includes a payment deadline; omission is misleading. | Forster & Garbus: Avila includes a safe harbor — a notice that clearly states payment of a specified amount by a specified date will fully satisfy the debt need not also disclose accrual of interest/fees. | The Second Circuit held Avila’s disclosure requirement does not apply to clear settlement offers that state payment by a specified date will fully satisfy the debt; reversal and judgment for defendant. |
| Whether the February 2, 2017 letter clearly communicated that payment of the offered amounts by the dates would extinguish the debt. | Cortez: The letter did not explicitly state the debt would be discharged upon payment, so ambiguity remains. | Forster & Garbus: The discounted "settlement choices" unmistakably communicated full satisfaction if accepted and paid by the dates. | The court concluded the notice reasonably could only be read as an offer to extinguish the debt upon timely payment; therefore it was not misleading under the FDCPA. |
Key Cases Cited
- Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016) (stating balances must disclose possible increase from interest/fees, but identifying two safe harbors including clear offer of full satisfaction by a date)
- Taylor v. Financial Recovery Servs., Inc., 886 F.3d 212 (2d Cir. 2018) (clarifying Avila: notices for static debts or clear full-satisfaction offers are not misleading)
- Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993) (adopting the "least sophisticated consumer" standard for determining misleading collection notices)
- Chuway v. Nat'l Action Fin. Servs., Inc., 362 F.3d 944 (7th Cir. 2004) (reasoning that stating the balance due suffices when collector intends only the amount stated to be collectible)
- Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d 191 (2d Cir. 2015) (holding FDCPA does not require disclosure of every collateral consequence in a settlement offer)