ANNMARIE AVILA, an individual; on behalf of herself and all others similarly situated, SARA ELROD, an individual; on behalf of herself and all others similarly situated, Plaintiffs-Appellants, v. RIEXINGER & ASSOCIATES, LLC, a Georgia Limited Liability Company, CROWN ASSET MANAGEMENT, LLC, a Georgia Limited Liability Company, STEPHEN P. RIEXINGER, an individual and in his official capacity, JOHN AND JANE DOES, NUMBERS 1 THROUGH 25, BUREAUS INVESTMENT GROUP PORTFOLIO NO.15, LLC, an Illinois Limited Liability Company, Defendants-Appellees.
Docket Nos. 15-1584(L), 15-1597(Con)
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August Term, 2015 (Argued: December 9, 2015 Decided: March 22, 2016)
Before: CALABRESI, POOLER, and LYNCH, Circuit Judges.
The Clerk of Court is respectfully directed to amend the official caption to conform with the caption above.
Affirmed in part, vacated in part, and remanded.
PHILIP D. STERN (Adam T. Thomasson, on the brief), Stern Thomasson LLP, Union, NJ, for Plaintiffs-Appellants.
POOLER, Circuit Judge:
BACKGROUND
Plaintiffs Annmarie Avila and Sara Elrod both received collection notices from defendant Riexinger & Associates, LLC. The notices stated that plaintiffs’ accounts had been “placed with [the firm] for collection and such action as necessary.” App‘x at 59, 109. The notices stated each plaintiff‘s “current balance” but did not disclose that this balance was continuing to accrue interest or that, if plaintiffs failed to pay the debt within a certain amount of time, they would be
Plaintiffs filed this lawsuit, alleging that the collection notices violated the FDCPA. They claimed, among other things, that the collection notices were misleading because they stated the “current balance,” but did not disclose that the balance might increase due to interest and fees. They alleged that they believed from reading the notice that the “current balance” was “static” and that their “payment of that amount would satisfy [the debt] irrespective of when [the] payment was remitted.” App‘x at 31, 100. Avila alleges that in fact interest was accruing daily at a rate equivalent to 500% per year and that defendants have tried to collect this interest from her.
Defendants moved to dismiss the complaint, and the district court granted the motion. The court recognized that district courts are divided on the question whether a debt collector must disclose that the amount of the debt will increase over time due to interest or fees. Compare, e.g., Jones v. Midland Funding, LLC, 755 F. Supp. 2d 393, 397-98 (D. Conn. 2010) (requiring debt collectors to disclose the
DISCUSSION
As noted, Section 1692e of the FDCPA provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
The question presented is whether the sending of a collection notice that states a consumer‘s “current balance,” but does not disclose that the balance may increase due to interest and fees, is a “false, misleading, or deceptive” practice prohibited by Section 1692e. In considering this question, we are guided by two principles of statutory construction.
The first principle is that, because the FDCPA is “primarily a consumer protection statute,” Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 95 (2d Cir. 2008), we must construe its terms “in liberal fashion [to achieve] the underlying Congressional purpose.” Vincent v. The Money Store, 736 F.3d 88, 98 (2d Cir. 2013) (quoting N. C. Freed Co. v. Bd. of Governors of Fed. Reserve Sys., 473 F.2d 1210, 1214 (2d Cir. 1973)). That purpose is to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using
The second principle is that, in considering whether a collection notice violates Section 1692e, we apply the “least sophisticated consumer” standard. Clomon, 988 F.2d at 1318. In other words, we ask how the least sophisticated consumer—“one not having the astuteness of a ‘Philadelphia lawyer’ or even the sophistication of the average, everyday, common consumer“—would understand the collection notice. Russell, 74 F.3d at 34. Under this standard, a collection notice can be misleading if it is “open to more than one reasonable interpretation, at least one of which is inaccurate.” Clomon, 988 F.2d at 1319.
Applying these principles, we hold that plaintiffs have stated a claim that the collection notices at issue here are misleading within the meaning of Section 1692e. A reasonable consumer could read the notice and be misled into believing that she could pay her debt in full by paying the amount listed on the notice. In fact, however, if interest is accruing daily, or if there are undisclosed late fees, a
Because the statement of an amount due, without notice that the amount is already increasing due to accruing interest or other charges, can mislead the least sophisticated consumer into believing that payment of the amount stated will clear her account, we hold that the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees. We think that requiring such disclosure best achieves the Congressional purpose of full and fair disclosure to consumers that is embodied in Section 1692e. It also protects consumers such as plaintiffs who may hold the reasonable but mistaken belief that timely payment will satisfy their debts.
In reaching the contrary conclusion, the district court noted, first, that another section of the FDCPA—Section 1692g—requires disclosure only of “the amount of the debt,” not the amount of the debt plus whatever interest and fees
The district court also expressed a concern that requiring debt collectors to disclose this information might lead to more abusive practices, as debt collectors could use the threat of interest and fees to coerce consumers into paying their debts. This is a legitimate concern. To alleviate it, we adopt the “safe harbor” approach adopted by the Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000).
In Miller, the collection notice stated the consumer‘s “unpaid principal balance,” but added that this amount did not include unpaid interest and fees. Id.
To minimize litigation under the FDCPA, the Miller court fashioned a “safe harbor” formula for complying with Section 1692g(a)(1). The court held that the following statement would satisfy a debt collector‘s duty to state the amount of debt in cases where the amount varies from day to day:
As of the date of this letter, you owe $___ [the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1–800– [phone number].
Id. at 876. The court held that a debt collector who used this form would not violate the “amount of the debt” provision, “provided, of course, that the information [the debt collector] furnishes is accurate and [the debt collector] does
We hold that a debt collector will not be subject to liability under Section 1692e for failing to disclose that the consumer‘s balance may increase due to interest and fees if the collection notice either accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or clearly states that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date. Like the Miller court, we do not hold that a debt collector must use any particular disclaimer. Using the language set forth in Miller will qualify for safe-harbor treatment, as would the language suggested in Jones, 755 F. Supp. 2d at 397 n.7, which may be preferable to the extent it advises the consumer of the specific rate of increase in the debt over time.2 Moreover, a debt collector who is willing to accept a
The collection notices at issue here stated only the “current balance” but did not disclose that the balance might increase due to interest and fees. Thus, Plaintiffs have stated a claim that these notices were “misleading” within the meaning of Section 1692e. The district court‘s dismissal of this claim is vacated, and we remand for further proceedings consistent with this opinion.
CONCLUSION
For the foregoing reasons, we VACATE the judgment of the district court insofar as it dismissed plaintiffs’ claim that defendants violated the FDCPA by sending plaintiffs a collection notice stating their “current balance” without disclosing that the balance might increase over time due to interest and fees. For the reasons given in the accompanying summary order, we AFFIRM the judgment of the district court insofar as it dismissed plaintiffs’ other claims.