More Fun With The Fair Debt Collection Practices Act

Written By: Jay L. Hack


In my April 15 blog, I urged banks to dumb down their collection letters because whether a letter is misleading under the FDCPA (and its state and city equivalents) is measured by how it is read by the least sophisticated consumer. In banking and finance, there is a court decision on an FDCPA appeal every week, topped only by foreclosure appeals. Last week, a federal judge in New York allowed a debt collector defendant to escape, but only by the skin of its teeth. The plaintiff debtor had claimed that the words “Current Balance” in a demand letter were misleading. Why? The debtor argued that the word “current,” implied that the balance could increase in the future but it could not. Luckily for the defendant, the court reasoned that since the demand letter already stated that the balance included no interest and no attorneys’ fees, an unsophisticated but reasonable debtor could have figured out that future balances would not change. However, the court could have just as well decided that by stating zero interest and legal fees, the letter implied that if the debtor did not pay immediately, legal fees and interest might be added.

Today’s Takeaway? Scrub your demand letters carefully to make sure that even a moron (my kids are trying to get me to stop using that word, but it seems appropriate here) won’t misunderstand. Consider creating a form demand letter that you show to both the local English teacher and your janitor to document your efforts not to mislead and debtor. Is it worth the effort? Only if you get sued, because the legal fees of defending such a case, even if you win, are much worse than the cost of some up front analysis.

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