New Collection Letter Lawsuits in California and New York: What Your Agency Needs to Know Now ("The Debt Collection Drill")

Collection letters are the bane of our industry. Letters are expensive to send and – despite what a certain television pundit claims – studies prove that few consumers actually read collection letters. The Consumer Financial Protection Burea (CFPB), the Federal Communications Commission, and other regulators pay little more than lip service to the urgent requests from consumer advocates to allow collectors to communicate with consumers electronically, with states such as New York enacting Byzantine and unworkable rules to “allow” collectors to communicate with consumers via email. It is anticipated that the CFPB, in its upcoming notice of proposed debt collection communication rules, will adopt standards for electronic communications similar to the convoluted rules found in New York. Ultimately it is consumers that are harmed by these rules that disregard modern electronic communications in favor of antiquated collection letters. Further, consumer attorneys scrutinize collection letters, measuring the font size of disclosures and injecting tortured interpretations of plain language to find possible lawsuits (and potential paydays) against collection agencies diligently seeking to comply with the law.

In the latest episode of The Debt Collection Drill podcast, Moss & Barnett attorneys John Rossman and Mike Poncin discuss a new wave of lawsuits against debt collectors in California, which focus on the font size of certain disclosures, and New York, which centers on a misreading of Second Circuit case law.


  • Mike Poncin: Welcome everybody to another edition of The Debt Collection Drill. I'm Mike Poncin and with me is John Rossman Chair of our Creditors Remedies Department here at Moss & Barnett.
  • John Rossman: Thanks Mike. You know something I've noticed. There have been a number of debt collection podcasts that have suddenly appeared over the past few months. We started this podcast back in 2011 and I believe it was the only debt collection podcast at the time and for many years it was. Maybe even in the last month I think I've seen four maybe five different podcasts on debt collection. So I'm really excited to see a lot of other folks getting out there and getting their message heard regarding debt collection. Mike our podcast is known for being short and to the point. So let's get right to it. We've been seeing some lawsuits in California recently and they have been brought alleging that the font size of certain disclosures on letters to California consumers has been incorrect. Mike do you want to give a little detail as far what we're seeing with those recent lawsuits.
  • Mike Poncin: In California with regards to the notice you have to give under the Rosenthal Act it has to be in the same size font as the rest of the letter and if there is an error made where that font is smaller, you're apt to find lawsuits now on it. I think little known there is not much case law on it. I don't think a lot of people knew about it or realized it was really out there was this cure provision under the California Civil Code Section 1788.30 and it's going to Subd. d. That provides that if you send out a letter, if you cure the violation within fifteen days of discovering the violation, there is no liability for said violation and again that was something that until six months ago I wasn't aware of myself.
  • John Rossman: I've talked to a number of other attorneys who litigate frequently in California and obviously we've done the research and there is not a ton of case law out there regarding it. But as you pointed out the California Rosenthal Act requires that Rosenthal notice be in what they say in the Act is the type size used in the disclosure shall be at least the same type size as that used to inform the debtor of his or her specific debt but is not required to be larger than 12-point type. So we have this requirement and presumably you have consumer attorneys in California now with a ruler or some type of micrometer or device measuring the font size of the disclosure of the debt and the Rosenthal disclosure to determine if they are the same size or at least 12-point font. And like you mentioned, there is this cure provision. Cure provision which has been in the Rosenthal Act since it was enacted says a debt collector shall have no civil liability under this title if within fifteen days either after discovering a violation which is able to be cured or after receipt of a written notice of such violation, the debt collector notifies the debtor of the violation and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor. So Mike walk me through how this potentially would work and how you would use this cure provision under the California law.
  • Mike Poncin: Of course you know when you first find out about the violation whether it be a complaint or a letter from a consumer attorney, it's important to act right away and within fifteen days to get a correction out. And that depends what the violation is. If it's this font issue, you know obviously you'd want to send out a new letter setting forth the proper sized notice and providing that to them. And then I think you're stuck with if they don't go away with a summary judgment motion. I do want to add interestingly there is case law which I believe is up on appeal which found that you could use the cure provision with regards to the calls, too many calls, inappropriate calls by not making further calls. That has been appealed to I believe the Ninth Circuit. It is one of those where it's questionable if you want to rely on that. But with regards to a letter violation such as the Rosenthal notice, it's definitely something that appears to be something you are capable of curing.
  • John Rossman: And especially with all these lawsuits we've seen recently alleging that the font size is incorrect on the Rosenthal disclosure, it's timely that we're talking about this type of cure and this type of provision. You know Mike it's interesting the California law has this cure provision which a lot of other laws don't have but curiously enough West Virginia recently enacted a cure provision in its statute. A little bit different in that situation before a lawsuit can be brought for a violation of the West Virginia Act the attorney or the consumer needs to give notice to the party, the defendant, and make some attempt to resolve the case. So we've got California and West Virginia that both have these cure provisions. I brought this up, these cure provisions up in some meetings I had with the CFPB a couple weeks ago in Washington, DC and we were actually there with Director Cordray and I asked Director Cordray point blank I said look I've read the FDCPA, the whole idea that it’s a strict liability statute. It doesn't say it right in the statute. That's a creature of case law. We've got California and West Virginia that both have these cure provisions why doesn't the CFPB in its rulemaking provide some type of cure provision for debt collectors. You know debt collection is probably the only industry of which I am aware where if a letter is sent out in error, there is some type of mistake that is made, there is no real way to cure that error and Director Cordray said well that's something that perhaps you could bring up with a future Director of the CFPB. So he punted on the issue but I think it's something to consider especially as we look at the FDCPA and the fact that we always refer to it as a strict liability statute but that's not something that's in the plain language of the FDCPA.
  • Mike Poncin: That's a good point John and I'm sure we're going to see more cases on this until there is more case law interpreting the cure provision in California.
  • John Rossman: Mike lets shift gears and lets move to the other coast. I want to talk a little bit about what is going on on the East Coast and specifically in the Second Circuit and more specifically in New York. I think we've had some podcasts where we have talked previously about cases that we're defending where the argument is that if you don't disclose that interest in not accruing on an account somehow or other that's a violation of the FDCPA and we've seen hundreds of those cases this year in 2017 and we are of course bringing the case before the Second Circuit and we're mid-brief as far as that case is concerned. Mike we've seen a little new twist on this argument and that’s the Avila case of course which required that if interest is accruing, a disclosure must be made. Mike there is a new twist that is coming out from the consumer attorneys based on this Carlin decision from the Second Circuit. Could you tell our listeners a little bit about the Carlin decision and the kind of lawsuits that we're seeing based on that.
  • Mike Poncin: The Carlin case is over used by the consumer but I don't it quite stands for the proposition that they assert it does and it's one of those that when the case came out it didn't really make headlines because it really doesn't stand for what the argument is. But the Carlin case had to do with a letter that was one of those payoff letters that in a week you would owe this much so if you send in this much you know this is what you would want to pay and it will take care of it. You know when you typically do that you usually get a refund check. So the argument that …
  • John Rossman: But it was in the foreclosure context which is typical pay off goods through this date but yes it was in the foreclosure context so it was talking about what the balance will be in the future.
  • Mike Poncin: Correct and the issue was that, and rightfully so I mean the Second Circuit looked at it and said that looking at this a debtor would not know the amount that was due at any particular day. They know what to do in the future but they would not know what to do on the day they received it. So it didn't set forth the amount of the debt adequately under 1962(g). I don’t disagree. I just don't think that this case ties into the Avila type of cases that we were seeing. Avila had to do with a case that interest was accruing. The Carlin case had to do with a case where interest was accruing but we're seeing all this litigation on cases where interest was not accruing where the debt was static. So again I just don't see Carlin as being applicable.
  • John Rossman: And I think what the consumer attorney's argument is is that well you should make a disclosure, good luck, that is so robust that the consumer can calculate what the debt will be in the future. And if you take a little bit of language from the Carlin case and you take it out of context and you look at it sideways that's what it says. But if you look at this case in the broader context, the context was it was a payoff letter for a mortgage and the letter specifically talked about here's what the balance is as of this date in the future. In the typical debt collection context, not looking at mortgage foreclosure, but in the typical debt collection context it is a debt collector's obligation under 1692(g) under the validation requirements to state the amount of the debt at the time the letter is sent. There is not this requirement that you tell the consumer and here's the balance that's going to be owing six months from now, sixty days from now. Avila does require that you disclose if interest is accruing or other charges are being made to the account but there is no specific requirement in Avila or in Carlin that requires in the typical debt collection context that a debt collector make a disclosure to the consumer about what the balance will be in the future. It's simply impossible. There is no way you can say what the balance will be in the future. So it's an impossibility.
  • Mike Poncin: I think the important thing and I think there was some language somewhere along the line to consumers able to look at the letter, take out their checkbook, cut a check for the amount on the letter and that resolves the debt. That should put an end to it. In the Carlin case that wasn't the point. They wouldn't have been able to because they didn't know what the debt was as of that time.
  • John Rossman: Right. Exactly and that's where I think this case is being misinterpreted and misrepresented. Ultimately, we know that the case that we have pending before the Second Circuit on this issue of whether or not you need to disclose that interest is not accruing will need to be resolved by the Second Circuit but I also envision that one of these cases arguing that the consumer should be able to calculate the balance in the future will also need to be resolved. Although here again a simple reading of the Carlin case would lead you to believe that that's not what the case says. Mike we are out of time for today. I'd like to that you for another great episode. I'd also like to thank our Executive Producer, Jodi Newsom, and we look forward to speaking with you next time. Thank you.

Visit the website for this podcast at the Debt Collection and follow us on Twitter @CollectDrill. This program does not create an attorney/client relationship between Moss & Barnett, a Professional Association, or any attorney appearing on this program and any listener. Please remember that we can only give general information and every case is unique. Always check with your individual attorney for any specific legal concerns.