Secondary Debt collectors Must Comply with Initial Notice Requirements, holds NY Federal Judge

An article[1] in Today's New York Law Journal discussed Tocco v. Real Time Resolutions[2] that decided an issue dividing the courts: whether subsequent debt collectors are obligated to comply with FDCPA § 1692g, a law that requires validation and dispute-related language in debt collectors' initial communications.

The answer is yes. All subsequent debt collectors must provide that information notwithstanding any prior holder of the debt having already done so.

Tocco was brought as a class action. Language-defect letters, such as those presented in Tocco, are well suited for class action treatment since the violations are proved by the letters themselves, and the class of persons affected are those that have received one. In Tocco, the plaintiffs alleged that Real Time's form letter failed to disclose the current owner of the debt and lacked the required notice of dispute. A second letter by Real Time omitted the amount of the debt, the identity of the creditor, and the right to dispute the debt.

Imposing this initial-language requirement on successive debt collectors would "foreclose potential confusion" and would be "consistent with the recommendations of the Federal Trade commission," found Judge Pauley.

Also rejected was Real Time's argument that, since one of its letters did not make an explicit demand for payment, it did not amount to a "communication" made "in connection with the collection of any debt."

Our last blog post discussed the Grubek case wherein a federal appellate court rejected the same argument (that absent a demand for payment, a letter does not qualify as a communication "in connection with the collection of any debt").

Judge Pauley saw no distinction between "informational letters" and those demanding payment for purposes of being made "in connection with collection of any debt." The phrase is "expansive" and is "broad enough" to encompass a letter that admits on its face that it was an attempt to collect a debt.[3]

It's not burdensome for a secondary debt collector to comply with the requirements of FDCPA § 1692g, found Judge Pauley. "To do otherwise risks confusing the debtor."

Lastly, but of no less importance, the court decided an issue – not yet decided by the U.S. Supreme Court or the Second Circuit – but integral to consumer class actions: whether a Rule 68 Offer of Judgment[4] strips a proposed class representative of her right to pursue a class action before she had an opportunity to certify a class.

The court answered no. Such use of an Offer of Judgment would amount to an attempt to "pick off" an individually named plaintiff before certification was reasonably sought and decided.