Jones v. Midland Funding LLC et al
RULING AND ORDER. Signed by Judge Robert N. Chatigny on 4/10/12. (Glynn, T.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
KENNETH W. JONES, on behalf
of himself and all others
MIDLAND FUNDING, LLC; MIDLAND
CREDIT MANAGEMENT, INC.,
CASE NO. 3:08-CV-802 (RNC)
RULING AND ORDER
This case presents a recurring issue under the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692, et seq.,
one on which courts are divided: whether a debt collector’s
“validation notice” to a consumer fails to correctly state “the
amount of the debt” as required by the Act unless it discloses
that the debt is accruing interest.
In a previous ruling I
granted plaintiff Kenneth Jones’s motion for partial summary
judgment on his FDCPA claim because the notice at issue failed to
disclose that interest was accruing, although the notice did set
forth the amount of the debt as of the day the notice was sent.
Defendants Midland Funding, LLC (“Midland”) and Midland Credit
Management, Inc. (“MCM”) moved for reconsideration of that ruling
arguing that, inasmuch as the notice correctly stated the amount
of debt on the day it was sent, there was no violation of the
statute as a matter of law.
The motion for reconsideration was
granted and oral argument has been held.
For reasons that
follow, I adhere to my ruling but certify this order for
interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
Plaintiff brought this action after receiving three debt
collection letters from MCM.
The first letter, dated June 24,
2007 - the “validation notice” required by the Act - stated that
Midland Funding had purchased a debt owed by plaintiff to First
Consumer National Bank, and that MCM, a debt collection company,
was seeking to collect the debt.
The letter listed a “Current
Balance” of $2,096.06 and informed plaintiff of his right to
dispute the validity of the debt within 30 days.
offered to settle the debt at a 10% discount if plaintiff paid by
August 8, 2007.
With that discount, the letter stated, the
“Amount Due” was $1,885.55.
The letter also provided a phone
number for an account manager.
Plaintiff subsequently received a second letter dated
October 19, 2007, informing him that the balance had grown to
$2,137.24, reflecting an increase of approximately 2% over the
“Current Balance” in the earlier letter.
This second letter
listed daily and annual interest rates, which had not been
provided in the June letter.
Plaintiff then received a third
letter, dated October 26, 2007, listing a balance of $2,139.83.
Plaintiff claims that the first letter – the only letter at
issue here – violated 15 U.S.C. 1692g(a).
This provision of the
FDCPA requires a debt collector to send a consumer a written
notice no later than five days after its first communication with
the consumer regarding collection of the debt.
notice” must state “the amount of the debt.”
Plaintiff argues that because the June 24 letter
did not disclose that daily interest was accruing on the balance
from the date the letter was sent, it failed to state “the amount
of the debt” in accordance with the law.
In my previous ruling I agreed with the plaintiff.
that when a validation notice is alleged to violate § 1692g, the
notice must be analyzed under “an objective standard, measured by
how the ‘least sophisticated consumer’ would interpret the notice
received from the debt collector.”
Savino v. Computer Credit,
Inc., 164 F.3d 81, 85 (2d Cir. 1998) (quoting Russell v. Equifax
A.R.S., 74 F.3d 30, 34 (2d Cir. 1996)).
In applying this
standard, “[t]he critical question is . . . whether the notice
fails to convey the required information ‘clearly and effectively
and thereby makes the least sophisticated consumer uncertain’ as
to the meaning of the message.” DeSantis v. Computer Credit,
Inc., 269 F.3d 159, 161 (2d Cir. 2001) (quoting Savino, 164 F.3d
In my previous ruling I distinguished two lines of cases.
Cases in the first line hold that under § 1692g, a validation
notice must disclose whether the amount of the debt on the date
the notice is sent will accrue interest.
See Miller v. McCalla,
Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872
(7th Cir. 2000); Dragon v. I.C. System, Inc., 483 F. Supp. 2d
198, 201-03 (D. Conn. 2007); Smith v. Lyons, Doughty & Veldhuius,
P.C., No. 07-5139, 2008 WL 2885887, at *6 (D.N.J. July 23, 2008);
Jackson v. Aman Collection Serv., No. IP 01-0100-C-T/K, 2001 WL
1708829, at *3 (S.D. Ind. Dec. 14, 2001).
Cases in the second
line hold that if the notice states the total amount of the debt
as of the date the notice is sent, the statutory requirement is
satisfied even though the consumer is not informed that
additional interest will accrue.
See Adlam v. FMS, No. 09 Civ.
9129 (SAS), 2010 WL 1328958, at *3 (S.D.N.Y. April 5, 2010);
Pifkov v. CCB Credit Servs., No. 09-CV-3057 (JS)(WDW), 2010 WL
2771832, at *3-4 (E.D.N.Y. July 7, 2010); Weiss v. Zwicker &
Assocs., 664 F. Supp. 2d 214, 217 (E.D.N.Y. 2009) (“even the most
unsophisticated consumer would understand that credit card debt
I sided with the first line of cases because the least
sophisticated consumer, although perhaps aware that debt
typically accrues interest, might well be uncertain as to the
amount of the debt after reading MCM’s letter of June 24.
found the notice in this case particularly problematic due to the
added feature of the settlement offer.
A consumer – even a
sophisticated one – would not know what the amount of the debt
would be if he did not pay the “amount due” of $1,885.55 by
See Chuway v. Nat’l Action Fin. Servs., Inc., 362 F.3d
944, 949 (7th Cir. 2004) (“If . . . the debt collector is trying
to collect the listed balance plus the interest running on it or
other charges, he should use the safe-harbor language of
Thus, the letter failed to clearly and effectively
state the amount of the debt as required by the statute.
New District Court Opinions
Since the date of my ruling, several district courts have
issued rulings on whether a validation notice must disclose
These new rulings do not change my opinion on which
line of cases better interprets the law.
Three opinions – one
from within the Second Circuit, two from without – fall into the
line of cases I endorsed.
See Curto v. Palisades Collection,
LLC, No. 07–CV–529(S), 2011 WL 5196708, *8 (W.D.N.Y. Oct. 31,
2011) (“Only were Defendants to now seek interest on the debt,
would the letter have been misleading.”); Michalek v. ARS Nat.
Systems, Inc., No. 3:11–CV–1374, 2011 WL 6180498 (M.D. Pa. Dec.
13, 2011); Stonecypher v. Finkelstein Kern Steinberg &
Cunningham, 2:11–cv–13, 2011 WL 3489685, *5 (E.D. Tenn. Aug. 9,
An out-of-circuit case favors defendants’ position:
Schaefer v. ARM Receivable Management, Inc., No. 09–11666–DJC,
2011 WL 2847768, *5-6 (D. Mass. July 19, 2011).1
One new case suggests that a settlement offer may protect a
debt collector from liability, as it allows the consumer to
settle the debt for a known sum within a reasonable period of
Kimmel v. Cavalry Portfolio Services, LLC, No. 10–680,
2011 WL 3204841, *7 (E.D. Pa. July 28, 2011)(“If the offer of a
30% or 20% discount was accepted within thirty days, there was no
risk that Plaintiff would be liable for additional accrued
I respectfully disagree.
As plaintiff’s counsel
pointed out at oral argument, if the consumer does not know the
amount of his debt, he cannot decide whether the settlement offer
is a good one.
Also, the statute requires that the notice state
the “amount of the debt,” not the amount necessary to settle the
Therefore, I adhere to my ruling in the face of this new
Defendants’ Arguments On Reconsideration
Defendants make several arguments in support of their
First, they argue that the plain language of the
statute – the notice shall state “the amount of the debt” –
requires a finding in their favor; second, they argue that three
The Schaefer court distinguished Dragon on the ground that
the letter in Dragon included language indicating that the
“principal owed” and the “balance due” were one and the same,
whereas the letter in Schaefer did not. While these two cases
might be reconcilable, as I read them, they embrace opposing
interpretations of the statue.
cases from the Seventh Circuit show that the notice in this case
was satisfactory; and third, they argue that the plaintiff is not
entitled to judgment because he has failed to present extrinsic
evidence that the letter would confuse the least sophisticated
Defendants contend that a finding in plaintiff’s favor is
contrary to the plain language of the statute, which simply
requires a validation notice to contain “the amount of the debt.”
They urge that MCM complied with 15 U.S.C. § 1692g by “accurately
stating the amount due” in its letter.
While this argument has
some force, I disagree with it for two reasons.
First, as noted, the amount of the debt is not necessarily
the amount needed to settle the debt, the “amount due” in this
Certainly, had MCM made the settlement offer without
disclosing plaintiff’s “current balance,” the notice would
violate the FDCPA.
Again, the settlement offer does not protect
Second, as plaintiff’s counsel aptly noted at oral argument,
plaintiff’s balance accrued interest daily.
Therefore, while the
notice of June 24 stated the amount of the debt as of the date it
was sent, it did not state the amount of the debt on the date it
Finding that the notice failed to state the
“amount of the debt” because it failed to state the balance as of
the date the notice was received gives effect to the plain
language of the statute.
Defendants’ Three Seventh Circuit Cases
Defendants argue that three cases from the Seventh Circuit –
Wahl v. Midland Credit Management, Inc., 556 F.3d 643 (7th Cir.
2009); Barnes v. Advanced Call Center Technologies, LLC, 493 F.3d
838 (7th Cir. 2007); and Olson v. Risk Management Alternatives,
Inc., 355 F.3d 509 (7th Cir. 2004) – are more relevant to this
case than Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, &
Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000), on which plaintiff
They argue that Wahl, in particular, should control the
It is true that the debt collection letters in the Wahl case
were similar, if not identical, to the letters sent to the
But the Wahl court never considered the question
presented here: Did the first letter – the validation notice –
fail to state the amount of the debt?
Instead, the court
examined letters that were sent to Ms. Wahl after the validation
Those letters included in the “principal balance”
interest that accrued before the debt collector purchased the
Wahl alleged that those letters violated § 1692e of the
FDCPA, not § 1692g, because they were literally false, as
interest is not part of principal.
The court found in favor of
the defendants; the letters were neither false nor misleading.
Wahl, 556 F.3d 645-46.
The questions at issue in Wahl – whether
previously-accrued interest can be termed “principal” when the
debt is purchased by another, and whether literal falsity is a
per se violation of the FDCPA – are irrelevant to the question in
Defendants attribute great significance to the absence of
discussion in Wahl of the first letter Ms. Wahl received - the
I decline to do so.
It is true that the
letter was very similar to the June 24 letter sent to the
plaintiff: it stated a “current balance” and offered a 25%
discount if Wahl paid within six weeks.
As the court stated,
however, Ms. Wahl had “no beef with that letter.”
556 F.3d at
The Wahl case, then, does not speak to the question at
Barnes and Olson also are inapposite.
In their brief on the
motion for summary judgment, defendants cited Barnes for its
finding that an unsophisticated consumer would recognize that the
“Current Amount Due” on a tear-off section of a debt collection
letter is “the amount of the debt.”
493 F.3d at 841.
that the June 24 letter had a tear-off section with the “current
balance” and the “amount due.”
Plaintiff does not argue that
these two amounts were obscured or that an unsophisticated
consumer would not realize he could settle the debt by accepting
Instead, plaintiff contends that these amounts were
insufficient to clearly and effectively state “the amount of the
In Olson, the court found that it is not contradictory for a
letter to contain both a “Balance” and an amount “Now Due.”
“[A]n unsophisticated consumer . . . would understand that the
amount of the debt is the ‘Balance’ and that the amount ‘Now Due’
is the portion of the balance that the creditor will accept for
the time being until the next bill arrives.”
366 F.3d at 513.
Again, the terms of the settlement offer are not in dispute.
Olson does not speak to the question of whether the amount listed
as “Balance” is sufficient to clearly and effectively state the
amount of the debt.
iii. Extrinsic Evidence
Defendants argue that the plaintiff has not sustained his
burden of showing that he is entitled to summary judgment because
the June 24 letter was not clearly misleading and plaintiff has
failed to provide extrinsic evidence that the letter would
confuse the least sophisticated consumer.
See Durkin v. Equifax
Check Servs., Inc., 406 F.3d 410, 414-15 (7th Cir. 2005).
The Seventh Circuit’s rule requiring extrinsic evidence when
a communication is not clearly misleading has not been accepted
See Evory v. RJM Acquisitions Funding L.L.C., 505
F.3d 769, 766 (7th Cir. 2007) (“Other circuits, perhaps less
kindly disposed to survey evidence than we, treat the deceptive
character of a debt collector’s communication as a question of
law . . . .”).
The Second Circuit, in particular, has treated
deceptiveness as a question of law for the court to decide.
e.g., Schweizer v. Trans Union Corp., 136 F.3d 233, 237-38 (2d
Thus, the plaintiff may obtain summary judgment
without offering extrinsic evidence.
Further, the question is not simply whether the least
sophisticated consumer knows that credit card debt accrues
The question is whether a validation notice listing a
“balance” that is outdated when received and continues to accrue
daily interest at an unspecified rate clearly and effectively
states the amount of the debt.
The least sophisticated consumer
would not know the precise amount of the debt as of the date he
received the June 24 letter, nor would he know how much he could
pay to settle the debt if he did not pay by the time the offer
This is an issue of statutory interpretation, not an
issue of factual deceptiveness.
Thus, plaintiff’s failure to
provide survey data is not fatal to his claim.
While I adhere to my original ruling, I recognize that
existing case law does not compel this outcome.
In their motion
for reconsideration, defendants urge me to follow Adlam and
Weiss, two district court cases within this Circuit indicating
that a debt collector need not disclose that interest will accrue
Those cases are distinguishable: they do not state
whether interest accrued daily, weekly, or monthly, and they do
not feature a settlement offer.
clash with both of them.
But my ruling does fundamentally
See also Dragon, 483 F. Supp. 2d at 202
n.1 (collecting cases interpreting Miller to “requir[e] that the
total amount of the debt be stated as the total amount due on the
date a collection letter is sent”).
District courts within the
Circuit are likely to continue to disagree concerning the
information that must be included in a validation notice in order
to clearly and effectively state “the amount of the debt” when
the debt is accruing interest.
This order involves a controlling question of law as to
which there is substantial ground for disagreement, and an
immediate appeal may materially advance the ultimate termination
of this litigation.
Interlocutory review is particularly
appropriate here because a class has been certified under Rule
23(b)(3) as to plaintiff’s claim under the FDCPA.
interlocutory review is conducted and the Court of Appeals
decides that MCM’s validation notice was sufficient, class action
proceedings will be unnecessary and judgment will enter in
defendants’ favor, saving both sides of this case significant
time and expense.
The Court of Appeals’ guidance on what
information is required in a validation notice when the debt is
accruing interest also will be helpful to other debt collectors,
consumers and lower courts.
Therefore, the order is well-suited
for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
Accordingly, I adhere to my earlier ruling granting partial
summary judgment in favor of the plaintiff on his claim under the
However, I certify this order for interlocutory appeal
pursuant to 28 U.S.C. § 1292(b).
So ordered this 10th day of April 2012.
Robert N. Chatigny
United States District Judge
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