December 29, 2017

Avila Language Update

Many collection agencies have recently seen an uptick in litigation related to the wording included in their letters regarding interest. It is important to carefully review the law as it continues to rapidly develop since the consumer bar is aggressively filing suit in this arena.

Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, L.L.C. is a good starting point when reviewing the language in your letters. 214 F.3d 872 (7th Cir. June 5, 2000). The Miller Court suggested the use of safe-harbor language to prevent FDCPA violations related to the “amount of the debt” provision so long as the information provided is accurate and does not obscure it by adding other confusing information. The Court provided the following language for use:

"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].”

Courts do not require the exact use of this particular disclaimer, but its use provides protection to the entity utilizing it for the “amount of debt” provision.

Avila v. Riexinger & Associates, LLC supports the Miller decision (“…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 consumer who pays the “current balance” stated on the notice will not know whether the debt has been paid in full.”) Ultimately, the Avila court held:

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 the 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.

The consumer bar is now pushing the envelope on this topic. They are bringing lawsuits based upon letters sent to debtors that include the safe-harbor language when interest is not actually accruing on the account. The attorneys theorize that the safe-harbor language leads the least sophisticated consumer to believe the account will accrue interest when, in fact, it will not. The consumer bar’s position is the alleged misstatement is made in an attempt to elicit payment from the consumer. The consumer bar is also taking issue with collectors itemizing “collection costs”, “interest”, and “fees” if the account is not actually accruing costs, interest, or fees.

Several courts recently provided rulings in favor of the collection industry. See Bryant v. Aargon Collection Agency, Inc., No. 17-cv-144096, 2017 WL 2955532 (S.D. Fla. June 30, 2017) and Jones v. Professional Finance Company, Inc., No. 17-cv-61435, 2017 WL 6033547 (S.D. Fla. Dec. 4, 2017). The Jones Court stated, in no uncertain terms, that the least sophisticated consumer would not be deceived by the letter at issue when the letter does not falsely state that there are fees associated with the debt; rather, the letter specifically shows no fees are associated with the debt. The Court cleverly pointed out that “the ordinary meaning of 0.00” is “none, zilch, nada.” Id. at *2.

The clearest compliance rule related to letters is to make sure every statement and every word is factually accurate for the specific consumer receiving a letter. While this is operationally difficult, it is not enough for your collection letters to apply to most of the consumers you contact. If you need additional information on this issue, please contact the firm.

Initial Communication Under the FDCPA

Your initial communication with a consumer should not be a voicemail. You may be caught between a rock and a hard place if you do.

Hart v. Credit Control (11th circuit- September 2017) ruled that a Zortman-type voicemail falls within the FDCPA’s definition of a “communication.” That, in turn, triggers the mini-miranda requirement. A voicemail that includes the shortened mini-miranda allowed for subsequent communications is not Zortman compliant.

Under this line of reasoning, a debt collector’s initial communication with a consumer should not be a voicemail (Zortman compliant or otherwise). It creates an unsolvable dilemma between 1692d(6) (third party disclosure) and 1692e(11) (initial communication must have the full mini-miranda). In this ‘initial communication is a voicemail’ scenario, if you comply with 1692d(6), then you arguably violate 1692e(11) and vice versa.

Hart was out of the 11th circuit and every circuit is different, but our overall advice is to make sure the 1692g notice is mailed (and received in a perfect world) before starting calls or, at the very least, before leaving voicemail messages.


Indemnification sounds complicated, but has a simple definition—to hold harmless. Issues surrounding indemnification arise frequently in the collection industry due to the relationships among companies that service consumer accounts, their creditor clients, forwarding law firms that eventually file suit to recover the obligation, and industry vendors. Creditors, debt buyers, collection agencies, law firms, and vendors are all valuable components of the collection process. All generally work together toward a common goal, but consumer complaints occasionally create a conflict of interest among companies. Most typically, indemnification arises through the contract for services entered between parties wherein a party accepts the contractual obligation to indemnify the other party under certain circumstances. The indemnification provision is important and should be reviewed carefully before entering into any agreement.

When your company and a company with which you have a business relationship are individually or collectively the target of a consumer demand or complaint, your company should immediately take the following steps:

1. Consult the service agreement between your company and any other entity that may have caused or contributed to the underlying issue which generated the threat or lawsuit;

2. Consider if allegations in the threat or lawsuit read in concert with each party’s contractual obligations warrants discussing whether someone may be contractually responsible for the defense of the threat or lawsuit; and

3. Notify your general counsel, compliance department, or attorney of any questions and/or decisions regarding indemnification.

Companies can save money, time, and business relationships by; (1) carefully reviewing indemnification provisions at the outset of the business relationship, and (2) immediately considering the benefits and risks triggering the indemnification provision upon receipt of a consumer demand or lawsuit. Early indemnification decisions can mitigate damages, assist with strategy, and provide business partners clarification of their respective responsibilities. Contact our firm for advice about how to manage the up front contract negotiations and/or the back end implications when indemnification becomes and issue in a threat or lawsuit.

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