Debtors allegedly misled into believing they could mount challenges by phone rather than in writing can proceed with a federal court class action against the collection agency.
The U.S. Court of Appeals for the Third Circuit reinstated the suit on March 1, reversing a judge who found the invitation to call or write, in the context of the entire collection letter, would not confuse the least sophisticated debtor and did not overshadow language advising that a challenge must be in writing.
"[I]t appears more likely that the ‘least sophisticated debtor’ would take the easier — but legally ineffective — alternative of making a toll-free telephone call to dispute the debt instead of going to the trouble of drafting and then mailing a written dispute," the appeals court said in Caprio v. Healthcare Revenue Recovery Group, No. 12-1846.
Ray Caprio received a Dec. 7, 2010, letter from Healthcare Revenue Recovery Group (HRRG), seeking payment on behalf of Emergency Physician Associates of North Jersey for $49.51 allegedly owed for emergency room medical services.
The letter said that if he had questions or "if you feel you do not owe this amount" he should "please call" a toll-free number "or write us at the above address."
On the reverse side of the letter was printed a notice citing the federal Fair Debt Collection Practices Act (FDCPA) and advising that the recipient, in order to dispute the debt’s validity, must notify HRRG in writing within 30 days, in which case HRRG would seek verification of the debt, including a copy of the judgment, from the creditor.
Caprio later filed a putative class action on behalf of a New Jersey class claiming that the letter gives the impression that a call or a written communication is sufficient.
Caprio contends that the letter violates 1692(g) of the FDCPA, which mandates what information a collector must provide and requires the collector to cease collection until it is able to obtain, at the debtor’s written request, verification of the debt.
The provision does not explicitly state that all debt disputes must be in writing, but that hard-and-fast rule was established by the Third Circuit in Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991).
Graziano and its progeny established that the validation notice must be conveyed effectively, and not overshadowed or contradicted by other information in the collection letter. Whether the notice is overshadowed or contradicted is determined by how the "least sophisticated debtor" would interpret the letter.
HRRG moved for judgment on the pleadings, which U.S. District Judge Dennis Cavanaugh granted on March 12, 2012, finding its invitation to call or write, when read in the context of the entire collection letter, would not confuse the least sophisticated debtor and did not overshadow or contradict the validation notice.
Cavanaugh noted that the "please call" invitation included an instruction to read the letter’s reverse side, and debtors are required to have read the entire notice in challenging its comprehensibility.
Caprio appealed, arguing that the least sophisticated debtor could reasonably believe, contrary to Third Circuit law, that he could effectively dispute a debt by phone rather than in writing.
Third Circuit Judges Robert Cowen, Joseph Greenaway Jr. and Morton Greenberg agreed and reversed, holding HRRG’s letter deceptive because it could be read to have two meanings, one of which is inaccurate.
Though the collection letter did not expressly state that a phone call would be sufficient, "it is not our responsibility to decide whether the debtor or the debt collector offers ‘a more appropriate reading’ of a debt collection matter," Cowen wrote.
"[B]oth the ‘substance’ as well as the ‘form’ of this Collection Letter overshadowed and contradicted the Validation Notice," Cowen wrote.
The words "please call" and the toll-free number were printed in bolder font than other words, unlike the validation notice, which was "relegated to the back side" of the letter, Cowen noted.
Cowen also noted a Fourth Circuit ruling that a debt collector’s letter demanding a phone call violated section 1692(g).
The court also reinstated Caprio’s claim under section 1692(e)(10) of the FDCPA, which prohibits "false, deceptive, or misleading representation or means in connection with the collection of any debt."
The matter was remanded for discovery.
Caprio’s lawyer, Fairfield solo Joseph Jones, says the decision "solidifies that, in the Third Circuit, Graziano is still good law."
"If you’re going to have an invitation to call … the debt collector should be clear that it’s an invitation merely to discuss the debt" rather than to formally challenge its validity, Jones says. "There’s a difference between an invitation and instructions."
Jones adds that the case "fits well into a class action because it appears to be a form letter."
He adds, "I don’t think [demonstrating] numerosity … is going to be difficult."
Richard Perr of Fineman, Krekstein & Harris in Philadelphia, counsel to Plantation, Fla.-based HRRG, says only that the decision is under review.