Recently, in a case of first impression in North Carolina, the Federal District Court for the Middle District ruled a summons and complaint issued to commence a collections lawsuit against a debtor constituted an “initial communication” under the Fair Debt Collection Practices Act (FDCPA).  According to the Court, when a summons and complaint predate all other communications to a debtor with respect to a specific debt, those items constitute an initial communication under the FDCPA.

The FDCPA sets forth the rules governing how a debt collector may go about collecting a debt as well as prohibiting certain abusive practices Congress has considered to be either deceptive or unfair.  The FDCPA provides in part:

“Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing:

1. the amount of the debt;

2. the name of the creditor to whom the debt is owed;

3. a statement that unless the consumer, within 30 days after receipt of the notice, disputes the validity of the debt . . . the debt will be assumed valid by the debt collector;

4. a statement that if the consumer notifies the debt collector in writing within the 30-day period that the debt . . . is disputed, the debt collector will obtain a verification of the debt . . . and a copy of such verification will be mailed to the consumer; and

5. a statement that, upon the consumer’s written request within a 30-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.”

The Court concluded that a legal complaint may constitute an initial communication because the FDCPA defines a “communication” as “the conveying of information regarding a debt directly or indirectly to any person through any medium.”  Citing a Maryland opinion, the Court said: “where a court summons and complaint precede all other communications to a debtor relative to a given debt, these items shall constitute an initial communication under the FDCPA.”  The Court also agreed with a 7th Circuit Opinion which held that “to except the service of pleadings from the definition of “communication” would erode the . . . requirement to inform debtors of their validation rights; debt collectors could avoid their obligation to advise debtors of their validation rights altogether by initiating litigation.  Such a loophole, creating an end-run around the validation notice requirement, is inconsistent with the drafter’s [Congress’s] intention of protecting debtors from “unfair, harassing and deceptive” collection tactics . . .”

As a result of this new decision, creditors and their counsel must determine whether or not the summons and complaint initiating an action to recover a debt precedes all other communications with the debtor with respect to the specific debt.  If so, the complaint must be drafted to inform the debtor-defendant of his validation rights in accordance with the provisions of the FDCPA.  The complaint should also be verified by the creditor-plaintiff.  While holding a complaint and summons can constitute an initial communication under the FDCPA, the Court also held that properly pleading the notice requirements of the Act in a verified complaint is sufficient to satisfy the requirements of FDCPA.

For more information on this alert or other litigation issues please contact Thomas H. Davis, Jr. at 919.783.2816 or at tdavis@poynerspruill.com or David Dreifus, Business Litigation Practice Group Leader, at ddreifus@poynerspruill.com or 919.783.2817.