New Initial Communication Rules

publications full of ideas

08.25.2006

Thomas H. Davis Jr.

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:

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

Physical Address: 301 Fayetteville Street, Suite 1900, Raleigh, NC 27601

related information

08.25.2006