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Islam v. American Recovery Service Inc.

United States District Court, E.D. New York

October 30, 2017

FATEMA ISLAM, Individually and on behalf of a class, Plaintiff,


          BRIAN M. COGAN U.S.D.J.

         The Second Circuit's decision in Avila v. Riexinger & Associates, 817 F.3d 72 (2d Cir. 2016), has led to a number of lawsuits in this district challenging the adequacy of disclosures concerning the accrual, or non-accrual, of post-default charges under the Fair Debt Collection Practices Act. Avila's narrow holding is this: if post-default interest or fees are accruing, it is not sufficient for the collection letter to list the "current amount" of the debt. The collection letter has to say that the amount may increase over time.

         The complaint before me seeks to extend Avila to cases where post-default charges are not accruing, but where the collection letter, by referencing the amount due "as of the date of this letter, " arguably implies that they are. Although the facts of Avila are thus distinguishable, its analytical framework is so indulgent of plaintiffs and their attorneys that I am constrained to deny defendant's motion for summary judgment and to grant plaintiffs motion.


         The material facts are undisputed.

         On August 4, 2016, Bank of America, N.A., placed plaintiffs credit-card account with defendant for collection. One week later, on August 11, 2016, defendant sent plaintiff a collection letter which stated, in part, that "fa]s of the date above, you owe $14413.78." (Emphasis added). The letter then set forth a table identifying Bank of America as the "original creditor"; the "total amount of the debt due as of charge-off' as $14, 413.78; the "total amount of interest accrued since charge off' as $0; and the "total amount of non-interest charges or fees accrued since charge-off as $0. After this table, the letter again advised that "[t]he balance owed above reflects the total balance due as of the date of this letter. The itemization reflects the post charge-off activity we received from Bank of America." (Emphasis added).

         Defendant sent a second collection letter on September 23, 2016, which did not contain the language "as of the date of this letter." It simply listed the "Balance Owed" as $14, 413.78, the same amount demanded in the first letter.[1]

         Bank of America has a policy of not accruing interest or fees once it has charged off a bad debt. Thus, consistent with the letter's terms, no interest or expenses accrued after August 4, 2016, the date on which the account was put out for collection to defendant.

         Based solely on the language in the August 11th letter, plaintiff contends that defendant violated the FDCPA in three respects: (1) by violating the general prohibition against "deceptive [or] misleading" representations in 15 U.S.C. § 1692e; (2) by violating the specific prohibition against "[t]he use of any false representation or deceptive means ... to attempt to collect any debt" in § 1692e(10); and (3) by violating § 1692g, which requires that a collection letter state the "amount of the debt."


         In Avila, the collection letter noted in two places the "current balance" of the debt, but did not disclose that after the date of the collection letter, the account was continuing to accrue interest at the alleged rate of 500% per year plus late fees. The Second Circuit held that referring to the "current balance" was not sufficient to disclose that the amount would increase after the date of the letter, and thus was a "deceptive [or] misleading representation" of the amount due under the general prohibition of 15 U.S.C. § 1692e. Its decision was premised on two principles: (1) the FDCPA should be liberally construed because it is a consumer-protection statute, see Vincent v. The Money Store, 736 F.3d 88, 98 (2d Cir. 2013); Jacobson v. Healthcare Fin. Servs., Inc.. 516 F.3d 85, 95 (2d Cir. 2008); and (2) the collection letter must be assessed from the perspective of the "least sophisticated consumer." See Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993). Applying these principles, the Court held that

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.

Avila, 817 F.3d at 76. Based on the procedure set forth in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000), the Second Circuit adopted a "safe harbor" option for debt collectors seeking to recover debts where the amount varies from day to day, under which a debt collector can advise the debtor either that the "current balance" may increase over time, or that the debt collector will accept the current balance as payment in full.

         I must of course apply Avila as controlling precedent, and although it is factually distinguishable, its analytical framework dictates the result here. Specifically, it applied the "liberal construction" and "least-sophisticated consumer" principles so broadly, to such a harmless, technical violation, that it effectively exchanged the words "deceptive" and "misleading" in the statute for "ambiguous." If a collection letter ...

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