Plaintiff Cristian D. Cortez owed credit card debt to Discover Bank. Discover Bank placed Cortez's debt with Forster & Garbus for collection. In 2011, Forster & Garbus filed a collection action in New York state court and obtained a default judgment. Over the years, Forster & Garbus mailed Cortez a number of collection notices. See Cortez v. Forster & Garbus, LLP, 999 F. 3d 151 (2nd Cir. 2021)
In one such notice dated February 2, 2017, Forster & Garbus indicated that Cortez's debt balance at that time was $13,457.65 and stated in relevant part:
This office has been authorized to advise you that a settlement of the above account can be arranged. You are being offered a substantial discount off the current balance due. You may choose one of the three payment options [. . .] Joint App'x at 19.
Cortez sued Forster & Garbus, claiming that this notice, by failing to disclose that interest was continuing to accrue on his balance, violated the FDCPA as interpreted by Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016).
Forster & Garbus moved for summary judgment, which the District Court denied. See Cortez v. Foster & Garbus, LLP, 382 F. Supp. 3d 259 (E.D.N.Y. 2019). The district court observed that the February 2 notice did not state whether interest and fees were accruing on Cortez's account even though Avila mandated that "debt collectors, when they notify consumers of their account balance," must "disclose that the balance may increase due to interest and fees." Id. at 261 (quoting Avila, 817 F.3d at 76). Forster & Garbus argued that the notice did not violate Section 1692e because under Avila, "a debt collector will not be subject to liability" under the FDCPA if it makes a settlement offer "clearly stat[ing] 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," 817 F.3d at 77; the district court read Avila to require that such a settlement offer must nevertheless be accompanied by a disclosure of whether interest would continue to accrue if the debtor "do[es] not make the payment by the specified date." Cortez, 382 F. Supp. 3d at 261.
Reversed — A debt collector will not be subject to liability under FDCPA Section 1692e for failing to disclose that the consumer's balance may increase due to interest and fees if the collection notice either [1] accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or [2] clearly states that the holder of the debt will accept payment in the amount set forth in full satisfaction of the debt if payment is made by a specified date.
I
The FDCPA provides that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt," 15 U.S.C. § 1692e, and, among other things, prohibits debt collectors from making any "false representation of the character, amount, or legal status of any debt," id. § 1692e(2)(A). To determine whether a debt collection notice violates these provisions, we employ the least sophisticated consumer standard, according to which a notice is deceptive or misleading if it is "open to more than one reasonable interpretation, at least one of which is inaccurate." Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993).
However, we proceeded to explain 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 interest and fees if the collection notice either [1] accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or [2] clearly states that the holder of the debt will accept payment in the amount set forth in full satisfaction of the debt if payment is made by a specified date.
Id. at 77. Together, these two disclosure options, or safe harbors, fully address the concern we articulated in Avila that a debtor might remit the listed balance without realizing that she has not fully paid off her debt. The first disclosure option contemplates debt collectors informing debtors that paying the specified amount will not satisfy the debt. See, e.g., Kolbasyuk v. Capital Mgmt. Servs., LP, 918 F.3d 236, 242 (2d Cir. 2019). The second disclosure option contemplates collectors informing debtors that paying the specified amount will satisfy the debt. When apprised of either of these two disclosures, no debtor reasonably could be unaware of the effect payment of the balance specified in the notice would have on her outstanding debt.
II
We reaffirm Avila's holding that a debt collector "will not be subject to liability under Section 1692e for failing to disclose" in a collection notice whether an account is accruing interest and fees so long as the notice "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." 817 F.3d at 77. Such collection notices do not present the risk that a debtor might pay the listed balance only to find herself still owing more. Payment of an amount that the collector indicates will fully satisfy a debt excludes the possibility of further debt to pay.
Our decision in Taylor v. Financial Recovery Services, Inc., 886 F.3d 212 (2d Cir. 2018), is instructive. There, debtors whose balances were static sued their debt collector, Financial Recovery Services ("FRS"), under the FDCPA for failing to disclose that interest and fees were not accruing on their accounts. They argued that under Avila, "a debt collector commits a per se violation of Section 1692e whenever it fails to disclose whether interest or fees are accruing on a debt." Id. at 214. We disagreed. While in Avila the collection notice's implication that payment of the outstanding balance would fully satisfy the debt was "prejudicially misleading," in Taylor "prompt payment of the amounts stated in [plaintiffs'] notices would have satisfied their debts." Id. (emphasis in original). For this reason, we held that FRS's notices to plaintiffs, which stated their respective balances without disclosing that interest and fees were not accruing on their accounts, did not violate the FDCPA. Id.; see also Chuway v. Nat'l Action Fin. Servs., Inc., 362 F.3d 944, 949 (7th Cir. 2004) (Posner, J.) ("If the debt collector is trying to collect only the amount due on the date the letter is sent, then he complies with the Act by stating the 'balance' due . . . and asking the recipient to remit the balance listed — and stopping there[.]"). This reasoning extends to a collection notice proposing to accept a specified amount in full satisfaction of a debt. As with debtors faced with a collection notice for a static debt, who are not prejudicially misled by the collector's failure to disclose that interest is not accruing, debtors faced with a settlement offer are not misled by the failure to disclose that interest is accruing because in both situations, payment of the amount indicated in a collection notice would extinguish the debt.
Nevertheless, here the district court held that debt collectors extending offers of full satisfaction must also "advise consumers that their debt [is] still accruing interest and/or fees." Cortez, 382 F. Supp. 3d at 261. In doing so, the court was drawn to our suggestion in Avila that
a debt collector who is willing to accept a specified amount in full satisfaction of the debt if payment is made by a specific date could considerably simplify the consumer's understanding by so stating, while advising that the amount due would increase by the accrual of additional interest or fees if payment is not received by that date.
Id. (quoting Avila, 817 F.3d at 77).
However, Avila held only that a debt collector must "either" disclose that interest and fees continue to accrue "or" offer to extinguish the debt in exchange for a specified payment. 817 F.3d at 77 (emphasis added). Avila's use of a precatory word to suggest that a debt collector "could" simultaneously avail itself of both safe harbors is consistent with the conclusion, explained above, that either disclosure option alone dispels the risk of a collection notice misleading a debtor about the effect paying the specified amount would have on the outstanding debt.
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III
With these principles in mind, we hold that Forster & Garbus's February 2 notice to Cortez did not violate Section 1692e because it extended a settlement offer that, if accepted through payment of the specified amount(s) by the specified date(s), would have cleared Cortez's account. The district court found it "debatable" that the notice "'clearly state[d] that [the defendant would] accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specific date'" because the notice "[did] not state explicitly that the debt will be discharged fully upon receipt of payment." Cortez, 382 F. Supp. 3d at 262 (alterations and emphasis in original) (quoting Avila, 817 F.3d at 77). However, the notice extended three "settlement choice[s]," each affording a "substantial discount off the current balance due," Joint App'x at 19, unmistakably communicating that acceptance of one of the options would extinguish Cortez's debt. We therefore conclude that, even when viewed from the perspective of the least sophisticated consumer, the February 2 notice could only reasonably be read one way: as extending an offer to clear the outstanding debt upon payment of the specified amount(s) by the specified date(s). Since this sole reasonable interpretation was accurate, the notice did not violate the FDCPA.
THIS CASEBOOK contains a selection of U. S. Court of Appeals decisions that analyze, interpret and apply provisions of the Fair Debt Collection Practices Act. Volume 1 of the casebook covers the District of Columbia Circuit and the First through the Fifth Circuit Court of Appeals. Volume 2 of the casebook covers the Sixth through the Eleventh Circuit Court of Appeals.