The Second Circuit recently held that a collector must disclose that there exists interest, costs and other fees when referencing the “current balance” of an account in a collection letter. The case, Avila v. Reixinger & Associates, LLC, analyzed whether “sending of a collection notice that states a consumer’s ‘current balance,’ but does not disclose that the balance may increase due to interest and fees, is a ‘false, misleading, or deceptive’ practice’ prohibited by the FDCPA. The Court decided that it does for a simple reason – debtors would be misled into believing that paying off the stated balance would satisfy their debts.
The Court’s decision appropriately relied on the relevant standards for violations under Section 1692e of the FDCPA. In particular, the Court utilized the “least sophisticated consumer” standard and explained that as long as a collection notice is “open to more than one reasonable interpretation, at least one of which is inaccurate,” the notice runs afoul of the FDCPA. As such, the Court held that a least sophisticated consumer could be misled into interpreting a collection notice with a statement referencing the “current balance” as the total amount due. Without reference to accruing interest and other charges, debtors can be deceived into inadvertently providing large payments with a false impression that those accounts would be closed upon that payment. The Court believed that even a reasonable consumer would believe that full payment of the identified “current balance” would clear her account.
This decision seems to be relatively straightforward and the Second Circuit even provided a Safe Harbor provision like the Seventh Circuit did in a similar 2000 decision. By using this language in its notices, collectors can avoid FDCPA liability. However, it seems likely that there will remain collectors who ignore these decisions and continue to prey upon consumers to collect the highest amount they can for their clients. This is why it is imperative for all consumers, especially those going through a period of financial hardship, to be aware of their rights under the FDCPA.