17‐1650‐cv
Taylor v. Fin. Recovery Servs., Inc.
In the
United States Court of Appeals
For the Second Circuit
________
AUGUST TERM, 2017
ARGUED: JANUARY 24, 2018
DECIDED: MARCH 29, 2018
No. 17‐1650‐cv
CHRISTINE M. TAYLOR, CHRISTINA KLEIN,
Plaintiffs‐Appellants,
v.
FINANCIAL RECOVERY SERVICES, INC.,
Defendant‐Appellee.
________
Appeal from the United States District Court
for the Southern District of New York.
No. 16‐cv‐4685 – Lorna G. Schofield, District Judge.
________
Before: LEVAL, CALABRESI, and CABRANES, Circuit Judges.
________
Appellants Christine M. Taylor and Christina Klein allege that debt
collection notices they received from Appellee Financial Recovery Services,
Inc. were “misleading” in violation of Section 1692e of the Fair Debt
Collection Practices Act because the notices did not indicate whether their
debts were accruing interest and fees. As no such interest or fees were
accruing, we affirm the district court’s May 19, 2017 award of summary
judgment in favor of Financial Recovery Services.
DAVID M. BARSHAY, Baker Sanders,
L.L.C., Garden City, NY, for Plaintiffs‐
Appellants.
JOHN P. BOYLE (Bradley R. Armstrong, on
the brief), Moss & Barnett PA,
Minneapolis, MN, for Defendant‐Appellee.
CALABRESI, Circuit Judge:
Section 1692e of the Fair Debt Collection Practices Act makes it
unlawful for a debt collector to “use any false, deceptive, or
misleading representation or means in connection with the collection
of any debt.” 15 U.S.C. § 1692e. This case asks whether it is misleading
within the meaning of Section 1692e for a debt collection letter to state
the amount of a debt without disclosing that the debt, which once
accrued interest or fees, no longer does so. We hold that such a notice
complies with Section 1692e and affirm the May 19, 2017 judgment of
the district court.
I.
Christine M. Taylor and Christina Klein are New York
residents who fell into credit card debt with Barclays Bank. After they
defaulted on their payments to Barclays, the bank placed their debts
with Financial Recovery Services, Inc. (“FRS”), a collection agent,
which the bank instructed not to accrue interest or fees on the debts.
2
FRS thereafter sent a series of collection notices to Taylor and Klein.
Each notice to Taylor stated an identical “balance due” of $599.98. J.A.
137‐142. The notices to Klein likewise all stated an unchanging
“balance due,” in her case $3,171.12. J.A. 36‐43. None of the notices,
however, included any statement addressing whether those balances
were accruing interest or fees. Neither Taylor nor Klein made any
payments to FRS in connection with their debts prior to filing
individually for Chapter 7 bankruptcy, at which point FRS closed
their accounts.
On June 20, 2016, Taylor and Klein brought suit against FRS in
the United States District Court for the Southern District of New York,
alleging that its collection notices were “false, deceptive, or
misleading” within the meaning of Section 1692e of the FDCPA. In
making this argument, Taylor and Klein relied heavily on our
decision in Avila v. Riexinger & Associates, LLC, 817 F.3d 72, 77 (2d Cir.
2016), where we held that a debt collector violates the FDCPA by
stating the “current balance” of a consumer’s debt without disclosing
that the balance is increasing due to the accrual of interest or fees.
During discovery, FRS produced unrebutted evidence that
neither Taylor’s nor Klein’s debt had accrued interest or fees during
the time those debts were placed with the company. FRS then moved
for summary judgment, arguing that, in stating the amount of Taylor
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and Klein’s debts, it was not obligated to add explicitly that no
interest or fees were accruing.
The district court agreed and, on May 19, 2017, entered
judgment in favor of FRS. Taylor and Klein filed this appeal the same
day.
II.
In determining whether a collection notice violates Section
1692e, “we are guided by two principles of statutory construction.”
Avila, 817 F.3d at 75. The first principle is that the FDCPA must be
construed liberally to effectuate its stated purpose—i.e., “to eliminate
abusive debt collection practices by debt collectors, to insure that
those debt collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and to promote
consistent State action to protect consumers against debt collection
abuses.” 15 U.S.C. § 1692(e).
The second principle is that collection notices are to be looked
at from the perspective of the “least sophisticated consumer.” Avila,
817 F.3d at 75. That is, “we ask how the least sophisticated
consumer—one not having the astuteness of a Philadelphia lawyer or
even the sophistication of the average, everyday, common
consumer—would understand the collection notice.” Id. (internal
quotation marks omitted). Pursuant to this standard, “a collection
notice can be misleading if it is open to more than one reasonable
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interpretation, at least one of which is inaccurate.” Id. (internal
quotation marks omitted).
Taylor and Klein’s primary argument is that FRS’s collection
notices were misleading within the meaning of Section 1692e because
the least sophisticated consumer could have interpreted them to
mean either that interest and fees on the debts in question were
accruing or that they were not accruing. In effect, they argue that 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. Taylor
and Klein contend that our holding in Avila supports them in this
argument.
They are mistaken. In Avila, we found a collection notice to be
misleading because “[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,” whereas, in reality, such a
payment would not settle the debt. Id. at 76. “The debt collector could
still seek the interest and fees that accumulated after the notice was
sent but before the balance was paid,” as well as any interest or fees
that accumulated thereafter. Id. This was no theoretical concern. One
of the plaintiffs in Avila had paid the stated balance of her debt only
to find herself still on the hook for an unpaid balance that was
accumulating interest at the alarming rate of 500% per annum.
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The collection notices FRS sent to Taylor and Klein, which
stated their respective balances due without discussing interest or
fees, could likewise have been read to mean that prompt payment of
the amounts stated would satisfy the debts in question. The difference
is that, while that message was prejudicially misleading on the facts
of Avila, on the facts of this case it was accurate: prompt payment of
the amounts stated in Taylor’s and Klein’s notices would have satisfied
their debts.
Of course, being informed that their debts were not accruing
interest or fees could have been advantageous to Taylor and Klein, as
it would have alerted them to the fact that they could delay
repayment without their debts increasing. Thus, the only harm that
Taylor and Klein suggest a consumer might suffer by mistakenly
believing that interest or fees are accruing on a debt is being led to
think that there is a financial benefit to making repayment sooner
rather than later. This supposed harm falls short of the obvious
danger facing consumers in Avila.
It is hard to see how or where the FDCPA imposes a duty on
debt collectors to encourage consumers to delay repayment of their
debts. And requiring debt collectors to draw attention to the fact that
a previously dynamic debt is now static might even create a perverse
incentive for them to continue accruing interest or fees on debts when
they might not otherwise do so. Construing the FDCPA in light of its
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consumer protection purpose, we hold that a collection notice that
fails to disclose that interest and fees are not currently accruing on a
debt is not misleading within the meaning of Section 1692e.1
Taylor and Klein object that this interpretation of Section 1692e
conflicts with our recent decision in Carlin v. Davidson Fink LLP, 852
F.3d 207 (2d Cir. 2017). That case concerned a debt collector’s
obligation under Section 1692g of the FDCPA to state “the amount of
the debt” within five days of its initial communication with a
consumer. 15 U.S.C. § 1692g. In Carlin, we explained that a collection
notice fails to satisfy Section 1692g if “it omits information allowing
the least sophisticated consumer to determine the minimum amount
she owes at the time of the notice, what she will need to pay to resolve
the debt at any given moment in the future, and an explanation of any
fees and interest that will cause the balance to increase.” 852 F.3d at
216.
Contrary to Taylor and Klein’s objection, our decision today
reads Sections 1692e and 1692g in harmony. That is, if a collection
notice correctly states a consumer’s balance without mentioning
interest or fees, and no such interest or fees are accruing, then the
1
In so holding, we join the Seventh Circuit, which held: ”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, stating that the creditor ‘has assigned
your delinquent account to our agency for collection,’ and asking the recipient to
remit the balance listed—and stopping there, without talk of the ‘current’
balance.” Chuway v. Nat’l Action Fin. Serv., Inc., 362 F.3d 944, 949 (7th Cir. 2004).
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notice will neither be misleading within the meaning of Section 1692e,
nor fail to state accurately the amount of the debt under Section 1692g.
If instead the notice contains no mention of interest or fees, and they
are accruing, then the notice will run afoul of the requirements of both
Section 1692e and Section 1692g.
III.
Taylor and Klein briefly raise two additional challenges to the
district court’s grant of summary judgment in favor of FRS, neither of
which we find persuasive. They first argue that Barclays continued to
accrue interest on their debts even after those debts were placed with
FRS. If true, that would bring this case squarely within the ambit of
Avila. But Taylor and Klein failed to create a genuine issue of fact in
this regard before the district court, instead arguing that “whether
the[ir] accounts were actually accruing interest and fees at the time
they were with [FRS] is irrelevant.” J.A. 362. They cannot escape
summary judgment by changing tactics on appeal.
Taylor and Klein fare no better with their argument that FRS’s
notices were misleading because, even if Barclays did not accrue post‐
placement interest on their debts, it nonetheless retained the right to
do so. Even if such a right existed, FRS’s collection notices were not
misleading because no interest or fees were being charged and Taylor
and Klein could have satisfied their debts by making reasonably
prompt payment of the amounts stated in the notices. In other words,
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the debts remained static long enough to permit Taylor and Klein to
satisfy them through prompt repayment of their respective balances
due, and, as we have already explained, failing to disclose that a debt
is static is not misleading within the meaning of Section 1692e.
The district court’s May 19, 2017 grant of summary judgment
in favor of FRS is AFFIRMED.
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