Debt disputes need not be in writing, court determines
The United States 2nd Circuit Court of Appeals, which encompasses New York, has ruled that the Fair Debt Collection Act (FDCA) does not require a notice of a disputed debt to be in writing to be deemed valid.
New York residents Karen Hooks and Geraldine Moore agreed in 2009 to purchase a timeshare from Wyndham, a firm specializing in vacation resorts, not realizing that the document they signed was a mortgage. Neither Hooks nor Moore made any payments toward the mortgaged timeshare.
Wyndham enlisted the services of Forman, Holt, Eliades & Ravin, LLC, a debt collector, to collect on the timeshare debt. Forman Holt sent a notice to Hooks and Moore stating that “unless you notify us in writing within thirty (30) days…that the debt…is disputed we will assume that the debt is valid.”
Hooks and Moore filed a lawsuit against Forman Holt, asserting that while the FDCA does require that debtors be notified that they can make a statement disputing the debt, that statement does not need to be in writing, as the letter sent from Forman Holt demanded.
The FDCA requires that notice of a debt sent to a debtor from a creditor or debt collector must contain “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”
The act also states that in order for a creditor to be required to “cease collection of a debt,” the debtor must dispute the debt in writing. Reading the two sections of the act as one, Forman Holt argued that in order for a debt to be appropriately disputed, the dispute must be made in writing.
The court disagreed. Handling this issue of the first time, the 2nd Circuit Court of Appeals said that the “right to dispute a debt is the most fundamental” part of the act — so fundamental that it was necessary to “ensure that the right can be exercised by consumer debtors who may have some difficulty with making a timely written challenge.”
“Requiring the debtor to give notice of their dispute in writing is deceptive,” Brooklyn debt attorney Simon Goldenberg said of Forman Holt’s actions. Requiring a written notice “limits the debtors’ ability to dispute a debt,” Goldenberg continued. For example, if a debt collector mails a notice to a debtor and the debtor happens to be on vacation at the time, the debtor may not be able to dispute the debt in writing in a timely fashion, Goldenberg noted.
Now that the court has ruled that notice of debt disputes may be made orally, the question becomes how one proves that they orally disputed a debt. Many debt collectors record the phone conversations between the debtor and the collection agency.
“These recordings are for the debt collectors’ benefit,” Goldenberg said. “If a consumer debtor asserts that they made an oral dispute and subsequently requests a copy of the phone recording, the creditor can merely say that they did not record that particular conversation.”
Goldenberg advises that debtors record the phone call(s) themselves, noting that “many states, such as New York, allow for one-party consent for taping phone conversations.”
Another option Goldenberg gives is getting an affidavit that outlines the details of the conversation. “The affidavit should contain information as to who you spoke to, the phone number dialed, the date, the time and the details of the conversation,” Goldenberg advised.
While the court ruled that notice of the dispute does not need to be in writing, it did rule that in order to effectuate the right to have a debt collector “cease collection of a debt,” the debtor must then provide notice of the dispute in writing. The court’s rationale was that the “power to demand cessation of all collection activities” places a burden on the debt collector and thus requires the debtor to take the “extra step” of a writing to activate the power.
The court, in conclusion, ruled that notice of a disputed debt need not be in writing, but in order for collection of the debt to cease, a written notice is required.
“Debt collection affects everyone,” Goldenberg said. “Even if you are responsible and pay your debts on time, there are instances of credit reporting mistakes or mistaken identity that may occur. Everyone one should be aware of their rights as related to debt-collection practices.”
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