Violations of state and local debt collection statutes aren’t violations of the Fair Debt Collection Practices Act, the U.S. Court of Appeals for the Second Circuit ruled Monday.
The court upheld the dismissal of a would-be class action, ruling that a debt collector's failure to include a contact name with a call-back number on a debt notice, as required by New York City law, doesn’t automatically state a claim under the FDCPA.
Plaintiff Jeffrey Gallego, who had a debt with Macy's, received a collection letter from Northland Group, a Minnesota-based collection agency, in 2014. The letter stated, "IT'S A NEW YEAR WITH NEW OPPORTUNITIES!" and it gave Gallego a chance to settle his account for $192.20 over four payments or $171.18 spread over two payments.
He filed a lawsuit alleging the lack of a name with the call-back number on the letter violated the FDCPA. Northland Group and Gallego worked quickly to settle the matter on a class-wide basis, agreeing Gallego would be paid $1,000, that $16,500 would be distributed to other class members and that attorney fees would be capped at $35,000.
However, a district court judge denied class certification and said the complaint appeared to allege no more than a violation of city law. He dismissed the case for lack of subject matter jurisdiction.
Gallego appealed to the Second Circuit, where a three-judge panel, heard the appeal in December. The panel disagreed that there was a lack of subject matter jurisdiction, with one judge writing that the U.S. Supreme Court has outlined the "level of frivolity required for a federal claim to fail to invoke federal subject-matter jurisdiction" by using terms such as "essentially fictitious" and "wholly insubstantial.”
But the circuit agreed on Gallego's failure to state a claim, which can be read as looking for relief on two theories. The first is that Northland ran afoul of the FDCPA because it used "unfair or unconscionable means," and the second is that its failure to include the call-back name itself is "deceptive" and "unfair unconscionable” - a phrase borrowed by the New York Administrative Code.
One of the judges wrote that state and local debt statute violations are not per se violations of the FDCPA, failing the first theory. The second theory fails because not listing call-back information is neither a "false representation" nor "deceptive means" under the FDCPA because it doesn't open up the collection letter to more than one interpretation, one of which is inaccurate.