Each Debt Collector Must Notify Consumer of Debt Verification Rights

Ninth Circuit’s July 20 Decision Important Step in Resolving Split Among the Courts

In a comprehensive opinion in Hernandez v. Williams, Zinman & Parham PC, 2016 WL 3913445 (9th Cir. July 20, 2016), the Ninth Circuit held that “…the FDCPA unambiguously requires any debt collector—first or subsequent—to send a § 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt.” This decision is consistent with the standard practice for many debt collectors—that even though a first collector has provided that notice, when that collector outsources or sells the debt, that subsequent collectors seeking payment from the same consumer on the same debt still provide the debt verification notice. Debt collectors who do not follow this practice open themselves up to FDCPA liability.

Even before Hernandez, over a dozen cases collected at NCLC’s Fair Debt Collection § 5.7.2.2 (8th Ed. 2014), updated online, have held that the FDCPA requires subsequent debt collectors to send a debt verification rights notice to the consumer. See, e.g., Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162 (9th Cir. 2006); Tocco v. Real Time Resolutions, Inc., 48 F. Supp. 3d 535, 539 (S.D.N.Y. 2014); Lewis v. Nationstar Mortg., 5 F. Supp. 3d 890 (E. D. Mich. 2014); and Wright v. Ocwen Loan Servicing, L.L.C., 2013 WL 5532687 (E.D. Mich. Oct. 7, 2013).

On the other hand, Hernandez is particularly important because it stands in contrast to three unpublished federal appellate and a number of lower court decisions, collected at § 5.7.2.2 , that had found only the first debt collector was required to provide a debt verification rights notice. See Lee v. Cohen McNeile & Pappas, P.C., 520 Fed. Appx. 649 (10th Cir. 2013), affirming 2012 WL 2449857 (D. Kan. June 26, 2012); Marshall v. Deutsche Bank Nat’l Trust Co., 445 Fed. Appx. 900 (8th Cir. 2011), affirming 2011 WL 345988 (E.D. Ark. Feb. 1, 2011); Oppong v. First Union Mortgage, 326 Fed. Appx. 663 (3d Cir. 2009), affirming 566 F. Supp. 2d 395 (E.D. Pa. 2008).

Rationale for Ninth Circuit Decision

While Hernandez recognized that § 1692g was ambiguous by itself, it found that the repeated reference in the FDCPA to “a debt collector” was meant to apply to “any debt collector,” and therefore § 1692 required “any” debt collector to provide their own debt verification notice. In addition, Hernandez found that limiting the § 1692g notice requirement to just the first debt collector would create a tremendous loophole undermining the § 1692g informal dispute resolution device that Congress considered “significant.”

Section 1692g(b) gives a debt collector the option of either verifying the debt upon timely request by the consumer or ceasing collection. The debt collection law firm’s construction in Hernandez would have allowed the first debt collector to ignore consumer’s timely request for verification by outsourcing or selling the debt to a second debt collector who would have no obligation to verify the debt or cease collection. The Ninth Circuit found that loophole could not have been intended by Congress. Further discussion explaining why each collector must send a notice of verification rights is found in an amicus brief filed jointly by the Consumer Financial Protection Bureau and the Federal Trade Commission with the Ninth Circuit in Hernandez.