In a decision released today, the 2nd Circuit upheld the district court’s opinion in Taylor v. Financial Recovery Services (FRS). In Taylor, the district court found that not including an interest disclosure was not a violation of the FDCPA. The 2nd Circuit agreed with the district court, finding that the concerns addressed in Avila were not present in the Taylor case.
Read today's decision here.
The court referenced that in Avila, the consumer could be misled into thinking that he paid the account in full by paying the balance listed on the letter when this was not in fact so because interest would have accrued on the balance between the date of the letter and the date the payment is processed. The 2nd Circuit found that this was not a concern in the instant case because had the consumer paid the balance on FRS’s letter, then the account would have indeed been paid in full.
Most notably, the 2nd Circuit found that the only impact a disclosure stating that interest is not accruing on the account would have is letting the consumer know that they can delay their payment without any impact. The court stated:
“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 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.”
The 2nd Circuit reprimanded Taylor for bringing new arguments on appeal that were not addressed in district court, specifically their argument that interest was still currently accruing even if it was not being collected.
The 2nd Circuit also dismissed the consumer’s argument that even if interest were not accruing now, the creditor can at some point in the future turn it back on. The court found that this, even if a possibility, is so far in the future that it would have no impact on the notice sent by FRS. The court found that since no interest or fees were being charged, then the notice was not misleading because the consumer could pay the balance on the notice and satisfy the account.
In the original insideARM article about the case in May 2017, the insideARM Perspective offered this comment from John Rossman, Attorney with Moss & Barnett:
“These cases are being filed en masse in New York – similar to the wave of lawsuits on the envelope issue after the Douglass case a few years ago – and Taylor is the first definitive decision on the issue. The decision follows a common sense approach and reading of the Avila decision. The Plaintiffs appealed the ruling in Taylor to the Second Circuit Court of Appeals and we expect that the appellate court will affirm this ruling while we anticipate all of the other pending cases on this issue will likely be stayed.”
This is a very positive result that may stem the tide referenced by Mr. Rossman.
insideARM has previously written about other cases involving the FRS and the statement regarding tax consequences. See the article on the Remington case here and the Everett case here. Click here to listen to a podcast on the topic from Moss & Barnett.