Second Circuit Rules Debt Collector did not Violate FDCPA by Sending Settlement Offer Without Disclosing Interest Would Continue to Accrue if Consumer did not Meet Payment Deadline

The U.S. Court of Appeals for the Second Circuit has ruled that a debt collector did not violate the Fair Debt Collection Practices Act by sending the plaintiff a settlement offer that did not disclose that his balance could increase due to interest and fees. 

In Cortez v. Forster & Garbus, LLP, the debt collector sent a collection notice to the plaintiff offering various options for settling his account for less than the full balance owed if he made the payments indicated by the dates specified in the notice. The plaintiff alleged that the debt collector violated the FDCPA by failing to disclose that interest was continuing to accrue on his balance.

In its 2016 decision in Avila v. Riexinger & Associates, LLC, the Second Circuit held that a collection letter that states a debtor’s current balance but does not disclose whether interest and fees are accruing is misleading in violation of FDCPA Section 1692e.  However, the Second Circuit also provided two safe harbors from liability under Section 1692e for failing to make such a disclosure.  A debt collector would not be liable if the letter either (1) accurately informs the consumer that that the amount of the debt stated in the letter will increase over time, or (2) clearly states that the holder of the debt will accept payment in the amount set forth in the letter in full satisfaction of the debt if payment is made by the specified date.