Class Action

FDCPA Class Action Defense Cases-Jacobson v. Healthcare Financial: Second Circuit Reverses Summary Judgment In Favor Of Defense In FDCPA Class Action And Vacates Award Of Attorney Fees And Costs Against Class Action Plaintiff

By Michael J. Hassen

As Matter of First Impression, FDCPA Permits Consumers to Notify Debt Collectors of Dispute Within 30 Days of Receiving Debt Collectors’ Letter Necessitating Reversal of Summary Judgment in Favor of Defense in FDCPA Class Action Second Circuit Holds

Plaintiff filed a putative nationwide class action complaint against Healthcare Financial Services (HFS), a “debt collector” within the meaning of the federal Fair Debt Collection Practices Act (FDCPA), alleging that a debt collection letter he received from HFS violated the FDCPA by failing to advise debtors of their right to dispute the validity of the debt. Jacobson v. Healthcare Fin. Servs., Inc., ___ F. 3d ___, 2008 WL 383060, *1 (2d Cir. February 14, 2008). The class action complaint did not allege that plaintiff suffered any actual loss, limiting recover to statutory damages and attorney fees. Id. Defense attorneys moved to dismiss the class action, or in alternative sought summary judgment, on the ground that the debt collection letter did not violate the FDCPA; the defense also sought attorney fees from plaintiff, arguing that he had filed the class action “in bad faith and for the purpose of harassment,” see 15 U.S.C. § 1692k(a)(3). Id. The district court granted summary judgment in favor of HFS and awarded HFS attorney fees and costs, id. The Second Circuit affirmed in part and reversed in part.

The FDCPA provision at issue provides that a debtor has the right to dispute a debt and seek verification of the validity of the debt by notifying the debt collector of the right to dispute the debt. Jacobson, at *2. The Second Circuit recognized that it must view the issue from the perspective of the “least sophisticated consumer,” see id., at *3 (citing Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993)), but observed also that “the objective test we apply [also] protects debt collectors from unreasonable constructions of their communications,” that the Second Circuit has “carefully preserved the concept of reasonableness,” and that “the FDCPA does not aid plaintiffs whose claims are based on ‘bizarre or idiosyncratic interpretations of collection notices.’” Id. (citations omitted). So viewed, the Circuit Court held that the letter sent by HFS clearly advised debtors of their right to dispute the validity of the alleged debt.

Full post as published by Class Action Defense Blog on March 05, 2008 (boomark / email).