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Fair Debt Collection Practices Act

» Posted June 27, 2018Articles

When sending pre-lien letters to delinquent homeowners, it is important to ensure that the letters comply with the Fair Debt Collection Practices Act (“FDCPA”). The FDCPA was created as a safeguard to assure that debt collectors fully disclose to debtors the details of the debts owed. Specifically, the FDCPA requires a debt collector to disclose to the debtor the amount of the debt owed, to whom the debt is owed, the right to dispute the debt within 30 days of receipt of the letter, and the right to obtain verification of the debt. If the debtor decides to dispute the debt and submits this request in writing to the debt collector within the 30-day period, the debt collector is required to stop the collection process until the debtor receives mailed verification of the debt owed.  

As shown by the newly published Federal case Mashiri v. Epsten Grinnell & Howell, No. 14-56927 (“Mashiri”), the standards to stay compliant with the FDCPA are rather high. In Mashiri, a homeowner sued a law firm that issued a pre-lien letter stating, “failure to pay your assessment account within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property” and “unless you notify this office within 30 days of receiving this notice that you dispute the valididty of the debt or any portion thereof, this office will assume this debt is valid.”

The Plaintiff homeowner in Mashiri, believed that the language in the letter did not give her proper notice to dispute the debt, violating the FDCPA. The District Court disagreed with the Plaintiff and dismissed the complaint, stating that the language in the pre-lien letter was sufficient and the law firm appropriately threatened to record a lien.

However, subsequently, the Court of Appeal overturned the ruling of the District Court and found the pre-lien letter raised a plausible claim under FDCPA on the basis of the specific language used. Instead of giving the debtor the right to dispute the debt within 30 days of receipt of the letter as mandated by FDCPA, the letter demanded payment within 35 days of the date of the letter. This nuance in language was enough to potentially violate the FDCPA. Further, the law firm neglected to explain to the debtor that collection activities would cease if she provided a written dispute of the debt owed.

In order to avoid a similar situation, due to the stringent standards of FDCPA, it is advised that associations and management companies review standard pre-lien letters with their collection attorney before sending the letters to delinquent homeowners.