Last Friday, July 24, the Second Circuit released Vangorden v. Second Round, Limited Partnership.  In short, the Second Circuit reversed the lower court's (E.D. NY) decision and held that debt collectors will be held strictly liable for misrepresenting an incorrect debt regardless of the initial notice a consumer receives.
In Vangorden, the consumer alleged that the debt being collected had been settled 5 years prior to initial collection letter.  The consumer complained that the debt buyer misrepresented the status of the debt in violation of Section 1692e and violated Section 1692f  by attempting to collect a debt that was not expressly authorized by agreement or law. The consumer did not dispute the validation notice.
The debt buyer defended on the basis that its validation notice sent to the consumer: a) under 1692g (the G Notice) takes away any technical falsity as the amount of the debt out of any actionable misrepresentation under 1692e and 1692f and b) precluded the least sophisticated consumer from being misled.
Surprisingly, the Second Circuit rejected this argument and found the validation notice does not prevent consumers from asserting a plausible claim that the letter was misleading and unfair; importantly, the notice does not alter FDCPA strict liability for debt collectors.  Rather, the Court found that the debt collector's intent is only relevant for the bona fide error defense under Section 1692k(c) of the FDCPA.
Important Takes From This Decision
1. Debt collectors are going to be held strictly liable for the data concerning the debt they include in their letters, regardless if a consumer elects to take advantage of their initial dispute rights. 
2. The validation notice will provide no automatic defense to errors on amounts claimed to be owed by the consumer. 
3. While debt collectors will still have an opportunity to prove a bona fide error as an affirmative defense, that "opportunity" burden shifts to the debt collector  the obligation to prove the bona fide error. BFEs are typically complicated and expensive to prove. 
4. Up for debate will be the amount of due diligence a debt collector must complete on its client's data, or seller's data for a debt buyer. 
5. This decision highlights the need to have comprehensive indemnification agreements with creditors that will protect debt collectors and buyers from data errors transmitted to them.
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