FDCPA Short Note: Failure To Dispute Within 30 Days Does Not Make Invalid Debts Valid

WHITAKER v. HUDSON & KEYSE, LLC, USDC-INSD No. 1:05-CV-1597-JDT-WTL, 2007 U.S.Dist. LEXIS 57706, before USDJ Tinder, filed 06 Aug 2007. Not binding anywhere but may be persuasive.

Plaintiff did not repay a Bank One, now Chase Bank, credit card debt of $3,558.96. A collection agency sent him a dunning letter seeking $4,726.89, and Plaintiff paid them about $1,200 in installments. Chase later sent him a letter stating that his account was reduced from $3,326.89 to $2,236.07, having been improperly stated before. American Coradius, another collection agency, dunned Plaintiff two months later for $2,436.07, which Plaintiff disputed and demanded cease-comm (and then American Coradius illegally sent him another dunning letter, but is not a defendant here). Finally, Defendant Hudson & Keyse, another collection agency, mailed Plaintiff a dunning letter demanding $4,802.37, which was the figure that Chase Bank had given them. Plaintiff did not dispute this amount with Defendant.

Plaintiff sued Defendant in U.S. District Court for the Southern District of Indiana per 15 U.S.C. § 1692e, alleging that Defendant had falsely represented the amount of the debt. Defendant moved for summary judgment, arguing that Plaintiff's failure to dispute the debt within 30 days allowed Defendant to assume the debt was valid per 15 U.S.C. § 1692g(a)(3), and also it was entitled to the bona fide error defense per 15 U.S.C. § 1692k(c) because its client had given it wrong information, contrary to its service agreement with its client. Plaintiff cross-moved for summary judgment.

The trial court noted that in the Seventh Circuit, collection agencies do not have to independently investigate accounts that their clients give them to collect. Also, it did not appear that Defendant had deliberately misrepresented anything to Plaintiff. However, in this case, the error was possibly due to miscalculation of interest, and Defendant had not produced enough evidence to show that its interest calculation procedures were adequate to establish a good faith error defense before trial. Defendant sent a dunning letter with an incorrect alleged amount of debt, even if not intentionally, which would be a violation absent the good faith error defense. PLAINTIFF'S SUMMARY JUDGMENT MOTION GRANTED IN PART and the jury would be instructed that the amount of debt was misstated, but DENIED in all other respects. DEFENDANT'S SUMMARY JUDGMENT MOTION DENIED, and it would have to prove its good faith error defense before the jury.

EDITORIAL: Makes sense to me. I have occasionally heard debt collector defense lawyers claim that you have to dispute the debt within 30 days or else you can never again say it was invalid. Well, if the letter already went out, the law has already been violated. Sorry, bill collectors, but the dispute thingie is NOT a tool for you to make a lie into the truth! Also, why in the doodle can't people compute interest correctly anymore? If these guys had only done so, they wouldn't have been sued. I predict this one will settle and we won't hear anything more about it.