Does the FDCPA Recognize Oral Debt Disputes?

yelling-at-phoneUnder the federal Fair Debt Collection Practices Act (FDCPA), does a consumer have the right to dispute a debt orally? Or must the consumer send a written dispute to the collection agency? A recent decision from the U.S. Court of Appeals for the Fourth Circuit addressed this issue.

No later than five days after the first communication with a consumer, a debt collector must give the consumer written notice of certain rights provided by the FDCPA. In Clark v. Absolute Collection Service, Inc., the Fourth Circuit considered whether one collection agency’s notice accurately stated those rights.

The Letter of the Law

According to the FDCPA, the notice must include “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” Here, the law doesn’t say anything about having to make the dispute in writing.

But in the very next subsection, the FDCPA requires the same notice to include “a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt.” (The emphasis is mine.)

The Debt Collector’s Letter

In the case before the Fourth Circuit, a collection agency sent notices that combined those two statements into one:

ALL PORTIONS OF THIS CLAIM SHALL BE ASSUMED VALID UNLESS DISPUTED IN WRITING WITHIN THIRTY (30) DAYS; IN WHICH CASE, VERIFICATION OF THE DEBT OR A COPY OF THE JUDGMENT WILL BE PROVIDED TO YOU.

So according to the debt collector, an oral dispute would have no effect. Is that correct?

The Fourth Circuit disagreed with the collection agency and found the notice to be an inaccurate statement of FDCPA rights. Although a written dispute gives the consumer additional protections, the Fourth Circuit held that an oral dispute does prevent the debt collector from assuming the debt to be valid.

Other Courts’ Views

The Fourth Circuit has now joined the Second and Ninth Circuits in allowing consumers to dispute debts orally. So far, only one federal appeals court — the Third Circuit — disagrees.

The Indianapolis area is located in the Seventh Circuit. Since the U.S. Court of Appeals for the Seventh Circuit hasn’t yet addressed the question of whether FDCPA disputes need to be in writing, we don’t have a definite answer. For this reason, among others, a written dispute is the better approach.

Matt Conrad is an Indianapolis bankruptcy attorney and the founder of Conrad Legal LLC, which helps people in Central Indiana get out of debt with Chapter 7 and Chapter 13.

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