The Fair Debt Collection Practices Act

Until recently, Massachusetts federal courts had not determined whether a debt collector violates the Fair Debt Collection Practices Act (“FDCPA”) by failing to state whether interest is accruing (or not accruing) when offering to settle a consumer debt. In a recent ruling, a Magistrate Judge for the United States District Court for the District of Massachusetts concluded a debt collector does not violate the FDCPA by failing to disclose in a settlement offer whether an account is accruing interest so long as the settlement offer states that the holder of the consumer debt will accept payment of the amount set forth in full satisfaction of the debt.

The case involved a class action lawsuit filed by a consumer, on behalf of herself and a putative class of Massachusetts consumers who received similar settlement correspondence from a debt collector. After the consumer’s debt was reduced to a judgment, the judgment creditor entered into an agreement with a debt collector for collection of the judgment. The debt collector then sent correspondence to the consumer identifying the total amount owed on the judgment and offering to settle the judgment for sixty-five percent of that amount (the “Settlement Letter”). Notably, the Settlement Letter did not specify whether interest was accruing on the balance at the statutory rate prescribed by Massachusetts law.

The consumer alleged the debt collector’s failure to disclose whether interest was accruing on the judgment made her suspect the Settlement Offer was fraudulent. The consumer further alleged this suspicion made it impossible for her to evaluate the offer contained in the Settlement Letter or her options for addressing the outstanding judgment. Finally, the consumer alleged the debt collector’s failure to disclose in the Settlement Letter whether interest was accruing on the judgment violated the FDCPA because it rendered the communication false, misleading and unconscionable.

In dismissing the consumer’s complaint, the Magistrate Judge determined the Settlement Letter did not violate the FDCPA because it clearly stated the creditor would accept payment of a sum certain in full satisfaction of the judgment. The Magistrate Judge reasoned that such an offer, even when viewed from the perspective of the least sophisticated consumer, can be reasonably read only one way: as offering to extinguish the consumer’s outstanding debt upon payment of the specified amounts. This decision is in line with other federal district courts previously considering the issue.