Eastern District of N.Y. Rules Fee May Be Collected with Principal Balance, Requesting Prompt Contact is Permissible

This article was written by David N. Anthony, Ethan G. Ostroff,
and Alice Grabe and originally published on the Troutman
Sanders LLP Consumer Financial Services Law Monitor and
is republished here with permission.  

In  Igor Vayngurt v. Southwest Credit
Systems, L.P., the Eastern District of New York
ruled that a debt collector did not violate the Fair Debt Collection Practices
Act by attempting to obtain payment of a collection fee at the same time as the
principal balance of the debt and requesting prompt contact in the initial
validation notice.

Vayngurt alleged that Southwest Credit Systems
misrepresented the balance due by “falsely represent[ing] that the $38.80
collection fee was due in full as of the date of the Collection Letter” because
the collection fee was not yet incurred.  In this case, a contract between
Vayngurt and his cellular phone provider stated that he “agree[s] to pay
collection agency fees [the creditor] incur[s].”  Vayngurt argued that the
collection fee is a “contingent fee” only incurred at the time the principal
balance is collected.

The Court ruled that Vayngurt and the creditor
intended the collection fee to be owed at the same time as the principal
balance.  The Court further explained that this interpretation is
favorable to the consumer because it “prevents multiple rounds of collection
activity from the same debt” and “allows the collection fee to be negotiated
down at the same time as the principal.”

This case also involved an overshadowing claim
regarding the language used in the collection letter that stated, “We are
willing to work with you, but you must contact our office promptly.”  The
Court ruled that this language did not overshadow the validation notice’s
thirty-day dispute period because “a single sentence requesting prompt contact
does not create an impression of dire urgency” when it immediately follows “the
validation notice, which reference[s] the thirty-day dispute period three
times.”  The Court reasoned that notices requesting “prompt contact …
could be to notify the sender that the debt is disputed, or to seek the
identity of the original debtor” and are thus “regularly found to be consistent
with § 1692g” of the FDCPA.