Chapter 7

Fair Debt Collection Practices Act Brief: Debt Collector May Not Require the Consumers Dispute Be in Writing

Richard J. Rubin is a private attorney in Santa Fe, New Mexico, whose federal appellate practice is limited to representing consumers in both federal consumer credit protection, including credit reporting and debt collection abuse litigation, and to consulting for other consumer rights specialists around the country. He and his solo practice were the subject of a profile published in the January 1993 ABA Journal. Mr. Rubin has taught consumer law at the University of New Mexico School of Law, is a regular contributor to the Consumer Credit and Sales Legal Practice Series manuals published by NCLC, and presents continuing legal education and attorney-training programs nationally in the areas of consumer credit, warranty law, and debt collection abuse. The United States Court of Appeals for the Seventh Circuit has acknowledged Mr. Rubin as a nationally known consumer-rights attorney (Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 1997 U.S. App. LEXIS 41397, *5 (June 6, 1997). Mr. Rubin is the past chair of the National Association of Consumer Advocates (NACA) and in 2000 was the recipient of the Vern Countryman Award. This brief urges the 9th Circuit to follow the plain language of the Fair Debt Collection Practices Act, 15 U.S.C. 1692g(a)(3) allowing oral consumer disputes to override the debt collectors assumption that the debt involved is valid, and not follow the contrary decision in Graziano v.Harrison, 950 F.2d 107 (3d Cir. 1991).1 The debt collectors 1692g notice had ignored the language of 1692g(a)(3) and stated it would assume the debt was valid unless the consumer disputed the debt in writing. The brief points out that this issue is particularly important in relation to another provision, 15 U.S.C. 1692e(8)2 which places the affirmative duty on the debt collector to include in any report to credit reporting agencies that the debt is disputed, again without any requirements that the dispute be in writing. Unfortunately, many debt collectors would like to ignore consumers oral disputes and explanations. The brief points out that this was not the scheme of the FDCPA and that the FDCPAs two requirements for written communication by consumers only reinforces that Congress did not require all other consumer communications to be in writing.

1 2

See NCLC's Fair Debt Collection 5.7.2.6.2 (5th ed. 2004) See Id. at 5.5.11.

IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT _______________________ Appellate Court No. 04-17126

[CONSUMER], on behalf of herself and all others similarly situated, Plaintiff-Appellee, v. BRIDGEPORT FINANCIAL SERVICES, INC., Defendant-Appellant.

BRIEF OF PLAINTIFF-APPELLEE

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA THE HONORABLE CHARLES C. BREYER, PRESIDING CASE NO. ____________________________________________________________________ [Attorneys for Plaintiff/Appellee] Attorneys for Plaintiff/Appellee [Consumer]

TABLE OF CONTENTS

Table of Authorities I. Statement of Subject Matter And Appellate Jurisdiction Statement of Issues Presented For Review Statement of the Case A. B. IV. Nature of the Case Statement of Facts

II. III.

Argument of Law A. B. C. Summary of Argument Standard of Review The District Court Correctly Followed Congresss Directive to Require a Debt Collector to Disclose to Consumers Their Right to Dispute a Debt by Both Written and Non-Written Means 1. The Plain Language of 1692g(a)(3) Exposes The Error in Debt Collectors Disclosure Statement The Separate Requirements to Disclose That Some Specific Types of Disputes Must Be Conveyed in Writing Confirms That Congress Purposefully Omitted the Writing Requirement in 1692g(a)(3) Requiring Debt Collectors to Disclose to Consumers the Right to Dispute Debts by Non-Written Means is an Essential Prophylactic Measure Consistent with Multiple Substantive Provisions Debt Collectors Unexamined Reliance on Graziano and its Refusal to Address the Reasoning of the Contrary Cases Confirm

2.

3.

4.

its Error 5. Language From This Courts Decision in Mahon is Not Controlling The Current Split Over the Issue Provides No Basis to Relieve Debt Collector From Liability Debt Collectors Appeal to Amend the FDCPA by Judicial Interpretation Can Only Create Havoc

6.

7.

V.

Conclusion

Statement of Related Cases Request for Oral Argument Certification of Compliance Pursuant To Fed. R. App. P. 32(A)(7)(C) And Circuit Rule 32-1 For Case Number 04-17126 Certificate of Service

TABLE OF AUTHORITIES

Cases Adams v. Law Offices of Stuckert & Yates, 926 F.Supp. 521 (E.D.Pa. 1996) Andreiu v. Ashcroft, 253 F.3d 477 (9th Cir. 2001) (en banc) Austin v. Great Lakes Collection Bureau, Inc., 834 F.Supp. 557 (D.Conn. 1993) Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996) Baker v. G.C. Services Corp., 677 F.2d 775 (9th Cir. 1982) Bentley v. Great Lakes Collection Bureau, 6 F.3d 60 (2d Cir. 1993) Brady v. Credit Recovery Co., 160 F.3d 64 (1st Cir. 1998) Cacace v. Lucas, 775 F.Supp. 502 (D.Conn. 1991) The Cetacean Community v. Bush, 386 F.3d 1169 (9th Cir. 2004) Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993) Consumer Prod. Safety Commn v. GTE Sylvania, Inc., 447 U.S. 102 (1980) Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980) Fox v. Citicorp Credit Services, Inc., 15 F.3d 1507 (9th Cir. 1994) Estate of Cowart v. Nichols Drilling Co.,

505 U.S. 469 (1992) Gonzalez v. Metropolitan Transportation Authority, 174 F.3d 1016 (9th Cir. 1999) Graziano v. Harrison, 950 F.2d 107 (3d Cir.1991) Harvey v. United Adjusters, 509 F.Supp. 1218 (D.Or. 1981) INS v. Cardoza-Fonseca, 480 U.S. 421 (1987) Irwin v. Mascott, 112 F.Supp.2d 937 (N.D. Cal. 2000) Jang v. A.M. Miller and Associates, 122 F.3d 480 (7th Cir. 1997) Koons Buick v. Nigh, __ U.S. __, 125 S.Ct. 460 (Nov. 30, 2004) Kuhn v. Account Control Technology, Inc., 865 F.Supp. 1443 (D.Nev. 1994) Lamie v. United States Trustee, 540 U.S. 526 (2004) Mahon v. Credit Bureau of Placer County Inc., 171 F.3d 1197 (9th Cir. 1999) Marshall-Mosby v. Corporate Receivables, Inc., 194 F.3d 830 (7th Cir. 1999) McCabe v. Crawford and Company, 272 F. Supp. 2d 736 (N.D. Ill. 2003) McStay v. I.C. Systems, Inc., 308 F.3d 188 (2d Cir. 2002) Miller v. Payco-General American Credits, Inc., 943 F.2d 482 (4th Cir. 1991) Nelson v. Chase Manhattan Mortgage, 282 F.3d 1057 (9th Cir. 2002)

Olson v. Risk Management Alternatives, Inc., 366 F.3d 509 (7th Cir. 2004) Ong v. American Collections Enterprise, Inc., 1999 WL 51816 (E.D.N.Y. January 15, 1999) Pittman v. J.J. Mac Intyre Co. of Nevada, Inc., 969 F.Supp. 609 (D.Nev. 1997) Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004) Reed v. Smith, Smith & Smith, 1995 WL 907764 (M.D.La., Feb. 7, 1995) In Re Risk Management Alternatives, Inc., Fair Debt Collection Practices Act Litigation, 208 F.R.D. 493 (S.D.N.Y. 2002) Rosado v. Taylor, 324 F.Supp.2d 917 (N.D.Ind. 2004) Russell v. Equifax A.R.S., 74 F.3d 30 (2d Cir. 1996) Russello v. U.S., 464 U.S. 16 (1983) Sambor v. Omnia Credit Services, Inc., 183 F.Supp.2d 1234 (D.Haw. 2002) Sanchez v. Robert E. Weiss, Inc., 173 F.Supp.2d 1029 (N.D.Cal. 2001) Spearman v. Tom Wood Pontiac-GMC, 2002 WL 31854892 (S.D.Ind. Nov. 4, 2002) Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222 (9th Cir. 1988) Terran v. Kaplan, 109 F.3d 1428 (9th Cir. 1997) Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991 (7th Cir. 2003)

United States v. American Trucking Assns., Inc., 310 U.S. 534 (1940) United States v. Hanousek, 176 F.3d 1116 (9th Cir. 1999) United States v. Lewis, 67 F.3d 225 (9th Cir. 1995) Wilson v. Quadremed Corp., 225 F.3d 350 (3rd Cir. 2000) Woolfolk v. Van Ru Credit Corp., 783 F.Supp. 724 (D.Conn. 1990) Statutes 28 U.S.C. 1292(b) 28 U.S.C. 1331 Fair Credit Reporting Act, 15 U.S.C. 1681m(g) Fair Debt Collection Practices Act, 15 U.S.C. 1692-1692o Miscellaneous F.R.Civ.P. 12(b)(6) FTC Statements of General Policy or Interpretation Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50097-50110 (Dec. 13, 1988) Elwin Griffith, The Plain Meaning of Language and the Element of Fairness in the Fair Debt Collection Practices Act, 27 U. Tol. L.Rev. 13 (1995) National Institute for Literacy, the State of Literacy in America: Estimates at the Local, State and National Levels (1998), available through http://www.nifl.gov White and Mansfield, Literacy and Contract, 132 Stanford Law & Policy Rev. 233 (2002)

I. STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION

Plaintiff-Appellee [Consumer] (hereinafter Consumer) brought this case pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. 1692-1692o (the FDCPA or the Act). Jurisdiction in the United States District Court for the Northern District of California was conferred by the FDCPA, 15 U.S.C. 1692k(d), and by 28 U.S.C. 1331. Defendant-Appellant Bridgeport Financial, Inc. (hereinafter Debt Collector) appeals from an interlocutory ruling denying its Rule 12(b)(6) motion to dismiss. (ER 70). Following that ruling, the district court certified the issue for interlocutory appeal. (ER 73-74). This Court granted the ensuing petition. (ER 77). Jurisdiction in this Court is conferred by 28 U.S.C. 1292(b).

II. STATEMENT OF ISSUES PRESENTED FOR REVIEW 1) Whether the court below correctly applied the Act's plain language that requires a debt collector to disclose to consumers their right to dispute a collection account without restricting the method of dispute to a writing. 2) Whether federal courts are free to ignore a statutes plain language in order, as Debt Collector now urges, to better serve the laws purposes.

III. STATEMENT OF THE CASE A. Nature of the Case Consumer filed this case as a putative class action on February 4, 2004. In response to Debt Collectors Rule 12(b)(6) motion, the district court held that the allegation that Debt Collector failed to disclose the information which 15 U.S.C. 1692g(a)(3) requires to be

included in its initial form dunning letter stated a claim for relief. (ER 51). Accordingly, the lower court denied the motion to dismiss. (ER 70). On July 16, 2004, the district court granted Debt Collectors motion to certify an interlocutory appeal. (ER 73-74). This Court granted Debt Collectors petition pursuant to 28 U.S.C. 1292(b) on October 19, 2004. (ER 77). By stipulated Order entered on December 9, 2004, the proceedings below are now staying pending resolution by this Court of this dispositive legal issue. (Docket No. 75).

B.

Statement of Facts Consumer alleged in her Complaint and Amended Complaint that Debt Collector violated

the Act by misrepresenting the consumer rights disclosure statement that Congress requires debt collectors to provide when they begin collecting a debt. She claimed that Debt Collector altered the substance of the disclosure that 1692g(a)(3) requires by disregarding its plain language. In its place, Debt Collector substituted a version that diminished the protections that Congress expressly afforded consumers. Rather than providing the statutory disclosure which Congress adopted and which imposes no restriction on whether a consumers dispute may be conveyed orally or in writing, Debt Collector expressly limited consumers to disputing a debt in writing. Consumer alleged that Debt Collector sent to her as its initial collection letter a dun that sought payment of $42.57 on an alleged Into Video debt. Because this letter was the initial collection communication on the debt, 1692g(a)(3) requires that this dun disclose, inter alia, the following: [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.

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Consumer alleged that Debt Collector violated this provision of the Act, and thereby restricted and misrepresented the rights of consumers, by disclosing this language with an added condition that the dispute must be made in writing. Debt Collector altered the statutory disclosure by inserting the emphasized words in the following sentence from its initial dun: Unless you notify this office in writing within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will be assume this debt is valid.

The sole issue presented by this interlocutory appeal is whether the district court correctly ruled that this diminishment of 1692g(a)(3) violated the Act.

IV. ARGUMENT OF LAW A. Summary of Argument Section 1692g(a)(3) unambiguously requires debt collectors as their first order of business to disclose to consumers that the debt will be assumed valid unless the consumer disputes the validity of the debt, or any portion thereof, within thirty days. Debt Collector here admits that it varies the disclosure statement by inserting the additional requirement that any such dispute must be conveyed in writing. It also candidly admits that 1692g(a)(3) contains no writing requirement. On this basis alone the lower court correctly held that Debt Collector violated the FDCPA. Debt Collector defends its conduct by arguing that its version of the consumer rights statement imposing the additional writing requirement serves the purposes of the law better than the statutory language itself does. The sole basis for this argument is its mistaken view that Congress provided in the FDCPA no function for an oral dispute. Even if the usefulness of this

11

provision were not apparent, this argument still would be an inadequate basis for ignoring the unambiguous Congressional directive. Nevertheless, a consumers oral notification that a debt is disputed dovetails specifically with the entire composition of the Act, including several other relevant provisions. Congress placed special duties on debt collectors once they know that the consumer considers a debt disputed. These duties are triggered whether that knowledge is conveyed in writing or otherwise. The Act itself therefore belies the linchpin of Debt Collectors contention that permitting or encouraging consumers to lodge oral disputes is irrational. Debt Collector simply ignores the compelling reasons that Congress wanted to encourage consumers to notify debt collectors of potential challenges. Advised repeatedly by both the ruling below and other federal decisions and now well aware of the efficacy of oral disputes, Debt Collectors failure to reply confirms that it has no answer to this dispositive argument. Instead of addressing this central issue, Debt Collector just repeats the rationale of the decision of the Third Circuit in Graziano v. Harrison. The Graziano court was unaware that Congress imposed different duties on debt collectors depending on whether they learn of a dispute in writing or orally. Accordingly, the Graziano panel incorrectly assumed that only a written dispute had a statutory value or function. In the nearly fifteen years since Graziano was decided, numerous federal district courts have identified this fatal flaw in the Third Circuits opinion. Every court which has analyzed Graziano has concluded that its fundamental assumption was wrong and thus has rejected its holding; conversely, every court which has followed Graziano has merely parroted its conclusion without scrutiny or otherwise deferred to the Third Circuits authority. Graziano

12

cannot withstand independent analysis. Debt Collector confirms this assessment by its refusal here to engage the discussion. B. Standard of Review The lower court's ruling of statutory construction on a motion to dismiss for failure to state a claim for relief is a question of law subject to de novo review by this Court. Gonzalez v. Metropolitan Transportation Authority, 174 F.3d 1016, 1018 (9th Cir. 1999).

C.

The District Court Correctly Followed Congresss Directive to Require a Debt Collector to Disclose to Consumers Their Right to Dispute a Debt by Both Written and Non-Written Means

1.

The Plain Language of 1692g(a)(3) Exposes the Error in Debt Collectors Disclosure Statement

Debt Collector argues that its insertion of a writing requirement into the consumer rights disclosure statement mandated by 1692g(a)(3) should be excused notwithstanding that Congress did not impose that limitation. The foundation for this contention is its own assessment that this alteration of statutory language better serves the purposes of the Act. (Appellants Opening Brief, p. 1). Debt Collectors approach (and therefore the resulting considerable restriction on the rights of consumers) is unsupportable. In contrast to Debt Collectors argument here, the lower court reached the correct result by first relying on the most venerable canon of statutory construction to discern Congressional purpose. There is, of course, no more persuasive evidence of the purpose of a statute than the words by which the legislature undertook to give expression to its wishes. United States v. American Trucking Assns., Inc., 310 U.S. 534, 543 (1940). No principle is more firmly enshrined in the methodology of statutory analysis than where the language employed by Congress is clear, the text controls and no further inquiry is permitted. Estate of Cowart v.

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Nichols Drilling Co., 505 U.S. 469, 475 (1992). This Court has consistently reaffirmed these principles: Statutory interpretation begins with the plain language of the statute. See Consumer Prod. Safety Commn v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 64 L.Ed.2d 766 (1980). If the language of the statute is clear, we need look no further than that language in determining the statutes meaning. See United States v. Lewis, 67 F.3d 225, 228 (9th Cir. 1995). United States v. Hanousek, 176 F.3d 1116, 1121 (9th Cir. 1999). The FDCPA provision imposing the disclosure requirement at issue states: (a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing-(1) (2) the amount of the debt; the name of the creditor to whom the debt is owed;

(3) 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; (4) 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 or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. 15 U.S.C. 1692g. Section 1692g(a)(3), the provision under scrutiny, clearly does not have the writing requirement that Debt Collector favors. The omission is plain. Sanchez v. Robert E. Weiss, Inc.,

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173 F.Supp.2d 1029, 1033 (N.D.Cal. 2001) (The plain language of 1692g(a)(3) does not require that a dispute be in writing.); Harvey v. United Adjusters, 509 F.Supp. 1218, 1221 (D.Or. 1981) (The notice also requires any dispute as to the validity of the debt to be in writing. That is not required under section 1692g(a)(3).); Reed v. Smith, Smith & Smith, 1995 WL 907764 at *2 (M.D.La. Feb. 7, 1995) ([S]ubsection (a)(3) does not require that the consumer must dispute the validity of the debt, or any portion thereof, in writing.) Indeed, Debt Collector concedes that 1692g(a)(3) does not reference a written notice of dispute. (Appellants Opening Brief, p. 1 (emphasis in original)).

2.

The Separate Requirements to Disclose That Some Specific Types of Disputes Must Be Conveyed in Writing Confirms That Congress Purposefully Omitted the Writing Requirement in 1692g(a)(3)

The degree of clarity in 1692g(a)(3) leaves no basis for imposing a writing requirement. A debt collector is obligated to accurately disclose each item of information in 1692g(a): "A debt collector may condense and combine the required disclosures, as long as he provides all required information." FTC Statements of General Policy or Interpretation Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50097-50110, 809(a)-4, at 50108 (Dec. 13, 1988) (hereinafter "FTC Commentary"); accord, Baker v. G.C. Services Corp., 677 F.2d 775, 777-78 (9th Cir. 1982); Terran v. Kaplan, 109 F.3d 1428, 1431 (9th Cir. 1997) ([T]he collection letter contained all of the statements required under section 1692g.). The omission of a writing requirement in 1692g(a)(3) therefore should end the debate in accordance with established law. E.g., United States v. Hanousek, 176 F.3d at 1121.

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Nevertheless, Debt Collector argues that the separate writing requirement in 1692g(a)(4) and (5) should be exported to 1692g(a)(3). Even if 1692g(a)(3) were not unambiguous and therefore resort to secondary sources of Congressional intent were appropriate, Debt Collectors contention is the diametric opposite from the prevailing canons of construction: The language and structure of these subsections indicate that the omission of the "in writing" requirement in subsection (a)(3) was intentional. Congress demonstrated (in the subsections immediately following subsection (a)(3)) its ability to impose a writing requirement on debtors; its failure to do so in subsection (a)(3) is thus less likely to be the result of inadvertence. See Elwin Griffith, The Plain Meaning of Language and the Element of Fairness in the Fair Debt Collection Practices Act, 27 U. Tol. L.Rev. 13, 50 (1995) ("The plain language of section 1692g(a)(3) does not require the consumer to put his objections in writing, and the omission does not seem inadvertent, given the difference in language between sections 1692g(a)(3) and 1692g(a)(4).... This seems like a careful choice of language that puts the Graziano [v. Harrison, 950 F.2d 107 (3d Cir.1991)] approach in doubt."). Ong v. American Collections Enterprise, Inc., 1999 WL 51816 at *2 (E.D.N.Y. January 15, 1999). Later opinions rejecting Debt Collectors position also have viewed the disparate writing requirement between 1692g(a)(3) and 1692g(a)(4) and (5) as confirmation of a different intent, not an inadvertent error or sloppy draftsmanship as Debt Collector supposes. Rosado v. Taylor, 324 F.Supp.2d 917, 929 (N.D.Ind. 2004) (If Congress includes particular language in one section of a statute but omits in another section of the same Act, it is generally presumed that Congress acts intentionally and purposefully in the disparate inclusion or exclusion, Russello v. U.S., 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) (citation and quotation omitted). The text imposes no writing requirement); Sanchez v. Edward E. Weiss, Inc., 173 F.Supp.2d at 1033.

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This Court has similarly applied this rule of construction: [W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion. Andreiu v. Ashcroft, 253 F.3d 477, 480 (9th Cir. 2001) (en banc), quoting INS v. Cardoza-Fonseca, 480 U.S. 421, 432 (1987) (quotations and citations omitted). Debt Collector now has turned this canon on its head to reach its erroneous result.

3.

Requiring Debt Collectors to Disclose to Consumers the Right to Dispute Debts by Non-Written Means is an Essential Prophylactic Measure Consistent with Multiple Substantive Provisions

With two exceptions the one upon which Debt Collector relies and another which it ignores all relevant provisions of the FDCPA require debt collectors to act to protect consumers (and themselves) in response to a non-written notification of a dispute. The overwhelming majority of FDCPA law is solicitous of oral disputes. Debt Collector now seeks to undermine this vital balance that Congress has struck by barring the very notice that the Act requires to be disclosed to alert consumers to their rights and to encourage oral disputes. The effect of this tactic, if successful, would be to eliminate significant protections that Congress adopted for the benefit of unsophisticated consumers, contrary to the very purpose of this consumer protection legislation. See Baker v. G.C. Services Corp., 677 F.2d at 777-78. Debt Collector correctly observes 1692g(b) parallels the disclosures required by 1692g(a)(4) and (5) in establishing procedures which a debt collector must follow once notified in writing during the initial thirty day period that a consumer disputes the debt or any portion or seeks identification of the original creditor:

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(b) If the consumer notifies the debt collector in writing within the thirtyday period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Debt Collector overlooks 1692c(c) that contains the only other FDCPA provision activated by a written dispute: (c) If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except-(1) to advise the consumer that the debt collector's further efforts are being terminated; (2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or (3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy. If such notice from the consumer is made by mail, notification shall be complete upon receipt.

In all other respects, the FDCPA requires debt collectors to act upon non-written notice of a dispute. The other provisions vividly illustrate the utility of the 1692g(a)(3) disclosure that Debt Collector claims is absent. The provision most often cited and specifically relied upon by the district court here (ER 51) is 1692e(8): A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: **** (8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.

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Section 1692e(8) dramatically exposes the objective inaccuracy of the holding in Graziano v. Harrison (on which the current split of authority rests) that there is no statutory ground for a debt collector to act on an oral dispute. 950 F.2d at 112. The plain meaning of this provision, as confirmed in the seminal decision interpreting this subsection, Brady v. Credit Recovery Co., 160 F.3d 64 (1st Cir. 1998), shows that Congress expressly anticipated oral notifications alerting debt collectors that a debt is disputed and required debt collectors to act in response. Accordingly, Grazianos pivotal truism that only a written dispute triggers the 1692g(b) obligation to verify a debt is immaterial because an oral dispute triggers other rights. Section 1692e(8) is but one of many examples disproving Debt Collectors myopic linchpin argument that oral disputes trigger [no] obligations in the collector. (Appellants Opening Brief, p. 40). Section 1692h obligates a debt collector to apply payments depending on whether the debt is disputed, in writing or otherwise: If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such debt in accordance with the consumers directions. Another example of the efficacy of non-written disputes is illustrated by the recent decision in Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004). There three debt collectors began collecting accounts which, unbeknownst to the collectors, had been discharged in bankruptcy. When advised of the discharge, the collectors immediately closed their files and ceased all collection activity. 368 F.3d at 728. The Seventh Circuit held that the collectors had not violated 1692fs prohibition against unfair or unconscionable collection efforts because all three collectors desisted immediately on learning about the bankruptcy proceedings. 368 F.3d at 733. The means by which the collectors learned of the discharge was immaterial.

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The Randolph holding can be applied to a myriad of common situations where debt collectors innocently attempt to collect, for example, void or previously paid debts, or merely pursue the wrong person. In each of these and other circumstances, an oral dispute to the collector provides notification that permits appropriate investigation and corrective behavior. Oral notification not only protects consumers but also provides the collector with an opportunity to avoid FDCPA liability. Debt Collectors contention that this Court should ignore Congresss stated preference in 1692g(a)(3) for the widest possible flow of dispute information and instead to discourage all but formal written disputes does not even serve the ultimate interests of the collection industry. Just as informal notice and appropriate corrective action by the collectors absolved them of liability in Randolph, informal notice with or without an appropriate response can be the basis for escaping or aggravating liability. Sections 1692k(b) and (c) establish as elements for imposing statutory damages or excusing liability altogether whether the collectors noncompliance was intentional. Thus, a collectors conduct undertaken after receiving notice of relevant information, however conveyed, is a key indicator of intent. For example, a debt collector continuing to collect after receiving notice that militates against doing so can expect to be assessed higher 1692k(b) damages. See, e.g., Cacace v. Lucas, 775 F.Supp. 502, 507 (D.Conn. 1991) (Maximum statutory damages awarded where defendant continued to use offending letter after being put on notice of its illegality). Conversely, a collector who acts unlawfully but unknowingly meets the first prong of the 1692k(c) affirmative defense. Russell v. Equifax A.R.S., 74 F.3d 30, 36 (2d Cir. 1996).

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Other statutory examples of the efficacy of non-written disputes and notification abound. Section 1692c(a)(1) bars communication with the consumer at a time or place known or which should be known to be inconvenient to the consumer. This Court has given effect to this provision based on a collectors continuing to call at work after the consumer orally informed collector not to do so. Fox v. Citicorp Credit Services, Inc., 15 F.3d 1507, 1516 and note 10 (9th Cir. 1994); accord, Austin v. Great Lakes Collection Bureau, Inc., 834 F.Supp. 557, 559 (D.Conn. 1993); Pittman v. J.J. Mac Intyre Co. of Nevada, Inc., 969 F.Supp. 609, 612 (D.Nev. 1997). These rulings also confirm the Federal Trade Commissions identical endorsement of the role of informal notification under this provision. FTC Commentary, 805(a)-2, 53 Fed. Reg. at 50104 (Dec. 13, 1988) ("A debt collector may not call the consumer at any time, or on any particular day, if he has credible information (from the consumer or elsewhere) that it is inconvenient.). Similarly, 1692c(a)(2) bars all communication with the consumer if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address. Again, debt collectors are bound by this rule irrespective of whether this information is conveyed in writing. Kuhn v. Account Control Technology, Inc., 865 F.Supp. 1443, 1453 (D.Nev. 1994). The FTC agrees. FTC Commentary, 805(a)-3, 53 Fed. Reg. at 50104 (If a debt collector learns that a consumer is represented by an attorney in connection with the debt, even if not formally notified of this fact, the debt collector must contact only the attorney and must not contact the consumer.) Simply stated, activation of this rule depends only on what the debt collector knows, not how it learns it. Randolph v. IMBS, Inc., 368 F.3d at 729.

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Section 1692c(a)(3) prohibits collection communications at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication. Again, Congress did not condition this rule on a collectors receipt of formal or written notice. FTC Commentary, 805(a)-4, 53 Fed. Reg. at 50104 (A debt collector may not call the consumer at work if he has reason to know the employer forbids such communication (e.g., if the consumer has so informed the debt collector.); compare, Adams v. Law Offices of Stuckert & Yates, 926 F.Supp. 521, 529 (E.D.Pa. 1996) (no "evidence suggesting that Defendants knew or had reason to know that [consumer's] employer prohibited its employees from receiving such communications at the workplace"). Congress reaffirmed the importance that it continues to place on simple notification of a dispute by informal means when it added in 2003 its anti-theft of identity amendments to the Fair Credit Reporting Act (FCRA). In a provision applicable solely to debt collectors under the FDCPA, Congress enacted within the FCRA the requirement that certain debt collectors must inform third parties of an allegedly fraudulent account when they themselves are notified that any information relating to a debt that the [debt collector] is attempting to collect may be fraudulent or may be the result of identity theft. 15 U.S.C. 1681m(g). Conspicuously absent from 1681m(g) is any requirement that the dispute be in writing.

4.

Debt Collectors Unexamined Reliance on Graziano and its Refusal to Address the Reasoning of the Contrary Cases Confirm its Error

Before Graziano, the federal courts that had addressed this oral/written dispute issue had, as Graziano acknowledges, unanimously held that the 1692g(a)(3) disclosure must be made as enacted by Congress without the limitation to a writing requirement. 950 F.2d at 112. The 1995

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decision in Reed v. Smith, Smith & Smith, supra, was the first to reject Grazianos abandonment of this plain language and portended future events. Once the First Circuit decided Brady v. Credit Recovery Co. and authoritatively exposed the error in the Third Circuits assertion that there is no statutory ground for a debt collector to act on an oral dispute, the federal district courts began a trend of refusing to follow Graziano. Beginning with Ong v. American Collections Enterprise, Inc., supra, the courts which have independently examined Graziano, including two district courts within this Circuit, have unanimously concluded not simply that 1692g(a)(3) contains no writing requirement; these decisions further recognize that the Graziano holding was indefensible for finding no utility in oral disputes and was therefore simply wrong in concluding that applying the plain language was incoherent [950 F.2d at 112]. Sanchez v. Edward E. Weiss, Inc., supra; Sambor v. Omnia Credit Services, Inc., 183 F.Supp.2d 1234, 1240 n. 4 (D.Haw. 2002); Rosado v. Taylor, supra; In Re Risk Management Alternatives, Inc., Fair Debt Collection Practices Act Litigation, 208 F.R.D. 493, 501-03 (S.D.N.Y. 2002); Spearman v. Tom Wood Pontiac-GMC, 2002 WL 31854892 at *6-8 (S.D.Ind. Nov. 4, 2002). Some other opinions, all cited by Debt Collector, continue to follow Graziano. However, each is subject to the same flaw as Debt Collectors instant submittal before this Court: none answers the criticism that provision for oral disputes permeates the FDCPA and thus none can rehabilitate the objectively erroneous foundation on which the Graziano court based its decision. Debt Collector itself underscores this defect with its futile attempt to invoke the recent decision in Koons Buick v. Nigh, __ U.S. __, 125 S.Ct. 460 (Nov. 30, 2004). Debt Collector uses selective and incomplete quotations from two of the five opinions generated in Koons to further urge the abandonment of the prevailing rules of statutory construction on which its argument

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stands and falls. It ignores the fact that Justice Ginsburgs majority opinion actually reaffirms these canons of construction, and therefore undercuts its argument, by first finding that the statutory language at issue there was unclear: Less-than-meticulous drafting of the 1995 amendment created an ambiguity. 125 S.Ct. at 463. This essential element in the majority opinion thus explains the Supreme Courts necessity, not present here, to resort to secondary sources to glean legislative intent. Similarly, Debt Collector quotes from the concurring opinion of Justice Stevens as though its sentiment had garnered the support of a majority of the Court. (Appellants Opening Brief, pp. 20-22). Even if the Supreme Courts analysis had not been premised on the absence of clear meaning from the statutes plain language, the Koons opinion still would provide no support for Debt Collectors position. Debt Collectors entire argument can be gleaned from the following paragraph in its brief, which is based on a self-serving distortion of the Supreme Courts teaching: Bridgeport submits this Court should be guided by the Supreme Courts analysis in Koons. The absence of the writing requirement in subsection (a)(3) simply is not, in and of itself, controlling. Rather, this Court should be guided by a holistic analysis of 1681g, read as a whole, in light of the clear legislative intent that the validation requirements are triggered only by a written dispute. A writing requirement should, thus, be read into the subsection of 1692g(a), just as a damages limitation was read into the subsection of the TILA provision at issue in Koons. Appellants Opening Brief, p. 22 (emphasis and double emphasis in original.). The holistic analysis necessitated by the ambiguous language in Koons is in no event the narrow approach that Debt Collector advocates here, limited only to reviewing 1681g. The majority opinion states instead: Statutory construction is a "holistic endeavor." A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme-because the same terminology is used elsewhere in a context that makes its

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meaning clear, or because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.

125 S.Ct. at 466-67 (internal quotes and citations omitted). Thus, even if one were free to disregard the plain language of 1692g(a)(3) to determine whether Congress intended to omit a writing requirement, the resulting inquiry would not be limited to 1692g but would require reviewing the entire statutory scheme. That review reveals 1692e(8) and 1692h, where Congress expressly anticipated that consumers would dispute debts orally and then imposed specific duties on debt collectors. That review would also show the various instances discussed in the previous section above where Congress planned that debt collectors would be notified of relevant information by non-written means and organized core provisions of the FDCPA around that structure. In short, a holistic review not only undermines Debt Collectors contention but also confirms here the plain meaning and the intentional Congressional design of 1692g(a)(3) in omitting a writing requirement. The lower court correctly observed that numerous subsequent decisions have criticized and disregarded Graziano. (ER 74). Debt Collector is now well aware of the error at the core of Graziano and yet omits any discussion or rebuttal to explain its continued unexamined reliance on this case. This silence can only be seen as confirmation that there is no explanation that can salvage Graziano.

5.

Language From This Courts Decision in Mahon is Not Controlling

With no legal analysis whatsoever, Debt Collector declares controlling here a single sentence that it takes out of context from the decision of this Court in Mahon v. Credit Bureau of Placer County Inc., 171 F.3d 1197 (9th Cir. 1999). Even if this sentence were read as Debt

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Collector wishes, it would not be controlling since it would be obiter dictum, as the court below held. (ER 55). The Mahon sentence therefore can impose no constraint on a later panel of this Court in undertaking its normal independent analysis of the legal question now presented. The Mahon opinion prefaced its discussion of the adequacy of a debt collectors verification of a debt under consideration with an overview of the operative provision, 1692g(b). The statement on which Debt Collector relies ([i]f no written demand is made, the collector may assume the debt to be valid [171 F.3d at 1202 (internal quotation omitted)]) was made solely in that context. The sentence says no more than repeat an uncontroversial and unremarkable axiom of 1692g(b). If the sentence purported to stand for the proposition that Debt Collector asserts, it would be beyond question nonbinding dicta, that is, a statement made during the course of delivering a judicial opinion, but is unnecessary to the decision in the case and is therefore not precedential. The Cetacean Community v. Bush, 386 F.3d 1169, 1173 (9th Cir. 2004) (internal quotation and citation omitted). In addition to the court below, Judge Mollway reached the same conclusion: The court recognizes that the Ninth Circuit has stated that, "if no written demand is made, 'the collector may assume the debt to be valid.'" Mahon v. Credit Bureau of Placer Inc., 171 F.3d 1197, 1202 (9th Cir. 1999) (quoting Avila v. Rubin, 84 F.3d 222, 226 (7th Cir. 1996)). However, the statement in Mahon was clearly dicta and therefore not binding on this court. Moreover, the statement in Mahon arose in the context of a discussion of 1692g(b), which, unlike 1692g(a)(3), does have a writing requirement. Although Mahon quoted Avila for the writing requirement, Avila said only that, under 1692g(a)(3), a debt collector could assume that a debt was valid if it was not disputed. Avila, 84 F.3d at 226. Avila did not state that a dispute under 1692g(a)(3) had to be raised in writing by the debtor. Sambor v. Omnia Credit Services, Inc., 183 F.Supp.2d at 1240 n. 4.

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Debt Collector concedes as much. It agrees that Mahon did not directly address the specific legal issue raised here. (Appellants Opening Brief, p. 31). Indeed, recognizing that the sentence may be construed as dicta, Debt Collector nevertheless persists that the sentence remains a controlling statement nonetheless. Id. This position is untenable.

6.

The Current Split Over the Issue Provides No Basis to Relieve Debt Collector From Liability

Anticipating affirmance, Debt Collector asserts that the current split of authority should preclude liability for its violation of the Act. (Appellants Opening Brief, p. 44). It cites no provision of the FDCPA or any authority whatsoever to support this unusual request. This plea is in fact directly contrary to the standard of strict liability that Congress has imposed, ignores the affirmative defenses that Congress has allowed for debt collectors to avoid liability, assumes facts that are unlikely to be proven true, and is in all respects an ultra vires attempt to shortcircuit the orderly adjudicatory process. Debt Collector apparently believes that its professed lack of fault is a defense to its violation of this law. It is incorrect: The FDCPA is a strict liability statute, and the degree of a defendants culpability may only be considered in computing damages. Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 63 (2d Cir. 1993) (citations omitted); see also, Pittman v. J.J. Mac Intyre Co., 969 F. Supp. at 613; Irwin v. Mascott, 112 F.Supp.2d 937, 963 (N.D. Cal. 2000). If Debt Collector is indeed blameless, the trier of fact may well consider that factor when it calculates statutory damages. 1692k(b). Otherwise, mere lack of bad intent is an inadequate excuse. Indeed, this Court is the author of the leading opinion rejecting a virtually identical attempt (but at least properly proffered with supporting evidence) to excuse liability because of the defendants good faith

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attempt to comply with the Act, including seeking and receiving competent legal advice. Baker v. G.C. Services, 677 F.2d at 779; see also, Fox v. Citicorp Credit Services, Inc., 15 F.3d at 1514. In any event, the assumptions that underlie Debt Collectors request for dispensation are highly suspect and at this juncture mere speculation inconsistent with logic and public facts. There is not even an allegation, let alone evidence, at this Rule 12(b)(6) stage of the litigation that Debt Collector acted in good faith reliance on Graziano or the advice of counsel. To the contrary, the evidence may well show the opposite. The evidence may show that no person reasonably trained in or knowledgeable about the FDCPA has ever recommended following Grazianos holding. Indeed, it is almost certain that the evidence will show, as it did in McCabe v. Crawford and Company, 272 F. Supp. 2d 736, 749-50 (N.D. Ill. 2003), that the American Collectors Association (ACA), Debt Collectors trade group, has specifically directed its industry members to use its 1692g model disclosure form that tracks the statutory language verbatim, including specifically 1692g(a)(3): Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days after receiving this notice that the debt or any portion thereof is disputed, this office will obtain verification of the debt or obtain a copy of a judgment, if there is one and mail you a copy of such judgment or verification. If you request this office in writing within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor. The evidence should also show that this model disclosure form has been widely published and has never been seriously challenged in any jurisdiction, including the Third Circuit post-Graziano. See, e.g., Wilson v. Quadremed Corp., 225 F.3d 350, 352 (3rd Cir. 2000); McStay v. I.C. Systems, Inc., 308 F.3d 188, 189 (2d Cir. 2002); Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991, 994 (7th Cir. 2003); Marshall-Mosby v. Corporate Receivables, Inc., 194 F.3d 830, 832-33 (7th Cir. 1999); Russell v. Equifax A.R.S., 74 F.3 at 32; Jang v. A.M. Miller and

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Associates, 122 F.3d 480, 482 (7th Cir. 1997); Olson v. Risk Management Alternatives, Inc., 366 F.3d 509, 511 (7th Cir. 2004). Debt Collector also assumes that a least sophisticated consumer would be misled by reading the disclosures mandated by the Act into believing that a non-written dispute would trigger the verification process. This assumption indulges the conjecture that this person would not be able to understand the clear meaning of the final two sentences of the model form that tracks 1692g(a)(4) and (5). In fact, that assumption is at odds with the applicable legal standard. Clomon v. Jackson, 988 F.2d 1314, 1318-20 (2d Cir. 1993) (The least sophisticated consumer standard refers to people of below-average sophistication or intelligence.that protects the naive and the credulous[while] carefully protect[ing] the concept of reasonableness.[T]he least sophisticated consumer can be presumed to possess a rudimentary amount of information about the world and read a collection notice with some care.). On remand, the evidence might show the opposite from Debt Collectors suppositions. The evidence may well confirm the notion that Debt Collector purposefully eschewed using the ACA model form, even though it had been assured that its use would insure compliance with the Act, because it wished to discourage consumers from lodging oral disputes that would then interfere with its view of an efficient collection operation. Rather than showing good faith, the evidence may show that Debt Collector seized on Graziano as an opportunity to avoid the inconvenience of complying with the Act. Speculation will not resolve this question. It is sufficient at this time that there is no equitable defense to liability under the FDCPA and that Debt Collector may present any relevant exculpatory evidence that it wishes in the damage phase of these proceedings.

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7.

Debt Collectors Appeal to Amend the FDCPA by Judicial Interpretation Can Only Create Havoc

Twenty-five years ago the Supreme Court stated in the context of the Consumer Credit Protection Act that the judiciary is ill equipped to substitute its judgment through statutory interpretation for the legislative decisions made by Congress. [J]udges are not accredited to supersede Congress or the appropriate agency by embellishing upon the regulatory scheme. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980). The wisdom of this admonition and the danger of such judicial activism are illustrated here. The decision to afford statutory protections to unsophisticated consumers on the basis of whether they exercised their rights in writing is a legislative decision with far-reaching conclusions. While the majority of the population may be quite capable of drafting a letter, a significant minority unfortunately does not have that capability, for lack of either literacy or English language skills. See, National Institute for Literacy, the State of Literacy in America: Estimates at the Local, State and National Levels (1998), available through http://www.nifl.gov. In addition, people naturally tend to use the telephone rather than write, particularly when encouraged to do so by debt collectors who provide toll-free telephone numbers. See, Miller v. Payco-General American Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991); Woolfolk v. Van Ru Credit Corp., 783 F.Supp. 724, 726 (D.Conn. 1990). Imposing a writing requirement in any consumer protection statute therefore places a burden, sometimes insurmountable, on a portion of its intended beneficiaries. See, White and Mansfield, Literacy and Contract, 132 Stanford Law & Policy Rev. 233 (2002). Imposing such a requirement under the FDCPA has an even greater disproportionate effect, since Congress designed the Act expressly to protect the least sophisticated debtor or consumer. Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225 (9th Cir. 1988). Congress carefully

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balanced a host of competing considerations relevant to this decision and found only two appropriate occasions under the FDCPA where it required consumers to express themselves in writing, as discussed above. In all other situations, Congress omitted any such requirement and obligated debt collectors to respond to consumers disputes made known by any means. The mischief created by the Graziano holding extends to a host of unintended consequences that inevitably flow from its decision to withhold from consumers important information that is linked to an array of other rights and obligations within the statutory framework. The effectiveness of each of these other provisions is necessarily compromised if consumers are told, contrary to the statutory language, that they may only dispute a debt in writing. In view of the absence of any ambiguity in 1692g(a)(3), the Supreme Court last year provided the only appropriate reply to the same claim as Debt Collectors current argument that Congress made a mistake when it adopted this subsection: If Congress enacted into law something different from what it intended, then it should amend the statute to conform it to its intent. Lamie v. United States Trustee, 540 U.S. 526, ___, 124 S.Ct. 1023, 1034 (2004). This Court recently re-asserted the same sentiment: It is not for a court to remake the balance struck by Congress, or to introduce limitations on an express right of action where a no limitations has been written by the legislature. Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir. 2002).

V.

CONCLUSION

For the foregoing reasons, the judgment below should be affirmed, with costs of appeal awarded to Consumer, and this matter remanded for further proceedings on the merits.

Respectfully submitted,

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___________________________ [Attorneys for Plaintiff-Appellee] Attorneys for Plaintiff-Appellee [Consumer]

STATEMENT OF RELATED CASES Pursuant to Circuit Rule 28-2.6, undersigned counsel declares that there are no known related cases pending in this Court.

REQUEST FOR ORAL ARGUMENT Plaintiff-Appellee hereby requests oral argument, as the issue presented is a matter that has been certified in accordance with 28 U.S.C. 1292(b) and presentation of counsel may therefore be of assistance to the Court.

CERTIFICATION OF COMPLIANCE PURSUANT TO FED. R. APP. P. 32(a)(7)(C) AND CIRCUIT RULE 32-1 FOR CASE NUMBER 04-17126 I certify that pursuant to Fed. R. App. P. 32(a)(7)(C) and Ninth Circuit Rule 32-1, the attached opening brief is proportionately spaced, has a typeface of 14 points and contains 7,311 words.

Date: January 26, 2005

________________________ [Attorney for Plaintiff-Appellee]

CERTIFICATE OF SERVICE

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I HEREBY CERTIFY that service was made on this 26th day of January, 2005, by placing two copies of the foregoing Brief of Plaintiff-Appellee in the U.S. Mail, first-class, postage prepaid, to: [Attorney for Defendant-Appellant]

___________________________ [Attorney for Plaintiff-Appellee]

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