Debt Collector to Answer for Confusing Letters

CHICAGO (CN) - A federal judge slammed a debt collection agency for sending confusing letters that do not explicitly identify the creditor.

The case concerns a February 2011 collection letter that Joshua Walls received from Toledo, Ohio-based United Collection Bureau.

The letter identified Resurgent Capital Services as the "client," LVNV Funding as the "current owner," and Credit One Bank as both the "original merchant" and the "original creditor."

Walls in turn filed a federal class action that claimed that the letter did not clearly state the name of his creditor, in violation of the Fair Debt Collection Practices Act.

He said there was no "explanation of the relationship between Resurgent and LVNV, or between the 'client' and the 'current owner.' Neither one is identified explicitly as the 'creditor to whom the debt is owned," according to the court's summary of the lawsuit.

U.S. District Judge John Grady refused to dismiss last week, finding that "the confusion alleged here is not the ingenious invention of an attorney, nor is it a bizarre interpretation of the dunning letter Walls received."

"Defendants assert repeatedly that the letter is not confusing because it accurately specifies that LVNV is the 'current owner of the debt,'" the decision states. "First, LVNV is not so identified. The letter refers to LVNV simply as 'current owner.' Current owner of what?, a significant number of unsophisticated debtors might reasonably ask themselves." (Emphasis in original.)

"Second, defendants ignore the plain language of the statute, which requires that the 'creditor to whom the debt is owed' be identified, not the 'current owner of the debt,'" Grady wrote. "This statutory language makes sense because an unsophisticated consumer likely does not ask himself, 'Who owns the debt?' or think about debt in terms of 'ownership.' Rather, he wants to know who is owed the money. In addition, the letter's designation of the 'original creditor' can be viewed as making the letter even more confusing in light of the fact that no phrase like 'current creditor' is used."

"The statute expressly requires identification of the creditor to whom the debt is owed; when that information is presented in an arguably confusing manner, it could influence the consumer's decision," Grady added. "For example, it could cause an unsophisticated consumer to be concerned about the possibility of being defrauded or about paying the incorrect creditor and continuing to have outstanding debt."

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