Fourth Circuit issues a primer on statutory construction in siding with consumers against debt collectors

By Jonathan Biran

In Clark v. Absolute Collection Service, Inc., issued on January 31, 2014, the Fourth Circuit provided a useful review of several standard tools of statutory construction, the application of which led the Court to come down on the pro-consumer side of a federal Circuit split. Mr. and Mrs. Clark incurred debts at a health care facility in North Carolina. After they didn’t pay those debts, the creditor referred the debts to ACS, a third-party debt collector. ACS then sent collection notices to the Clarks that said, among other things: “ALL PORTIONS OF THIS CLAIM SHALL BE ASSUMED VALID UNLESS DISPUTED IN WRITING WITHIN THIRTY (30) DAYS” (emphasis added).

The Clarks filed a putative class action against ACS in federal district court in Raleigh under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., alleging that ACS’s collection notice violated section 1692g(a)(3) of the FDCPA by stating that consumers only could dispute the validity of claimed debts in writing. Section 1692g(a)(3) provides that a debt collection notice must state 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.” That section of the statute does not explicitly require the consumer to dispute the debt in writing (as opposed to orally).

ACS moved to dismiss the Clarks’ lawsuit under Fed. R. Civ. P. 12(b)(6), arguing that its collection notice complied with the FDCPA because section 1692g(a)(3) contains an inherent writing requirement. The district court granted the motion, reasoning that ACS’s interpretation of the statute rendered the statutory scheme less confusing than the plaintiffs’. The Clarks appealed to the Fourth Circuit, arguing that the FDCPA allows consumers to dispute debts orally, not just in writing. Surprisingly, this presented a question of first impression in the Fourth Circuit. However, there already was a Circuit split on this issue, with the Third Circuit having held in 1991 that section 1692g(a)(3) must be read to include a writing requirement, while the Ninth and Second Circuits had held more recently (2005 and 2013, respectively) that section 1692g(a)(3) permits oral disputes.

In a concise and relatively rare per curium published opinion, the panel (comprised of Circuit Judges Diaz and Floyd and U.S. District Judge Anderson of South Carolina sitting by designation) unanimously sided with the Second and Ninth Circuits and reversed the district court’s dismissal of the complaint. As in all statutory construction cases, the Court began with the plain language of the statute in question, which, as the Court explained, does not refer to disputing a claimed debt in writing in order to prevent the debt collector from assuming the debt to be valid. The Court declined ACS’s invitation to read “in writing” into section 1692g(a)(3). In support of its reliance on the plain language of (a)(3), the Court noted that other portions of the FDCPA do require consumers to dispute claimed debts in writing in order to trigger other protections. For example, section 1692g(a)(3)’s neighboring subsection (a)(4) requires the debt collection notice to inform the consumer 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” (emphasis added). Sections 1692g(a)(5) and 1692g(b) similarly refer to other things the debt collector must do if the consumer disputes the debt in writing. In particular, section 1692(g)(b) provides that if a consumer “notifies the debt collector in writing” that the debt is disputed, the debt collector must “cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt … and a copy of such verification … is mailed to the consumer by the debt collector.” The Court thus invoked the classic canon of statutory construction that “where 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.” Slip Op. at 7-8 (quoting Russello v. United States, 464 U.S. 16, 23 (1983)) (internal quotation marks omitted).

ACS argued that section 1692g(a)(3) must nevertheless be read as imposing an inherent writing requirement, or else the procedure would be inconsistent with the other debt dispute mechanisms under section 1692g, which, according to ACS, would serve only to confuse consumers. That is, without finding that a writing requirement was impliedly included in section 1692g(a)(3), consumers might be led to believe that an oral dispute triggers the further protections of sections 1692g(a)(4), 1692g(a)(5), and 1692g(b) when, in fact, those protections are waived if not invoked in writing. If ACS’s solicitude for consumers struck the Court as anything less than genuine, the Court did not let on. Rather, the Court continued its discourse on statutory construction, explaining that the plain language of section 1692g(a)(3) does not lead to absurd results, which would permit a search for meaning beyond statutory text. That is because, according to the Court, section 1692g(a)(3) triggers statutory protections for consumers independent of those that are set forth in sections 1692g(a)(4), 1692g(a)(5), and 1692g(b). For example, under section 1692e(8), once a consumer disputes a debt under section 1692g(a)(3), a debt collector cannot communicate that consumer’s credit information to others without disclosing the dispute. Similarly, under section 1692h, if a consumer owes multiple debts and makes a payment, a debt collector cannot apply that payment to a debt that has been disputed. Neither of those sections says anything about the consumer having disputed the debt in writing. The Court reasoned that this statutory scheme is not absurd; rather, it is “a logical, bifurcated scheme of consumer rights.” Slip Op. at 7. Finally, the Court invoked yet another well-established canon of statutory construction: that is, the Court must “give effect, if possible, to every clause and word of a statute.” Slip Op. at 9 (quoting United States v. Menasche, 348 U.S. 528, 538-39 (1955)) (internal quotation marks omitted). Put another way, if possible, a court should avoid an interpretation that renders any “clause, sentence, or word … superfluous, void, or insignificant.” Duncan v. Walker, 533 U.S. 167, 174 (2001). The Court reasoned that “[r]elying on the writing requirements in sections 1692g(a)(4), 1692g(a)(5), and 1692g(b) to give effect to section 1692g(a)(3) would violate these principles, leaving section 1692g(a)(3) with no independent meaning.” Slip Op. at 9-10.