May 2016

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By: Attorney Lucas P. Bennewitz

The Fair Debt Collections Practices Act (FDCPA) and Wisconsin Consumer Act (WCA) provide avenues for consumers to request additional documentation regarding their debt. The WCA allows consumers to request accurate writings evidencing the debt[1] and the FDCPA allows consumers to request validation of the debt within thirty days after the debt is placed for collections.[2] Confusingly, consumers and debt consolidation companies request debt validation at all parts of litigation: pre-placement, during litigation, post-judgment, etc. Once a validation request under the FDCPA or writings evidencing request under the WCA has been received, the question of how—and if—creditors need to respond becomes a matter of timing.

                Under the WCA, a creditor must provide accurate copies of writings evidencing the debt upon request by the consumer.[3] While the WCA does not explicitly state when a consumer is permitted to request the documents, the plain language of the Act infers that the right only exists once a lawsuit has been filed. First, the writings evidencing requirement is first mentioned under Section 425.109, entitled “Pleadings.”[4] Second, the statute itself states “[a] complaint by a merchant to enforce any cause of action arising from a consumer credit transaction shall include” such information as the ability for the consumer to request complete writings evidencing the debt.[5] Third, the Act articulates the creditor’s exact obligation after a consumer’s request, stating:

Upon the written request of the customer under sub. (1) (h), the merchant shall submit accurate copies to the court and the customer of writings evidencing the customer's obligation pursuant to an open-end credit plan upon which the merchant's claim is made and default judgment may not be entered for the merchant unless the merchant does so. The writings requirement under this subsection is satisfied if the merchant provides the customer with a copy of the billing statement referenced in sub. (1) (d) 1. addressed to the customer reflecting the total outstanding balance on the customer's account at the time this billing statement was issued. [6]

As the statute provides, if a consumer makes a request before a lawsuit has been issued, the statute’s clear requirement that a lawsuit be filed permits the creditor to not substantiate the premature request. This conforms to the legislature’s intent in enacting the WCA: it allows consumers to avoid costly discovery by simply making the request after the lawsuit has been filed.[7] Conversely, if a consumer made this request before a debt was charged off, it would lead to an absurd result, as the creditor could never satisfy the request. If the consumer makes the request post-judgment, a consumer’s request has timed out and a creditor is not obligated to provide the documents.

Even if a consumer makes a timely request, the only recourse available is that judgment cannot be entered until the request is satisfied.[8] If that results in the lawsuit being dismissed, it would be a dismissal without prejudice, allowing the creditor to simply refile the lawsuit once documents become available. Consumers incorrectly assume that if a creditor cannot provide accurate writings evidencing the debt at the time of the request, the creditor is permanently barred from ever filing a lawsuit. This interpretation of the WCA has no authority.

Similar to the WCA, the FDCPA provides a clear condition precedent for when a validation request must be submitted in order to stay the creditor’s collection efforts. Under the FDCPA, a creditor must send out first correspondence letter to the consumer giving notice of the debt.[9] Once that notice is sent, the consumer has only thirty days to request the debt be validated by the creditor.[10] The FDCPA’s plain language is clear: the creditor’s obligation to validate only attaches once the thirty day notice is sent to the consumer.[11] However, consumers frequently send creditors validation requests at random points during the life of the debt, but a consumer’s ability to temporarily—or permanently—stay collections efforts exists in an extremely limited amount of time.

                The FDCPA does not explicitly define what constitutes proper “validation” of the debt. As such, the federal circuits are split as to how much validation is required once a timely request is made. The most widely accepted interpretation is that of the Fourth Circuit, merely requiring that the debt collector “confirm[] in writing that the amount being demanded is what the creditor is claiming is owed.”[12] Despite this extremely low bar for how much validation is required to comply with the FDCPA, consumers often believe they can set their own terms for how much information the creditor must provide to validate the debt to the consumer’s satisfaction. It is not uncommon for consumers to send template validation requests they find on the internet, arguing that the debt will only be “properly validated” if the creditor provides such documents as complete payment histories, entire account statements, or even documentation supporting the creditor’s ability to collect. However, these validation requests run afoul of Congress’s intent to simply eliminate the possibility that creditor’s try to collect from the wrong person or on a debt that is already paid.[13]

                In summary, the WCA and FDCPA both provide tools for consumers to try to validate their debts, but those requests have temporal limitations. Creditors should be aware of when a request for validation is received during the life of the debt, because timing is everything in determining how to respond.

[1] Wis. Stat. § 425.109(2)

[2] 15 U.S.C. § 1692(g)(a)-(b)

[3] Wis. Stat. § 425.109(2)

[4] Wis. Stat. § 425.109

[5] Wis. Stat. § 425.109(1)(h)

[6] Wis. Stat. § 425.109(2) (emphasis added)

[7] See, e.g., Estate of Newgard v. Bank of Am. 2007 WI App 161, ¶¶9-10.

[8] Wis. Stat. § 425.109(2)

[9] 15 U.S.C. § 1692(g)(a)

[10] 15 U.S.C. § 1692(g)(b)

[11] Id.

[12] Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999); see also Nasman v. Chase Home Finance, LLC, et al, 2013 U.S. Dist. LEXIS 131620 (W.D. Wis.); Michael D. Slodov, Documentation? I Don’t Have to Show You Any Stinkin’ Documentation! An Evaluation of the Verification Requirement of 15 U.S.C. § 1692g(b), 24 Loy. Consumer L. Rev. 2, 160-61 (2011).

[13] See Slodov, supra note 12, at 163 (citing Chaudhry at 406).

Posted: 5/17/2016 8:18:12 AM by Tom Connor | with 0 comments