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Billing Statements – More Than Meets the Eye

Here in California, original creditors are subject to most of the FDCPA due to the Rosenthal Fair Debt Collections Practices Act (Cal. Civ. Code §1788.17).  That’s right; Capital One, American Express, Bank of America, Discover, Chase and Wells Fargo and other credit card companies can be held liable for violating State and Federal debt collection laws.  Additionally, these original creditors are bound by the Truth In Lending Act (“TILA”) and Regulation Z.  Both Regulation Z and TILA require original creditors to send a periodic billing statement if a balance exists on an account.

The FDCPA prohibits communication with a debtor in connection with the collection of a consumer debt with knowledge the debtor is represented by counsel.  (15 U.S.C. §1692c(a)(2)).  This presents a dilemma.   On the one hand a creditor must send a billing statement to a debtor and on the other hand a creditor cannot communicate with that debtor in connection with the collection of a debt.  This is  the very issue presented in Marcotte v. General Electric Capital Services, Inc., (S.D. Cal. 2010) 709 F.Supp.2d 994.

In Marcotte the court was presented with the problem of conflicting law where there was no intent by either the State or Federal Legislatures to repeal the statutes.  As such the court was bound to maintain the integrity of both statutes.  This was fairly simple.  The Rosenthal Act has a provision which prohibits debt collectors from communicating with debtors after receipt of written notification that a debtor is represented by counsel. (Cal. Civ. Code § 1788.14).  This provision also contains an exception for statements of account.  Clearly, the State Legislature recognized that an exception for billing statements had to be made of the law would be preempted by TILA and Regulation Z.  All the court had to do was apply that very same exception to Cal. Civ Code §1788.17 which binds original creditors to 15 U.S.C. §1692c(a)(2).  This same exception would also apply to 15 U.S.C. §1692c(c) which prohibits original creditors from communicating with a debtor in connection with a consumer debt after receipt of written notice that the debtor will not pay the debt or does not want to be contacted any longer.

So now, original creditors can send billing statements or statements of account without threat of violating either the FDCPA or The Rosenthal Act.  But, what is a billing statement? A billing statement or statement of account contain (1) the outstanding balance, (2) transactions, (3) finance charges, (4) the interest rate and charges, and (5) the billing cycle among other things. (Cal. Civ. Code §1810.3).  Pretty straight forward right……WRONG! The court in Marcotte only protected the sending of billing statements or statements of account; it did not protect the documents content.

For example, it is a violation of the FDCPA and The Rosenthal Act to falsely represent the amount of a debt. (15 U.S.C. §1692e(2)(A)).   Although an original creditor can send a billing statement or statement of account it cannot misrepresent the amount owed within those documents.  The reason is very simple; Marcotte does not protect the original creditor here because this provision does not create liability solely for sending out a billing statement or statement of account.  The violation is the misstatement of the debt not the sending of the document.

The court in Marcotte also did something very interesting.  In keeping with the courts clear intent not to protect the content of billing statements or statements of account the court left room for these documents to transform into debt collection letters.   The court found that the billing statements or statements of account in Marcotte were protected because they contain “nothing else that would change the billing statement into demand letters or efforts at debt collection. The statements do not state that any amounts are past due, and there is no indication that the documents are aimed at debt collection.” (Id. at 1002).  This out right states that a document intended to be a billing statement or statement of account which contains language that an amount is past due or that is aimed at debt collection really is a debt collection letter.

The moral of this story is a billing statement or statement of account sent to a debtor in California for a consumer debt can still be a basis for a violation of the FDCPA and the Rosenthal Act if its contents are false and misleading or if it contains past due amounts or language aimed at debt collection.

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