The recent outcome of a case coming out of the Southern District Court of California has provided insight into regulations surrounding the disclosure of interest loans.


The Plaintiff: Juan Pavlovich
The Defendants: DNF and Account Discovery Systems

TL;DR: A court in California upholds the legal soundness of language used by a collection agency in a mailed notice. Before you bounce, don't forget to check out Arbeit's lawsuit-proof software.

The Background

Juan Pavlovich brought a class action suit to the Southern District Court of California against Account Discovery Systems, LLC and DNF Associates, LLC for allegedly violating the FDCPA, the Rosenthal Act and the California FDBPA.

As is standard, Pavlovich received a notice from DNF summarizing the amount to be collected. As he read over the notice, a particular phrase stood out to him. Thus, an entire lawsuit ensued. Here is the phrase he questioned:

"At our discretion, a statement or correspondence may include post charge-off interest and/or offer a settlement amount less than the legal now due balance."

How is this the basis of a lawsuit? What does this even have to do with TCPA compliance? Who came out of the debt collection lawsuit on top? Keep reading to find out.

The Basics

Pavlovich accrued a debt that was sold to DNF as a charge-off. DNF then hired Account Discovery Systems to collect the debt. When Pavlovich received a notice from ADS stating he owed an outstanding balance $1,997.79, something in the language of the notice struck him the wrong way.

On the second page of the notice was the statement:

“At our discretion, a statement or correspondence may include post charge-off interest and/or offer a settlement amount less than the legal now due balance.”

The bold portion of the statement above, according to Pavlovich, “is not only unclear, but it is also false, misleading, deceptive, and confusing, and can be reasonably read to have two or more different meanings, one of which is inaccurate."

In other words, Pavlovich read the sentence in question and didn’t get it. So, like any reasonable person, he decided to take it to court.

The Reaction

Reaction by the Defendant

After being hit with the lawsuit, DNF leaped into action.

They moved for summary judgment, claiming that the notice clearly stated the amount of the debt and "did not contain any language to lead the least sophisticated consumer otherwise."

In other words, DNF stood by the language of their notice.

Reaction By the Court

While the court agreed with the basis of Pavlovich's claim: any language surrounding the amount to be collected should be, if nothing else, straightforward - they contested his claim that the language was confusing. As a result, the court agreed to a summary judgment.

According to court documents, in interpreting the contested language-“may include post charge-off interest”-the Court looks not only at those words but to the context of the surrounding paragraph for meaning.

As a result, they investigated what led Pavlovich to file a claim in the first place.

Seeing as the phrase didn't qualify as confusing, the court considered the phrase in context. Considering that the surrounding language may have been what brought on the lawsuit.

After considering the phrase in context, the court found the disclosure language appropriate. They found that DNC neither stated nor alluded to additional interest being charged.

The court also considered that the notice never stated that the balance owed might change, or the Pavlovich could expect the balance might change based on the language of the notice.

The Decision

In the end, the Court found the plaintiff failed to establish an underlying legal violation. They ruled that appropriate interest rate disclosures are within the bounds of the FDCPA and other consumer protection acts.

Navigating the bounds of the FDCPA can be tricky. The nerds at Arbeit are not only well-versed in compliance, they have created tools specifically designed to help you avoid lawsuits altogether. To see how they can help you avoid a lawsuit, check out their TCPA compliance solution