FDCPA — Overshadowing of 1692g language in a homeowner’s association collection letter


Does a collection letter from a collection law firm seeking payment of an alleged homeowner’s association fee constitutes a “debt” under the Fair Debt Collection Practices Act (FDCPA)?  Yes, it does.

The Ninth Circuit faced this question in Mashiri v. Epsten Grinnell & Howell.

The district court (trial court) dismissed the case as it ruled there was no FDCPA violation.

Not accepting this roadblock, the consumer (Mashiri) appealed.

Here is the relevant part of the collection letter:

This letter is to advise you that $598.00 is currently owing on your Association assessment account. Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property upon authorization of the Board of Directors. All collection costs incurred will be charged to your account.

Unless you notify this office within 30 days of receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days of receiving this notice that the debt, or any portion thereof, is disputed, we will obtain verification of the debt or a copy of the judgment against you (if applicable) and a copy of [] such verification or judgment will be mailed to you.

The consumer argued that the collection letter violated the FDCPA in that it “overshadowed” or was “inconsistent” with the requirements of the FDCPA.  

The court stated this about the FDCPA section 1692g and “overshadowing/inconsistent”:

The FDCPA requires a debt collector to send the debtor a written notice that informs the debtor of the amount of the debt, to whom the debt is owed, her right to dispute the debt within thirty days of receipt of the letter, and her right to obtain verification of the debt.[6] Because the notice must inform the debtor of her right to obtain verification of the debt, the notice is commonly referred to as a “validation” notice. However, “[t]he statute is not satisfied merely by inclusion of the required debt validation notice; the notice Congress required must be conveyed effectively to the debtor.” Swanson v. S. Or. Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988).

Importantly, notice of the debtor’s right to dispute the debt and to request the name of the original creditor must not be overshadowed or inconsistent with other messages appearing in the communication.[7] 15 U.S.C. § 1692g(b). Overshadowing or inconsistency may exist where language in the notice would “confuse a least sophisticated debtor” as to her validation rights. Terran v. Kaplan, 109 F.3d 1428, 1432 (9th Cir. 1997). In other words, “[u]nder the law of this circuit, whether the initial communication violates the FDCPA depends on whether it is likely to deceive or mislead a hypothetical `least sophisticated debtor.‘” Id. at 1431 (internal quotation marks omitted).

So what did the consumer say was wrong with the letter?

She argues that the May Notice violated § 1692g for two reasons. First, she contends that the May Notice demanded payment sooner than the expiration of the debtor’s thirty-day dispute period. Second, she claims that by threatening to record a lien within thirty-five days, irrespective of whether she disputed the debt, Epsten failed to explain effectively a debtor’s right to dispute the debt.

The court quickly got rid of the argument by the collection law firm that it was not even collecting a debt:

“The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5) (emphasis supplied); see also Ho, 840 F.3d at 621 (“For the purposes of the FDCPA, the word `debt’ is synonymous with `money.'”). “The FDCPA imposes liability only when an entity is attempting to collect debt.” Ho, 840 F.3d at 621.


The contents of the May Notice plainly belie Epsten’s contention that it did not attempt to collect a debt. The May Notice requested payment of Mashiri’s homeowner’s assessment fee, stating: “This letter is to advise you that $598.00 is currently owing on your Association assessment account. Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property.” See supra at 5 (emphasis added). Mashiri’s obligation to pay the assessment fee relates to her household and arises from her membership in the HOA. The overdue assessment fee is a debt under § 1692a(5).”

The court then addressed whether collecting a debt that might lead to a lien (a security interest) falls under the FDCPA.

Epsten nonetheless argues that, based on the definition of a “debt collector” under § 1692a(6),[4] entities engaged in the enforcement of security interests are subject only to § 1692f(6). There was, however, no existing security interest for Epsten to enforce at the time it sent the May Notice because a lien had yet to be recorded against Mashiri’s property. Rather than seeking to enforce an existing security interest or lien, the May Notice sought to collect Mashiri’s overdue assessment fee and to make necessary disclosures that would perfect the HOA’s security interest and permit it to record a lien at a later date. See Cal. Civ. Code § 5660 (providing that “[a]t least 30 days prior to recording a lien upon the separate interest of the owner of record to collect a debt that is past due under Section 5650, the association shall notify the owner of record in writing by certified mail” of specified information).[5]

In addition, Epsten’s interpretation of § 1692a(6) is incorrect. As we recently observed in Ho, “[i]f entities that enforce security interests engage in activities that constitute debt collection, they are debt collectors.” 840 F.3d at 622. Ho addressed whether a trustee’s communications—limited solely to pursuing non-judicial foreclosure—were debt collection activities for purposes of the FDCPA. Id. at 619-20, 623. In contrast to this case, the trustee sought to enforce a secured loan and sent a notice of default that did not request payment but instead “merely informed Ho that the foreclosure process had begun, explained the foreclosure timeline, apprised her of her rights and stated that she could contact [the lender] (not [the trustee]) if she wished to make a payment.” Id. at 623. We held that where an entity is engaged solely in the enforcement of a security interest and not in debt collection, like the trustee and unlike Epsten, it is subject only to § 1692f(6) rather than the full scope of the FDCPA. See id. at 622 (“We do not hold that the FDCPA intended to exclude all entities whose principal purpose is to enforce security interests. . . . We hold only that the enforcement of security interests is not always debt collection.”).

Because Epsten sent the May Notice as a debt collector attempting to collect payment of a debt—irrespective of whether it also sought to perfect the HOA’s security interest and preserve its right to record a lien in the future—it is subject to the full scope of the FDCPA, including § 1692g and § 1692e. See id. Epsten’s attempt to escape liability under § 1692g and § 1692e therefore fails.

Then the court looked at whether there was a problem — a violation — between the letter and the FDCPA and it found there was:

We have previously observed that a § 1692g violation would result if a debt collector demanded payment prior to the expiration of the thirty-day dispute period to which debtors are entitled. As we explained in Terran:

A demand for payment within less than the thirty-day timeframe necessarily requires the debtor to [forgo] the statutory right to challenge the debt in writing within thirty days, or suffer the consequences. For this reason, requiring a payment that would eliminate the debt before the debtor can challenge the validity of that debt directly conflicts with the protections for debtors set forth in section 1692g.

Id. at 1434.

In this case, the May Notice demanded payment within thirty-five days of the date of the letter, which is inconsistent with a debtor’s right to dispute a debt within thirty days of receipt of the letter. By the time a debtor receives such a letter, there may be fewer than thirty days before payment is due.[8] Moreover, even if the debtor received the letter promptly, in order for the payment to be received within thirty-five days of the date of the letter, the debtor would likely need to mail the payment prior to the thirtieth day of the dispute period. See Chauncey v. JDR Recovery Corp., 118 F.3d 516, 519 (7th Cir. 1997). The least sophisticated debtor, when confronted with such a notice, would reasonably forgo her right to thirty days in which to dispute the debt and seek verification. The infringement of the debtor’s right to thirty days in which to dispute the debt plausibly violates § 1692g. See Terran, 109 F.3d at 1434.

The key point is if a debt collector does not give you, the consumer, at least 30 days (from receipt of the letter) to dispute, then the FDCPA is normally violated.

Here are some ways this can happen:

  • “You must pay this within 30 days of the date of this letter”
  • “You have 10 days from receipt to pay this debt you owe”
  • “Whether you dispute the debt, you must pay the debt by 30 days from today’s date”

Next the consumer argued:

Mashiri alleged a plausible § 1692g violation for the additional reason that the least sophisticated debtor may not understand, on the basis of the May Notice, that upon notifying Epsten of a dispute, debt collection activities would “cease . . . until the debt collector obtains verification of the debt . . . and a copy of such verification . . . is mailed to the consumer by the debt collector.” 15 U.S.C. § 1692g(b). Rather, the May Notice stated that a lien “will” be recorded if Mashiri “fail[ed] to pay.” The least sophisticated debtor would likely (and incorrectly) believe that even if she disputed the debt and Epsten had not yet mailed verification of the debt to her, Epsten would record a lien on the thirtyfifth day after the date of the letter. “In this manner, the letter effectively overshadows the disclosed right to dispute by conveying an inaccurate message that exercise of the right does not have an effect that the statute itself says it has.Pollard v. Law Office of Mandy L. Spaulding, 766 F.3d 98, 105 (1st Cir. 2014).

This is a reasonable argument.  The collection law firm chose the words to use — it chose to say the lien “will” be recorded on day 35 after the date of the letter.  Regardless of any dispute.

Here’s the court’s ruling/analysis:

Epsten relies on Shimek v. Weissman, Nowack, Curry & Wilco, P.C., 374 F.3d 1011 (11th Cir. 2004) (per curiam) for the proposition that, upon receipt of a request for debt verification, the FDCPA does not require a debt collector to take affirmative action to stop the recording of a lien that had already been filed. That case, however, correctly recognizes that “sending a lien to the clerk of the court [for filing] after a verification of the debt was requested is clearly contrary to § 1692g(b)’s requirement that a debt collector shall `cease collection of the debt’ once the verification is requested.” Id. at 1014. In addition, Shimek is factually inapposite because “[u]nder Georgia law, the filing of a lien by a creditor is a necessary step for securing payment of a debt,” and the Eleventh Circuit “assum[ed] the propriety of filing the lien with the Court Clerk contemporaneously with the demand letter.” Id. at 1013-14. In California, pursuant to the Davis-Stirling Act, a homeowners’ association may not record a lien with a county recorder’s office contemporaneously with mailing the demand letter, but instead must provide notice of the debt at least thirty days prior to recording a lien, during which time a debtor-homeowner may dispute the debt. Cal. Civ. Code § 5660.

The obligations imposed on the HOA pursuant to the FDCPA, including the provision requiring suspension of debt collection activities pending debt verification, are thus consistent with the requirements the HOA must satisfy pursuant to the Davis-Stirling Act. The HOA’s right to record a lien thirty days after providing notice under section 5660 is not absolute, but instead is dependent on whether the homeowner disputes the debt. Indeed, pursuant to the Davis-Stirling Act, if the homeowner disputes the debt and requests an informal dispute resolution proceeding, the HOA must participate in dispute resolution “prior to recording a lien.” Cal. Civ. Code § 5670.

In this context, the threat of recording of a lien is a debt collection activity, which under the FDCPA must cease if the debtor-homeowner disputes the debt and the debt collector has not yet mailed verification of the debt to the debtor-homeowner. The Davis-Stirling Act does not mandate otherwise. Epsten was obligated to explain such debt validation rights in an effective manner. See Swanson, 869 F.2d at 1225. In failing to do so, the threat of filing a lien overshadowed Mashiri’s right to dispute the debt, in violation of § 1692g. Because Mashiri has plausibly alleged a violation of § 1692g on the basis of inconsistency and overshadowing, we reverse the district court’s dismissal of that claim.

The take home message for consumers is if a collection letter, in any way, tries to take away your rights under the FDCPA, you need to look at suing for the violation.  Courts view your rights very seriously and do not appreciate debt collectors trying to cut back on your federal rights under the FDCPA.

We have talked before about how our system only works if you stand up to these debt collectors and sue them.  

If you live in Alabama and want to chat with us, feel free to call us at 205-879-2447 or click here to fill out a short contact form.  We’ll get right back with you to help you understand your rights.

Thanks and if you found this helpful, feel free to share this article.

John G. Watts
PS — we also recommend if you are receiving any collection letters to pull your credit reports.  Not only are there FDCPA violations in letters but often in the credit reporting by collectors.

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