Camille Haddad v. Alexander, Zelmanski, Danner & Fioritto
2014 U.S. App. LEXIS 13498, 2014 WL 3440174, 758 F.3d 777 (2014)
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Rule of Law:
Under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692g(b), a debt collector's obligation to verify a disputed debt is not met by merely providing an accounting with an unexplained carryover balance. Verification requires providing the consumer with notice of how and when the debt was originally incurred, such as the date and nature of the transaction, to enable the consumer to sufficiently dispute the payment obligation.
Facts:
- Camille Haddad bought a condominium unit in 1991, lived in it until 2005, and then began renting it out.
- In October 2008, the law firm Alexander, Zelmanski, Danner & Fioretti, PLLC (the Firm), on behalf of the Cumberland Condominium Association, sent Haddad a notice for delinquent assessments totaling $898.
- On November 13, 2008, Haddad sent a letter to the Firm disputing the debt, stating he had never missed a payment.
- In response, the Firm sent Haddad an account ledger which included late charges stemming from an unexplained carryover balance of $75.
- Haddad again wrote to the Firm, specifically questioning the unsubstantiated beginning balance.
- The Firm sent another ledger on January 20, 2009, which now showed an unexplained initial carryover balance of $50 from when a new property manager took over in August 2006.
- Haddad disputed this $50 balance, stating it was unsubstantiated and he would pay it only if the Firm could prove why and when it was assessed.
- On May 19, 2009, having never provided an explanation for the original $50 charge, the Firm filed a lien against Haddad's condominium for a new total of $1,704.
Procedural Posture:
- Camille Haddad sued the law firm Alexander, Zelmanski, Danner & Fioretti, PLLC in the U.S. District Court for alleged violations of the FDCPA and the Michigan Collection Practices Act (MCPA).
- The parties filed cross-motions for summary judgment.
- The district court granted summary judgment to the Firm, holding the debt was commercial and not covered by the FDCPA.
- Haddad (appellant) appealed to the U.S. Court of Appeals for the Sixth Circuit, with the Firm as appellee.
- The Sixth Circuit reversed the district court, holding that the condominium assessments were a 'debt' under the FDCPA, and remanded the case.
- On remand, the parties again filed cross-motions for summary judgment.
- The district court again granted summary judgment to the Firm, this time finding that the Firm had properly verified the debt and that its collection efforts were not misleading.
- Haddad (appellant) appealed this second grant of summary judgment to the U.S. Court of Appeals for the Sixth Circuit, with the Firm again as appellee.
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Issue:
Does a debt collector satisfy the FDCPA's debt verification requirement under 15 U.S.C. § 1692g(b) by providing a consumer with account ledgers that show a carryover balance from a previous creditor without explaining the date and nature of the original transaction that created that balance?
Opinions:
Majority - Per Curiam
No. A debt collector does not satisfy the FDCPA's verification requirement by providing an account ledger with an unexplained carryover balance; instead, verification must provide the consumer with enough information to sufficiently dispute the debt, which typically includes the date and nature of the transaction that created it. The purpose of the FDCPA's verification provision is to prevent collectors from dunning the wrong person or collecting on debts already paid. The court reviewed decisions from the Third, Fourth, Eighth, and Ninth Circuits, concluding that the baseline for verification is what enables a consumer to 'sufficiently dispute the payment obligation.' Here, the entire disputed amount, including all subsequent late fees, fines, and legal fees, stemmed from an initial unexplained $50 charge. By providing account ledgers that only showed this as a carryover balance without explaining its origin, the Firm deprived Haddad of the ability to meaningfully contest it. Because the Firm continued collection efforts by placing a lien on Haddad's property without properly verifying the disputed portion of the debt, it violated 15 U.S.C. § 1692g(b). The court affirmed, however, that the Firm did not make misleading statements regarding the lien amount, as its calculation method was authorized by the condominium bylaws and Michigan law.
Analysis:
This decision establishes a more robust, consumer-protective standard for debt verification under the FDCPA within the Sixth Circuit. It clarifies that merely confirming a balance with a creditor is insufficient, especially when a consumer disputes the origin of a specific charge. The court sets a functional standard: verification must provide enough detail—specifically the date and nature of the underlying transaction—to allow for a meaningful dispute. This holding puts a greater burden on debt collectors to investigate the source of disputed debts and provide substantive documentation rather than just summary ledgers, potentially reducing collections based on unsubstantiated 'carryover' balances from prior creditors.
