An Electronic “Mailbox Rule” in The CFPB Proposed Debt Collection Regulations And The Effect of the Lavallee Case

In a blog post last year, I talked about Beth Lavallee v. Med-1 where a debt collector’s attempt to send an FDCPA validation notice by email was struck down by the court. Among other things, the court ruled that using email to send a validation notice did not constitute ‘sending’ it within the meaning of the relevant statute 15 U.S.C. s, 1692g(a).

The court observed there was a presumption of receipt of a properly addressed notice sent by US Postal Service, but that there was no reason to apply such presumption (also known as the ‘mailbox rule’) to a method of delivery like email.

Of course, the court’s reasoning for why the email was not truly ‘sent’ was that the debt collector’s tracking software failed to show Ms. Lavallee received the email, leading to the observation that the Lavallee court found  that in order to have properly sent a validation notice by email, the debt collector is required to show it was received.

The debt collector, MED-1 appealed the decision, and on August 8, 2019, the Seventh Circuit Court of Appeals affirmed the lower court’s decision, although for different reasons. In order to have accessed the validation notice, Ms. Lavallee had to have opened an email from a sender with whom she claimed she was not familiar, then click through a series of links until she could open a .pdf with the validation notice.

The 7th Circuit stated that in order to constitute a ‘communication’ under  15 U.S.C. s. 1692(a), an email had to at least imply the existence of a debt. Since the initial email from the debt collector said nothing about a debt, it was not a ‘communication’ within the meaning of the statute and could not therefore constitute a proper validation notice.

The second ground for the 7th Circuit’s rejection of the debt collector’s argument was that the email itself did not contain the validation notice. It analogized a communication that merely provides a phone number the debtor could call to obtain the validation notice.

The CFPB’s proposed debt collection regulations (NPRM) appear to have been, at least partially, written to provide a regulatory framework for electronic communications that addresses what the lower court Lavallee decision saw as shortcomings in email communications. (the NPRM cites the lower court Lavallee decision)

Perhaps in recognition of the sometimes contentious nature of the debtor-creditor relation, many statutes requiring notices in the debt collection context require only that the notice is sent to the last address the creditor has for the debtor.

For example, Massachusetts G.L. c. 255B s. 20A(b) requires that a lender only send a default notice to an automobile owner before repossessing. Similarly with Massachusetts G.L. c. 244 s.14 a foreclosing mortgagee need only send a notice of an auction sale. In neither case is the creditor required to show the notice was received.

Requiring only that the notice be sent likely relies on the concept of the ‘mailbox rule’ referenced above, a line of cases in many jurisdictions that a properly addressed and stamped letter sent through the U.S. mail is assumed to reach its intended addressee. There is no requirement in such cases that the creditor prove the debtor opened the envelope or have read the contents. It follows that most cases regarding the ‘mailbox rule’ find that if the correspondence comes back to the creditor undelivered, it is not considered to have been ‘sent’.

The NPRM contains several methods of transmitting statutorily required notices electronically but does not directly address the concept of what constitutes having ‘sent’ the notice within the meaning of 15 U.S.C. s, 1692g(a).

E-Sign – Under 12 CFR 1006.42(b)(1), the debt collector may comply with section 101(c) of E-Sign, 15 U.S.C. s. 7001(c). E-Sign requires extensive pre-communication disclosure by the debt collector, including hardware and software requirements for communication, the debtor’s right to discontinue electronic communication, and the debtor’s affirmative consent to electronic communication.

In The Body of The Email – An alternative approach is set forth in 12 CFR 1006.42(c)(1). This section permits a debt collector to send a validation notice to an email address could have been used to provide electronic disclosures under ESign, so long as the notice is in the body of the email and the subject line contains the name of the creditor to whom the debt is currently owed and one additional piece of information, (other than the amount of the debt) identifying the debt. The NPRM suggests that the other piece of identifying information may be: a truncated account number, the name of the original creditor, the name of any store brand associated with the debt, the date of sale of a product or service giving rise to the debt, the physical address of service, or the billing address on the account. These are suggested so that the consumer might recognize the debt and/or keep it from going into the consumer’s spam filter.

Hyperlink – A third alternative is sending the validation notice by placing the communication on a secure website and providing a hyperlink pursuant to the 12 CFR 1006.42(c)(2)(ii) .

12 CFR 1006.42(b)(3) provides a cognate to the mailbox rule returned U.S. Postal service letter, by requiring the debt collector utilize mechanisms which “Permit receipt of notifications of undeliverability from communications providers, monitor for any such notifications, and treat any such notifications as precluding a reasonable expectation of actual notice for that delivery attempt.”

Presumably, if the debt collector can show it did not receive a notification of undeliverability it has met its burden under the NPRM, but there is nothing in the NPRM that states conclusively that non-receipt of undeliverability is proof of receipt.

It can be inferred that even if the debt collector is able to show it received nothing to show the email was not received, the consumer can still claim she did not receive the notice. Certainly with the extensive requirements of utilizing E-Sign and providing a hyperlink pursuant to 12 CFR 1006.42(c)(2)(ii), an aggrieved consumer would seek discovery as to the debt collector’s records showing compliance with these methods as well as the reliability of the debt collector’s email communications systems. Evidence of undeliverability or no, if a consumer can show the debt collector did not comply in some respect with the technical requirements for sending email, any defense based on 12 CFR 1006.42(b)(3) would be questionable.

What makes the ‘defense’ of no notice of undeliverability under 12 CFR 1006.42(b)(3)  questionable is that 12 CFR 1006.42(a) requires that a debt collector must deliver notices “…in a manner that is reasonably expected to provide actual notice…” (emphasis added) This must be contrasted with the word “send” set forth in FDCPA 15 USC 1692g(a) The word “send” would seem to require only a mailbox-rule type properly addressed and stamped envelope deposited with the U.S. Postal Service which is not returned to the sender. “Actual notice” suggests not only that the notice be forwarded by an approved delivery method, but that the consumer receive the notice, have read it and understand it. This is a significantly higher standard than that set forth in 15 USC 1692g(a).

Based on all of the above the NPRM leaves open the concept of when a notice is ‘sent’ electronically. I would expect litigation on this issue if the current NPRM proposed rules become final.

Circling back to the Lavallee case, the NPRM’s attempt to set forth a framework for sending notices electronically may be in jeopardy, at least in part.  The 7th Circuit Lavalee appellate opinion rejected the debt collector’s use of a hyperlink to convey the FDCPA notice, throwing the NPRM’s hyperlink delivery method in doubt. The 7th Circuit Lavallee court also refused to consider whether the use of E-Sign would comply with the FDCPA. Unquestionably, sending notices by text, allowed under the NPRM, are of questionable validity under the 7th Circuit  Lavallee decision because a text message is too short to convey the necessary identification required by the court. It will be interesting to see if the 7th Circuit Lavallee case causes the CFPB to revise its electronic communication rules.


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