Fair Debt Collections Act complicates eviction proceedings.

The impact of the federal Fair Debt Collections Practices Act (FDCPA) on non-payment eviction proceedings against residential tenants has long been controversial.

The FDCPA requires that for a "debt collector" to seek payment of a debt (rent), there must be served upon the debtor (tenant) a thirty-day notice to verify the debt. If the tenant fails to dispute the debt within thirty days, the debt will be assumed to be valid. This notice is commonly called "the validation notice." Failing to provide this validation notice exposes the debt collector to liability for money damages as well as attorney fees.

The United States Supreme Court in 1995 held that the term "debt collector" applies, to lawyers who regularly try to collect consumer debts, including attorneys who regularly engage in rent collection activities through litigation. These attorneys must serve the federally required validation notice upon the tenant. These requirements, however, do not apply when the landlord himself directly attempts to collect the rent and in doing so uses his own name and not the name of a third person. As a result of these FDCPA requirements, many attorneys are advising their landlord clients to serve all required notices upon defaulting tenants by using the landlords' own names.

A landlord, Missionary Sisters of the Sacred Heart Inc., commenced non-payment eviction proceedings against tenants, Mr. & Mrs. Dowling for rent arrears of $3,800 for two months.

A rent demand which was signed by Sister Fanto Massimo, the treasurer of the Missionary, was served on the tenants pursuant to New York Real Property Actions and Proceeding Law (RPAPL). On the bottom of the Rent Demand was a notation "Case Code: 64-18-095" which indicated that the document was prepared in the office of the landlord's attorney.

The landlord then formally commenced the eviction proceedings by the service of a notice of petition and petition. These instruments also contained the reference to the "case code" number.

The Dowlings moved to dismiss the petition claiming that the landlord violated FDCPA by serving the rent demand and the petition, both of which instruments, although signed by the landlord, were prepared by the attorney for the landlord, but they did not contain the validation notice required of a debt collector by FDCPA.

Judge Shlomo S. Hagler of the Housing Court, Civil Court of the City of New York heard this case and made a detailed analysis of FDCPA as it relates to landlord-tenant proceedings in New York State.

The requirements of FDCPA are: (i) the debt collector may not use any false, deceptive, or misleading representation in connection with the collection of any debt and (ii) the debt collector must inform the debtor within five days after the initial "communication" of the amount of the debt, that the debtor's failure to dispute the debt within thirty days will cause the debt to be assumed to be valid ("validation notice") and (iii) the debt collector must disclose that in attempting to collect the debt, any information obtained will be used for that purpose.

Judge Hagler stated that Congress enacted FDCPA in 1977 to regulate the manner in which debt collectors (including attorneys for landlords seeking to collect rent) may attempt to collect personal debts (including rent). If the landlord itself seeks to collect the rent, the landlord is not considered a "debt collector" and the FDCPA does not apply.

Although this statute existed for more than twenty years without impact on summary non-payment proceedings in New York State, the 1997 case of Romea v Beibergerr & Associates 988 F. Supp. 712 (S.D.N.Y: 1997) changed everything. In Romea, the federal District Court held that rent was a "debt" and that a rent demand was a "communication" within the meaning of the Act. As a result, landlords' attorneys must be aware that sending rent demands which do not comply with the strict requirements of FDCPA may subject them to statutory penalties.

Judge Hagler stated that in this case, the Dowlings seek to enlarge the reach of Romea by arguing that the rent demand which, although signed by an officer of the landlord, nevertheless violates FDCPA because it was drafted by the landlord' s attorneys. Since these communications did not contain the validation notice required by statute, the landlord violated FDCPA. As a result, the petition must be dismissed since FDCPA, being a federal statute, preempted the conflicting requirements of RPAPL under which these eviction proceedings were commenced.

In the analysis of recent precedence effecting FDCPA requirements, Judge Hagler cited Goldstein v Button, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 39 F. Supp.2d 394 (S.D.N. Y: 1999) which sustained a tenant's class action lawsuit against a law firm claiming that the rent demand, although signed by the landlord's management agent, was in fact printed on the law firm's letter head with the firm's name and address appearing on the mailing envelope. The District Court held that this amounted to the law firm "sending" the rent demand.

Judge Hagler ruled that the case at bar is quite different. Here the rent demand and the petition were clearly signed by the landlord, and the mere drafting of the instruments by its attorneys does not amount to a violation of FDCPA. A landlord may seek the advice of counsel and counsel may assist a client in drafting a rent demand so long as it is not "sent" by counsel.

The Court then considered Dowlings' novel issue as to whether the Petition itself is a "communication" subject to the provisions of the FDCP A. Judge Hagler ruled that is was not. He stated that the courts have specifically held that the Act exempts a formal pleading made in connection with a legal action from the requirements of FDCPA. An ordinary court-related document does not come within the ambit of the Act.

Judge Hagler stated that if he were to take Dowlings' argument to its logical conclusion, any summons and complaint filed in New York would invariably violate the provisions of FDCPA if no validation notice was contained therein. If such was the intention of the Congress, the Act would have so stated.

The Court then considered whether or not an FDCPA violation is a defense to the eviction proceedings brought on by the landlord.

Judge Hagler stated that assuming arguendo, that the rent demand or the petition violates FDCPA, it may give rise to liability on the part of the landlord under FDCPA, but it does not serve as a defense to the underlying eviction proceedings. He stated that this view has been upheld by the Appellate Terms of the First and Second Department of New York as well as by federal courts.

The Appellate Term ruled recently in the case of Wilson Ran Associates, Inc. v. Arthur N. YL.J: July 6, 1999 Pg. 29 Col.3 that a non-payment proceeding may not be dismissed simply because the rent demand violated FDCPA. There is also authority holding that FDCPA cannot be affirmatively utilized as a sword by debtors, but only as a shield that Congress intended it to be, so that it could not be used to attack the merits of the underlying action to recover a debt Young v. City Corp. Retail Services, Inc. 159 F.3d 1349 (1998).

Judge Hagler concluded that the motion of the tenants to dismiss the landlord's Petition must be denied in its entirety.