Press "Enter" to skip to content

Calif. App. Court (1st Dist) Holds Rosenthal Act Allows Class Actions, Cure Provisions to Apply to Debtor Notices

In an unreported opinion, the Court of Appeal for the First District of California recently held that a debt collector that violated the minimum type-size requirement for collection letters under Cal. Civil Code § 1812.701(b) may utilize the procedure for curing violations under California’s Rosenthal Fair Debt Collection Practices Act to correct its violations.

However, the Appellate Court reversed the dismissal because the trial court should have allowed the consumer to amend the complaint or locate a suitable class representative after granting summary judgment in favor of the debt collector on her individual claim.

In so ruling, the Court also held that Rosenthal Act violations may be brought as class actions under a 1999 amendment essentially incorporating the federal Fair Debt Collection Practices Act’s provisions into the Rosenthal Act.

A copy of the opinion in Timlick v. National Enterprise Systems, Inc. is available at:  Link to Opinion.

The consumer received a debt collection letter from the debt collector that did not provide certain statutorily required language in the proper type-size.  The consumer filed a complaint on behalf of a putative class alleging violation of Cal. Civil Code § 1812.701(b).  As you may recall, a violation of section 1812.701(b) is “considered a violation of the Rosenthal Fair Debt Collection Practices Act.”  Cal. Civil Code § 1812.702

Nine days after it was served with the consumer’s complaint, the debt collector sent a revised collection letter that contained the required language in the same type-size as that which was used to inform her of her debt.

The debt collector argued that it cured the alleged violation within the 15-day period prescribed by Cal. Civil Code § 1788.30(d) for a curable Rosenthal Act violation.  The debt collector moved for summary judgment on the consumer’s individual claim.

The trial court found that the “cure” provision under section 1788.30(d) applied to the debt collector’s section 1812.701(b) violation, and granted the debt collector’s motion for summary judgment and dismissed the entire putative class action.

This appeal followed.

As you may recall, debt collection practices in California are governed by federal law and by California’s Rosenthal Fair Debt Collection Practices Act, Cal. Civil Code § 1788, et seq.

Originally the Rosenthal Act did not permit class actions.  In 1999, the Legislature passed Assembly Bill No. 969, adding Cal. Civil Code B’ 1788.17 to the Rosenthal Act, which provides in relevant part:  “[n]otwithstanding any other provision of this title, every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, of, and shall be subject to the remedies in Section 1692k of [the FDCPA].”

Section 1692k of the FDCPA specifically provides for both individual and class action remedies, but does not contain a cure provision like the Rosenthal Act.

Then in 2003, the Legislature enacted the Consumer Collection Notice law, Cal. Civil Code §§ 1812.700-1812.702, which required third-party debt collectors subject to the FDCPA, in their first written notice to debtors, to provide a description of debtor rights under state and federal law.  Cal. Civil Code B’ 1812.700(a).

As relevant in this case, “[t]he type-size used in the disclosure shall be at least the same type-size as that used to inform the debtor of his or her specific debt, but is not required to be larger than 12-point type.”    Cal. Civil Code § 1812.701(b).

The cure provision in the Rosenthal Act states:  “[a] debt collector shall have no civil liability under this title if, within 15 days either after discovering a violation which is able to be cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor of the violation, and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor.”  Cal. Civil Code § 1788.30(d).

The consumer argued that the trial court erred in applying section 1788.30(d) because the cure provision was repealed when the Legislature enacted section 1788.17 to require debt collectors to comply with listed provisions of the FDCPA and subjected them to the remedies in section 1692k of the federal act.

The Appellate Court disagreed.  Finding no express repeal language in Civil Code § 1788.18, the Appellate Court explained that an implied repeal will be found “only when there is no rational basis for harmonizing the two potentially conflicting statutes.”  Garcia v. McCutchen (1997) 16 Cal.4th 469, 477.  The Appellate Court observed that the Ninth Circuit Court of Appeals addressed this very issue in Afewerki v. Anaya Law Grp. (9th Cir. 2017) 868 F.3d 771, and held that section 1788.17 did not remove or impliedly repeal section 1788.30b’s defense for cured violations.

The Appellate Court noted that while section 1788.17 applied “[n]otwithstanding any other provision” of the Rosenthal Act, the mere incorporation of certain provisions from the FDCPA — none of which says anything about curing violations — did not render sections 1788.17 and 1788.30(d) so inconsistent that the two cannot operate concurrently.

Moreover, the Appellate Court found nothing in the legislative history of section 1788.17 indicating an intent to repeal section 1788.30(d).

The consumer also argued that the type-size violation cannot be cured under section 1788.30(d) because the statute requires compliance in the debt collector’s first written communication to the consumer.

Alternatively, the consumer argued that the cure provision did not apply to the debt collector’s section 1812.701(b) violation.

The Appellate Court rejected these arguments, citing the floor analysis of Senate Bill No. 1022 — the bill that enacted the Consumer Collection Notice Law — and noted that the Legislature intended a violation of the type-size requirement to be a Rosenthal Act violation and subject to the 15-day correction period.

Thus, the Appellate Court found no error in the trial court’s application of section 1788.30, and its determination that the debt collector’s violation could be cured in a writing sent after the first written communication with the debtor.

Next, the Appellate Court turned to the consumer’s argument that the trial court erred by dismissing the entire putative class action after granting summary judgment on her individual claim.

To resolve this issue, the Appellate Court began by considering whether the language “individual action” in section 1788.30 barred a class action based on alleged violations of section 1812.701(b).

As you may recall, the remedies provision of the Rosenthal Act state that “[a]ny debt collector who violates this title with respect to any debtor shall be liable to that debtor only in an individual action, and his liability therein to that debtor shall be in an amount equal to the sum of any actual damages sustained by the debtor as a result of the violation.”  Cal. Civil Code B’ 1788.30(a).

The debt collector may also be liable for statutory damages for a willful violation.   Cal. Civil Code § 1788.30(b).

However, in the Appellate Court’s view, section 1788.17 may be reasonably read to incorporate the class action remedies of the FDCPA into the Rosenthal Act, “[n]otwithstanding any other provision” of the Rosenthal Act, such as the individual action provisions in section 1788.30.b

The Appellate Court observed that several federal courts faced with this questions have concluded that “class actions may proceed under the amendment to the Rosenthal Act.”  Gonzales v. Arrow Fin. Servs., LLC (9th Cir. 2011) 660 F.3d 1055, 1066 (collecting cases).

Thus, the Appellate Court determined that the consumer could bring a putative class action for her claim under section 1812.701(b).

Finally, the Appellate Court turned to the issue of the pick off exception in putative class actions.

As you may recall, a typical pick off situation arises when prior to class certification, a defendant gives the named plaintiff the entirety of the relief claimed by that individual and then attempts to obtain dismissal of the action, on the basis that the named plaintiff can no longer pursue a class action.

The involuntary receipt of relief does not, of itself, prevent the class plaintiff from continuing as a class representative. Wallace v. GEICO General Ins. Co. (2010) 183 Cal.App.4th 1390, 1399.  Rather, the trial court must decide whether the named plaintiff can continue to fairly represent the class in light of the individual relief offered by the defendant.  Id., at pp. 1399-1400.

The debt collector argued that it did not pick off the named plaintiff, but rather, it substantively prevailed on the merits of her individual claim based upon the cure defense under section 1788.30(d).

However, the Appellate Court determined that the debt collector did not prevail against the consumer in the sense that her allegations were disproven or shown to be meritless.  Instead, her allegations were implicitly conceded and the debt collector did not produce any evidence that it corrected the alleged violations as to the rest of the putative class.

In the Appellate Court’s view, the debt collector voluntarily gave special treatment to the named plaintiff only, resulting in the elimination of her standing to maintain a putative class action.

Thus, the Appellate Court held that the trial court erred in dismissing the entire putative class action without affording the consumer the opportunity to amend her complaint, redefine the putative class, or locate a suitable class representative.

Accordingly, the Appellate Court reversed the trial court’s judgment and remanded for further proceedings.

Print Friendly, PDF & Email

Eric Tsai practices in Maurice Wutscher’s Commercial Litigation and Consumer Credit Litigation groups, and in its Regulatory Compliance group. He concentrates his practice primarily on the defense of consumer and commercial financial services companies, including mortgage lenders and servicers, mortgage loan investors, third party debt collectors, and other financial services providers. He also counsels clients on regulatory compliance, licensing, and other consumer protection matters. Eric earned his undergraduate degree from the University of California, Irvine. Prior to attending law school, he worked as a loan officer for national direct lenders. He earned his Juris Doctor from California Western School of Law and thereafter obtained a Master of Laws (LLM) in Taxation from the University of San Diego School of Law. Eric publishes extensively on various issues affecting consumer lending and litigation, including both federal and California-specific developments. He is licensed to practice law in California, Nevada, and Oregon, and is admitted in all United States District Courts in the State of California, the United States District Court for the District of Oregon, the United States District Court for the District of Nevada, the U.S. Tax Court, and the Ninth Circuit Court of Appeals. He is also a licensed real estate broker in the State of California.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.