How to Respond to a Consumer Demand Letter

For businesses in the consumer financial services industry, getting a demand letter from a customer’s lawyer is as unwelcome as it is inevitable. In deciding how to respond to a demand letter, every case will be different. With the normal caveat—this is not legal advice!—here is a general framework for crafting an effective response. It applies in particular to demand letters alleging non-class violations of the Telephone Consumer Protection Act (TCPA), Fair Debt Collection Practices Act (FDCPA), and Fair Credit Reporting Act (FCRA), although it may apply to a wider range of claims, including class claims.

1. Consider an initial response. It will take time to assess the letter and draft a substantive response. Don’t let the sender—the plaintiff’s attorney—go weeks thinking you’re stonewalling. An initial response noting that you’ve received the letter and are reviewing it may help prevent the filing of a lawsuit, which frees you to negotiate further without deadlines or other court obligations.
2. Investigate the account. Make sure you can identify exactly which account is at issue. Some plaintiff law firms conduct client intake through internet forms and may have missing or incorrect customer information. Depending on the nature of the account and the allegations, you should consider whether you need to flag the account as disputed or flag the customer as being represented by an attorney.
3. Investigate the issue. Does the letter raise a genuine compliance issue that extends beyond a single customer?
4. Assess the merits of the allegations. With the assistance of in-house or outside counsel, the company should assess the extent to which the allegations in the letter are true and whether they rise to the level of a valid legal claim.
5. Decide. Should you negotiate a settlement, or are you prepared to litigate? It’s often true that the legal fees required to defend a lawsuit (even one lacking merit) are higher than what it usually takes to settle a claim pre-suit. But companies should also assess the risk of repeat demand letters as part of their overall strategy. Avoiding bad precedent and publicity are other relevant factors. In the end, whether to settle or litigate any particular claim will depend on the specific situation and the company’s risk-benefit analysis.