When collectors
get sued in an FDCPA action, they face a steep uphill battle. Courts apply the very pro-consumer “least
sophisticated debtor” standard when evaluating a collector’s communications,
and most violations of the Act are “strict liability” – meaning the debtor can
win the case without proving the collector intended to violate the
statute. Recently, however, the “least
sophisticated debtor” seems to have gotten more sophisticated, and his memory
about his account and his past communications with the collector has
improved.
Courts have gradually demanded more
of the “least sophisticated debtor” and have rejected suits based on
hypertechincal misstatements and strained interpretations of the Act.[i]
Even when a collector’s statement is
false or misleading, it must also be “material” or it does not violate the
FDCPA.[ii] And in a significant recent trend, courts
have insisted that the challenged communication cannot be considered in a
vacuum. Even though the “least
sophisticated debtor” standard is objective, that hypothetical debtor is
charged with knowledge of the account’s history, and the communication at issue
must be considered in the context of all other communications made to the
plaintiff regarding the debt.[iii]
A striking example of this trend is
the Ninth Circuit’s decision in Davis v.
Hollins Law Firm, _F.3d _, 2016 WL 4174747 (9th Cir. Aug. 8, 2016). There, the collection law firm defendant
communicated with plaintiff on a number of occasions, and each time the firm
identified itself as a “debt collector,” as required by section 1692e(11) of
the FDCPA. Id. at *2. In a subsequent
voice mail message, however, the defendant’s employee stated only “Hello, this
is a call for Michael Davis from Gregory at Hollins Law. Please call sir, it is
important, my number is 866-513-5033. Thank You,” without specifically reciting
he was a “debt collector.” Id. at *3. Although the trial court felt this was only a
“de minimus” violation of section
1692e(11), it entered judgment in favor of Davis. Id. On appeal, the Ninth Circuit reversed.
The Court observed that the overarching purpose of the FDCPA “is to
prevent debt collection actions that frustrate consumers' ability to chart a
course of action in response to a collection effort.” Id.
at *1. The Court applies “an objective
standard” to decide whether the “least sophisticated debtor” would be misled by
the communication. Id. at *4. The standard
presumes “that the debtor has a basic level of understanding, which does not
include bizarre or idiosyncratic interpretations of the communication at
issue. We also must avoid taking a
hypertechnical approach.” Id. (citations, quotation marks
omitted).
The Court emphasized that while the
“least sophisticated debtor” standard protects consumers, it must be
interpreted in a way that protects collectors from “bizarre or idiosyncratic”
interpretations of collection communications.
The Court stated: “Even though the least sophisticated debtor may be
uninformed, naive, and gullible, the debtor's interpretation of a collection
notice cannot be bizarre or unreasonable.
Courts have carefully preserved the concept of reasonableness and have
presumed that debtors have a basic level of understanding and willingness to
read [the relevant documents] with care in order to safeguard bill collectors
from liability for consumers' bizarre or idiosyncratic interpretations of
collection notices.” Id. at *1. (citations, quotation marks
omitted).
In addition, a collector’s statement
must be “material” in order to be actionable under the FDCPA. Id.
at *2. This means a false or misleading
statement does not violate the FDCPA, unless it also frustrates the ability of
the consumer to intelligently choose an appropriate response. “Immaterial errors, by definition, would not
frustrate a debtor's ability to intelligently choose an appropriate response to
a collection effort.” Id.
With this in mind, the Ninth Circuit
concluded the failure to expressly state the voicemail was from a “debt
collector” did not violate section 1692e(11).
Significantly, the Court noted that “given the extent of the prior
communications” between Davis and the law firm, and given “the context,” the
voice mail message complied with the Act: “We conclude, given the extent of the
prior communications, that the voicemail message's statement that the call was
from "Gregory at Hollins Law" was sufficient to disclose to a debtor
with a basic level of understanding that the communication at issue was from a
debt collector. Indeed, any other
interpretation of Daulton's voicemail message would be bizarre or
idiosyncratic. Given the context, the call was not false, deceptive, or
misleading, and would not frustrate consumers' ability to intelligently chart a
course of action in response to a collection effort. Although Daulton's voicemail message did not
expressly state that Hollins Law is "a debt collector," § 1692e(11)
does not require a subsequent communication from the debt collector to use any
specific language so long as it is sufficient to disclose that the
communication is from a debt collector, as it was here.” Id.
at *4.
The decision in Davis continues an encouraging new trend for collectors. Consumers cannot simply pluck a single
communication out of a series of interactions with a collector and argue that,
when read in isolation, a minor misstatement contained in it would be confusing
to the least sophisticated debtor.
Rather, the challenged communication must be materially false or
misleading when evaluated in the context of the entire account history and all
prior communications relating to the debt.
[i] See, e.g,
Wahl v. Midland Credit Mgmt., Inc.,556
F.3d 643, 645 (7th Cir. 2009) (“The unsophisticated consumer isn’t a
dimwit. She may be uninformed, naive,
and trusting, but she has rudimentary knowledge about the financial world and
is capable of making basic logical deductions and inferences.”) (citations and
internal quotations marks omitted); Campuzano-Burgos
v. Midland Credit Mgmt., Inc., 550 F.3d 294, 299 (3d Cir. 2008) (“Even the
least sophisticated debtor is bound to read collection notices in their
entirety.”); Greco v. Trauner, Cohen
& Thomas, L.L.P., 412 F.3d 360, 363 (2d Cir. 2005) (“[E]ven the least
sophisticated consumer can be presumed to possess a rudimentary amount of
information about the world and a willingness to read a collection notice with
some care.”) (citations and internal quotation marks omitted).
[ii] See,
e.g., Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1034 (9th Cir. 2010); Hahn v. Triumph Partnerships LLC, 557
F.3d 755 (7th Cir. 2009) (letter that accurately stated total amount due did
not violate §§ 1692e or e(2)); Wahl,
556 F.3d at 646 (“If a statement would not mislead the unsophisticated
consumer, it does not violate the FDCPA - even if it is false in some technical
sense.”); Miller v. Javitch, Block &
Rathbone, 561 F.3d 588, 596 (6th Cir. 2009).
[iii] See Wahl, 556 F.3d at 645-46 (the “unsophisticated consumer,
with a reasonable knowledge of her account’s history, would have little trouble
concluding that the ‘principal balance’ included interest charged by [the
original creditor].”); McNair v. Maxwell
& Morgan, P.C., 142 F. Supp. 3d 859, 871 (D. Ariz. 2015) (“ The least
sophisticated debtor is charged with a reasonable knowledge of both
communications between the debtor and the debt collector, and the account's
history.”) (citations omitted); Goodrick
v. Cavalry Portfolio Services, LLC, 2013 WL 4419321 (D. Ariz. Aug. 19,
2013) (“[E]ven the most unsophisticated debtor would not have been confused by
Defendant's failure to say that Plaintiff's longstanding loan was continuing to
accrue interest.”).
