Consumer Class Action Blog

News, analysis and commentary on state and federal consumer class action litigation

Interesting FDCPA decision

Posted by Philip Kay on August 19, 2009

Interesting FDCPA decision out of the 7th Circuit a couple days ago. In Ruth v. Triumph Partnerships, 2009 WL 2487092 (7th Cir., Aug 17, 2009),  the court decided an issue of first impression in the federal appellate courts:  whether the “in connection with” element of 15 U.S.C. §1692e is subject to the “unsophisticated consumer” test.

A little background: Section § 1692e provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  Its pretty well settled that whether a statement is “false, deceptive, or misleading” is based on whether the statement would mislead or deceive the “unsophisticated consumer” (one who is “uninformed, naive, and trusting, but also assumed to possess rudimentary knowledge about the financial world and capable of making basic logical deductions and inferences”).  Under this standard, even a patently false statement isn’t “false” in the FDCPA sense of the word unless an unsophisticated consumer would find it misleading.

What wasn’t so clear was whether the “unsophisticated consumer” test applied when the question wasn’t whether the statement was false or misleading but whether the statement was made “in connection with” the collection of a debt.  In Ruth, consumers brought an FDCPA class action against a debt collection agency and a company which purchased defaulted debts. The debt collection agency included in the same envelope with its collection notice a second letter from the company which purchased the defaulted debt that falsely informed the debtor that his or her personal, non-public information could legally be shared with marketers, retailers, and other third parties unless the debtor “opted out.”  Was this letter sent “in connection with” the collection of the debt such that the FDCPA applied to it?  The district court ruled that the answer turns on whether an unsophisticated consumer would consider the letter as sent “in connection with” the collection of the debt.

The 7th Circuit reversed and ruled that whether a communication was sent in connection with an attempt to collect a debt is a question of objective fact to be proven like any other fact and it need not be established by extrinsic evidence of what the unsophisticated consumer might think.  Since in this case any reasonable trier of fact would conclude that the letter was sent in connection with an attempt to collect a debt, the FDCPA applied to the letter as a matter of law.   (However, whether the letter was false or misleading still had to be determined using the unsophisticated consumer test, the only exception being when the statement is so clearly misleading on its face that the court deems extrinsic evidence unnecessary.  Lucky for the plaintiffs in Ruth, the 7th Circuit found the letter in question to fall into this “clearly misleading” category).

This is a good case for consumers but there’s an easy out for the debt collectors.  Until now, the debtor who received misleading extraneous material usually had to arm himself with extrinsic evidence (such as consumer surveys) and an expert or two to show that (1) an unsophisticated consumer would consider the extraneous material as sent “in connection with” the debt collection notice such that the FDCPA applies to the extraneous material, and (2) an unsophisticated consumer would consider the extraneous material misleading.  Now, any material included in the same envelope with the collection notice will be considered as sent “in connection with” collecting the debt so the debtor needs only to satisfy element (2).   Not so clear is whether a separate mailing of the extraneous material would yield the same result.  I think in that case we’re probably back to square one.  It may cost the debt collector an extra postage stamp but consumers can expect separate mailings of extraneous material from this point forward.

A side note:  the Ruth court declined to address whether the FDCPA’s bona fide error provision applies to legal errors as opposed to just procedural or clerical errors (such as stating incorrectly the amount owed).  The courts of appeals are divided on this question and the Supreme Court recently granted certiorari on the issue in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 538 F.3d 469, 476 (6th Cir.2008) (holding that the defense applies to legal errors), cert. granted, 557 U.S. —- (June 29, 2009).


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