Important FDCPA Ruling: Brown v. Card Service Center

    By Brian Wolfman

    The Third Circuit has issued an important Fair Debt Collection Practices Act (FDCPA) decision in Brown v. Card Service Center , __ F.3d __,  2006 WL 2788476 (Sept. 29, 2006).  I should mention at the outset that the plaintiff's case was argued by CL&P Blog contributor, Cary Flitter.  Noted Philadelphia consumer lawyer David Searles served as Cary’s co-counsel.

    Brown begins with two key general holdings of a kind not seen too often these days.  First, the court noted that because the FDCPA is a remedial statute, it should be construed “broadly” to achieve its ambitious consumer protection purposes.  Second, because of the Act’s remedial purpose, whether a debt collector has engaged in deception or misrepresentation must be judged from the perspective of the “least sophisticated debtor,” not merely a “reasonable debtor.”  This standard has been adopted by many other courts, but it has come under attack in some quarters in recent years.  Congress’s point, the Third Circuit explained, was to protect naive, trusting, and even gullible consumers from unscrupulous debt collectors.  Now for a bit more detail . . . .

    The facts of the case are simple.  The debt collector wrote a letter to the debtor saying that failure to make arrangements to pay the debt within 5 days “could result in our forwarding this account to  our attorney with directions to continue collection efforts” and that “[r]efusal to cooperate could result in a legal suit being filed for collection.”

    The FDCPA outlaws “any false, deceptive, or misleading” representations in connection with debt collection, 15 U.S.C. 1692e, including but not limited to “[t]he threat to take any action that cannot be taken or that is not intended to be taken.” Id. § 1692e(5).

    The district court granted the debt collector’s motion to dismiss because the letter had stated only that the debt collector “could” refer the case to a lawyer or “could” file suit.  Because the letter did not say that the debt collector “would” take such actions, the court held, the debt collector had neither stated nor implied that such actions were imminent.

    In reversing, the Third Circuit declined to decide whether the letter constituted a “threat” to take an action that it did not intend to take, as specifically prohibited by 15 U.S.C. 1692e(5), presumably because of the letter's conditional wording.  But the court went on to hold that the “least sophisticated consumer” might well believe that legal action was imminent if she did not respond within 5 days.  That being the case, if the debtor could show (as she had alleged) that the debt collector never intended to sue or refer the case to a collection lawyer, a reasonable jury could find in favor of the debtor.  The Third Circuit cited FTC commentary to the same effect as further support for its holding.    

Comments

[Mahlon]

I've always had a problem with the least sophisticated debtor standard. What you end up with is a bunch of lawyers and judges haggling about semantics in applying a standard that must presume illiteracy. It's nonsense. Don't try to use a fuzzy concept to attack fuzzy language. All you end up with is lint.

[Brian Wolfman]

Interesting comment. "Least sophisticated consumer" is a fuzzy concept to be sure, but that's to be expected. As the statute is written, a court has to decide from what perspective the alleged deception or mispepresentation should be judged. Whether the standard is a "reasonable" consumer perspective or something different (e.g., a gullible consumer perspective), the standard will necessarily be squishy. But that doesn't mean the standard is completely meaningless. Much of tort law, after all, is based on what a "reasonable" person would do under the circumstances, and a body of case law has developed to put flesh on the concept and lend some predictability to the system.

The FDCPA could have been based only on rules, that is, highly specific prohibitions, but that would have given debt collectors the freedom to practice deception simply by working around the rules. Congress wisely, I think, chose to enact a broad standard (plus a few specific rules) rather than rules alone.

On the other hand, it may be true that a "least" sophisticated consumer is potentially problematic. If taken literally, the standard could focus on the perspective of the one person in the world most likely to be deceived or manipulated, meaning that even perfectly truthful, perfectly reasonable statements could lead to liability. But, in practice, it hasn't worked out that way. Courts adopting the least sophisticated consumer standard have understood that the concept has some limits. It means that you don't look at the problem from the perspective of the "reasonable" or ordinary consumer, but from the perspective of a consumer who, because of a lack of sophistication, is relatively more likely than the average consumer to be deceived. See, e.g., Jeter v. Credit Bureau (11th Cir. 1985). I think that comports with Congressional intent.