3rd Circuit: Hypertechnical Misstatements in Debt Collection Communications with Consumers Don’t Violate FDCPA

In a case of first impression in the Third Circuit, the court unanimously adopted a “materiality” requirement for false, misleading or deceptive statements under the FDCPA.

In July 2013, the ACA International Board of Directors approved initiatives to protect the long term viability of the credit and collection industry. These efforts are funded by a three-year Industry Advancement Fund assessment.

Last week, the Third Circuit Court of Appeals found that that the use of an incorrect name for the New Jersey superior court clerk on a post-judgment information subpoena was not a material misrepresentation and, therefore, was not actionable under the Fair Debt Collection Practices Act. The Third Circuit concluded that the “least sophisticated consumer” standard that governs FDCPA claims does not stand alone, but instead it encompasses a materiality requirement. 

In the case, Jenson v. Pressler & Pressler and Midland Funding, LLC, 14-2808, 2015 WL 3953754, ---F.3d--- (3rd Cir., June 30, 2015), a consumer filed a class-action complaint against a debt buyer and a collection law firm alleging violations of the FDCPA. The consumer alleged that the collection law firm violated the FDCPA in the course of its efforts to recover on a judgment entered in favor of the debt buyer and against the consumer when it sent the consumer an information subpoena and written questions, which inadvertently misidentified the name of the court clerk.   

The consumer argued that the information subpoena was “illegal” because it bore the “counterfeit” name of a retired county clerk. The consumer claimed that this false statement rendered the information subpoena grossly deceptive because the “least sophisticated consumer” would be confused as to whether the subpoena was enforceable or not. The consumer contended that the wrong name for the clerk of court on the information subpoena constituted a “false representation” in connection with the collection of the judgment. 

The district court disagreed with the consumer. The court decided that the entirely immaterial use of the wrong name for the clerk of court on the information subpoena is not the type of abusive debt collection practice sufficient to give rise to liability under the FDCPA. Accordingly, the district court entered judgment in favor of the debt buyer and the collection law firm, and dismissed the consumer’s FDCPA claims. The consumer appealed. 

Following the Fourth, Sixth, Seventh and Ninth Courts of Appeals’ adoption of the materiality requirement as a prerequisite for establishing liability under the portions of the statute concerning “false, deceptive, or misleading representations,” the Third Circuit affirmed the district court’s decision. 

The court ruled that “a false statement in a communication from a debt collector to a debtor must be material in order to be actionable under a provision of the Fair Debt Collection Practices Act...” The court reasoned that “a false statement is only actionable under the FDCPA if it has the potential to affect the decision-making process of the least sophisticated debtor; in other words, it must be material when viewed through the least sophisticated debtor’s eyes.”    

As such, the court found that the presence of the wrong name for the clerk of court on the information subpoena was not material because “[i]t could not possibly have affected the least sophisticated debtor’s ’ability to make intelligent decisions.’” Consequently, the court concluded that the subpoena was not a debt collection communication that violated the FDCPA’s prohibitions against false statements or representations.