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Eleventh Circuit Refuses to Impose a ‘Least Sophisticated Consumer’ Standard to Discharge Violations https://t.co/FwkJpuXtnq
In Church v. Financial Recovery Services, the Western District Court in New York held that a debt collector did not violate § 1692e(10) of the FDCPA. The Court held that a form collection letter with offers of settlement did not “use… false representation or deceptive means to collect or attempt to collect [a] debt” when the form letter contained language which stated, “[t]hese settlement offers may have tax consequences” following Defendant’s three offers to settle Plaintiff’s debt for less than the full amount that was due and owing.
Specifically, Plaintiff (the consumer) found issue with the following language in Defendant’s (the debt collection agency) form collection letter:
“These settlement offers may have tax consequences. We recommend that you consult independent tax counsel of your own choosing if you desire advice about any tax consequences which may result from this settlement. FRS is not a law firm and will not initiate any legal proceedings or provide you with legal advice. The offers of settlement in this letter are merely offers to resolve your account for less than the balance due.”
Plaintiff alleged that the language regarding tax consequences was a false representation because the statement “these settlement offers may have tax consequences” could be interpreted to mean that the mere extension of the offers, whether or not these offers were accepted by the consumer, may create tax consequences to the consumer.
A number of district courts have previously dealt with nearly identical language to this current case. Other district courts determined that the statement “this settlement may have tax consequences” did not violate § 1692e. However, the difference between this statement and the language in the Rozzi case is that Defendant included the word offer. Plaintiff argues that “these settlement offers may have tax consequences” is a false statement because unaccepted settlement offers cannot possibly cause a consumer to incur tax consequences.
To determine whether the Defendant violated the FDCPA, the Court adopted the “least sophisticated consumer” standard. This standard looks through the lens of the least sophisticated consumer in its assessment of how a consumer would understand the communication. Avila v. Riexinger & Assocs., 817 F.3d 72, 75 (2d Cir. 2016). A collection letter “can be deceptive if [it is] open to more than one reasonable interpretation, at least one of which is inaccurate.” E.g., Easterling v. Collecto, Inc., 692 F.3d 229, 233 (2d Cir. 2012) (quoting Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993)).
With that said, the Court stated that while the “least sophisticated consumer… lacks the sophistication of the average consumer and may be naïve about the law,” the consumer would still be “rational, and possess a rudimentary amount of information about the world.” Arias v. Gutman, Mintz, Baker & Sonnenfeldt LLP, 875 F.3d 128, 135 (2d Cir. 2017). Additionally, the least sophisticated consumer is “willing to read a collection notice with some care.” Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 363 (2d Cir. 2005). This distinction is important because it helps protect the naïve consumer while preserving the concept of what is reasonable and thereby not subjecting debt collectors to arbitrary results on the grounds of bizarre or idiosyncratic interpretations of their collection notices.
The Court pointed out that immediately after the statement “[t]hese settlement offers may have tax consequences,” it is followed by, “[w]e recommend that you consult independent tax counsel of your own choosing if you desire advice about any tax consequences which may result from this settlement.” While it is arguable that based on a technicality, it is an inaccurate statement to say that settlement offers may have tax consequences, it is clear that the author of the letter intended to convey that tax consequences may result from an accepted offer, thus an agreed upon settlement. As such, the Court chalked up Defendant’s collection notice to a sloppy and poorly written notice and that even the least sophisticated consumer would have read the entirety of the paragraph and understood that tax consequences would only attach once the offer has been accepted. Therefore, the Court found that although this one sentence was arguably inaccurate, Defendant did not violate the FDCPA when the letter was read in its entirety.
The Rozzi Court’s holding that the inclusion of the term “offers” did not amount to a false representation or deceptive practice to collect a debt means that the Court will look at the language in a collection letter in its entirety to determine the reasonable interpretation of the least sophisticated consumer. Although the hyper-technical reading of one sentence of an entire form letter may be inaccurate, the Court did not stretch to permit Plaintiff’s interpretation. The collection letter read in its totality did convey that the tax consequences would only attach once an offer was accepted. Therefore, Plaintiff’s interpretation was unreasonable even based on the least sophisticated consumer standard. Therefore, as a matter of law, Defendant’s form letter did not violate § 1692e(10) of the FDCPA.
Hannah Kays is an associate in the firm’s Creditors’ Rights and Collections practice group, representing a broad range of businesses in North and South Carolina through all stages of the collection litigation process, including pre-suit collection efforts, lawsuits, judgments, and executions. Before joining Smith Debnam, Hannah represented clients in the areas of personal injury workers’ compensation, social security disability, and mass torts. She earned both her BA in Political Science as well as her JD from the University of North Carolina at Chapel Hill. She also received a Masters of Law degree in International Business Law from Radboud University in the Netherlands....LEARN MORE