Thursday, September 18, 2014

FYI: 1st Cir Adopts "Unsophisticated Consumer" Standard for FDCPA Actions

The U.S. Court of Appeals for the First Circuit recently affirmed a judgment against a debt collector for violation of the federal Fair Debt Collection Practices Act (“FDCPA”) where the debt collector’s debt validation or “1692g” notice included an implied threat of imminent litigation, which the Court held overshadowed the consumer’s right to dispute the debt. 


In so ruling, as a matter of first impression in this circuit, the First Circuit held that “for FDCPA purposes, a collection letter is to be viewed from the perspective of the hypothetical unsophisticated consumer.”


A copy of the opinion is available at:


On October 23, 2012, a debt collection law firm (Law Firm) sent a consumer (Consumer) a collection letter which explained that Law Firm planned to collect the debt “through whatever legal means are available and without [Consumer’s] cooperation.”  The letter went on to inform Consumer that Law Firm was “obligated to [its] client to pursue the next logical course of action without delay” and described how the [Consumer] could make payments.  The collection letter “contained the statutorily mandated notice of consumer rights.” 


Following her receipt of this collection letter, Consumer contacted Law Firm to dispute ownership of the debt and request validation.  Approximately one month after the collection letter arrived, Consumer sued for alleged violations of the FDCPA.


As you may recall, a debt collector must inform the consumer that s/he has thirty days from receipt of the debt validation notice within which to dispute the debt, and that if the consumer disputes the debt, the debt collector must provide the consumer with verification of the debt. See 15 U.S.C. § 1692g(a)(3)-(4).  If the consumer either disputes the debt or requests information concerning the identity of the original creditor within this thirty-day period, the debt collector must suspend collection efforts until it supplies such data.  See Id. § 1692g(b).


The Financial Services Regulatory Relief Act of 2006 amended the FDCPA to include that “[a]ny collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor.” See Pub. L. No. 109-351, § 802(c), 120 Stat. 1966, 2006-07 (codified at 15 U.S.C. § 1692g(b)).


The First Circuit first considered whether Consumer had standing.  Law Firm argued that Consumer lacked “a constitutionally cognizable injury because she was not flummoxed about her statutory rights after reading the collection letter, as evidenced by the fact that she exercised those rights.”  The First Circuit rejected Law Firm’s standing arguments, reasoning that “[i]n cases in which a plaintiff's injury stems solely from the violation of a statute, the nature of the right that the statute confers is of paramount concern,” citing Warth v. Seldin, 422 U.S. 490, 500 (1975).  Thus, the First Circuit held that “[t]he invasion of a statutorily conferred right may, in and of itself, be a sufficient injury to undergird a plaintiff's standing even in the absence of other harm … the FDCPA does not require that a plaintiff actually be confused.”


In analyzing whether the collection letter actually violated the FDCPA (specifically, 15 USC 1692g), the First Circuit held that “for FDCPA purposes, a collection letter is to be viewed from the perspective of the hypothetical unsophisticated consumer.” 


The Court noted that a majority of the circuits applies a "least sophisticated consumer" standard. See, e.g., Fed. Home Loan Mortg. Corp. v. Lamar, 503 F.3d 504, 509 (6th Cir. 2007); Terran v. Kaplan, 109

F.3d 1428, 1431-32 (9th Cir. 1997); Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996); cf. Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 42 (1st Cir. 2010) (referencing, though having no occasion to adopt or apply, the least sophisticated consumer standard).


However, the First Circuit stated that was adopting the “unsophisticated consumer” formulation “to avoid any appearance of wedding the standard to the ‘very last rung on the sophistication ladder.’"  The Court noted that two other circuits -- the Seventh and Eighth -- concluded that a collection letter is to be viewed from the perspective of the hypothetical unsophisticated consumer.  See Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051, 1055 (8th Cir. 2002); Gammon v. GC Servs. Ltd. P'ship, 27 F.3d 1254, 1257 (7th Cir. 1994).


The First Circuit then held that “a collection letter is confusing if, after reading it, the unsophisticated consumer would be left unsure of her right to dispute the debt and request information concerning the original creditor.”


The Court found that Law Firm’s collection letter “conveys the message that [Law Firm] is not inclined to do anything other than file a lawsuit and that it plans to pursue such a course of action ‘without delay.’  At bottom, the letter seems to threaten immediate litigation.” 


The First Circuit further found that “implicit in this threat, is the idea that litigation can be avoided only if payment is made forthwith. That idea is reinforced by the fact that the letter appears on law firm letterhead and bears the signature of an attorney.”


The Appellate Court was particularly critical that of the collection letter’s second-to-last sentence:  “[W]e further inform you that despite the fact that you have a thirty (30) day period to dispute the debt may not preclude [sic] the filing of legal action against you prior to the expiration of the period.”  According to the First Circuit, “this sentence is easily read as suggesting that a lawsuit is going to proceed without delay whether the consumer disputes the debt or not.”


The First Circuit concluded that “the letter effectively overshadows the disclosed right to dispute by conveying an inaccurate message that exercise of the right does not have an effect that the statute itself says it has … [it] could dupe the unsophisticated consumer into believing that disputing a debt could not forestall a suit.”


The Court also rejected the Law Firm’s other arguments.  Law Firm had argued that “the thirty-day validation period is not a grace period.”  However, the First Circuit held that an unsophisticated consumer could be confused when “faced with two seemingly contradictory statements:  that they may dispute the debt and that they must pay immediately.”  Accordingly, the First Circuit held that “when undertaking collection, a debt collector bears the burden of apprising the consumer of her validation rights in an effective manner.”


Law Firm also argued that “its collection letter [was] not confusing because it [did] not contain an express demand for payment within thirty days.”  The First Circuit disagreed:  “Although the letter does not demand immediate payment in haec verba, it not so subtly threatens immediate litigation and tells the plaintiff how to make payments. The clear implication is that the plaintiff can stave off suit only by ignoring her validation rights and making payment.”


Finally, Law Firm argued that “the fact that this collection letter was sent by an attorney is irrelevant.”  However, the First Circuit stated that it shared the view of the Third Circuit that “[u]nder the [FDCPA], attorney debt collectors warrant closer scrutiny because their abusive collection practices are more egregious than those of lay collectors,” citing Campuzano-Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294, 301 (3d Cir. 2008).  Thus, “[a]n unsophisticated consumer, getting a letter from an attorney, knows the price of poker has just gone up,” citing Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996).


Accordingly, the First Circuit affirmed the lower court’s judgment against the debt collection law firm.




Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
(312) 551-9320
(312) 284-4751
(312) 493-0874


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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