Weak FDCPA Claims Fall Upon Scrutiny

John Rossman

The Supreme Court ruling in the Jerman case in 2010 surprised some observers because the high court rejected a bona fide error defense premised on a mistake of law. The Jerman case provided a second surprise recently when the District Court in that case awarded no damages – neither statutory nor actual – to the Plaintiff.

District Court Awards No Damages in Case Decided by the Supreme Court

The Plaintiff in Jerman alleged that the validation notice she received from a debt collector technically violated the FDCPA because it did not precisely recite the language required by the statute.  After the Supreme Court struck down the debt collector’s bona fide error defense, the District Court closely examined each of the factors the FDCPA specifies regarding an award of statutory damages. The factors the FDCPA requires the Court to examine in determining statutory damages in a class action are:

1. The frequency and persistence of noncompliance by the debt collector.
2. The nature of the noncompliance.
3. The resources of the debt collector.
4. The number of persons adversely affected.
5. The extent to which the debt collectors noncompliance was intentional.
6. Other relevant factors.

The Court applied these factors to the facts of the case and determined that no statutory damages would be awarded.  In addition, the Court noted:

Further, while acknowledging that statutory damages may be awarded in the absence of actual damages, defendants note that the Act sets no minimum damages. Thus, additional damages are not automatic. And, defendants contend, where there are no actual damages and no evidence of an intent to engage in abusive and deceptive debt collection practices, additional damages are not warranted.

The question remains as to what amount of attorney fees and costs the Court in Jerman will award to the Plaintiff, after years of litigating the case up to the Supreme Court and back to the District Court, where no damages were awarded.

Some Courts Hold that Hyper-technical Violations of the FDCPA are not Actionable

In the recent Seventh Circuit Court of Appeals Case Hahn v. Triumph Partnerships LLC, the Court held that a technical misstatement in a collection letter regarding the delineation of interest and costs on an account (where the account balance was correctly stated) was not actionable because the purported FDCPA violation was not material.  In that case, the Court wrote:

We do not see any reason why materiality should not be equally required in an action based on §1692e. The statute is designed to provide information that helps consumers to choose intelligently, and by definition immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect)…A statement cannot mislead unless it is material, so a false but non-material statement is not actionable.

The Sixth Circuit Court of Appeals also recently examined allegations of an FDCPA violation arising from a collection lawsuit that technically misstated some non-material aspects of the debt transaction in the Miller v. Javitch, Block & Rathbone case. In rejecting the claims of an FDCPA violation as immaterial, the Court wrote:

It is interesting to contemplate the genesis of these suits. The hypothetical Mr. Least Sophisticated Consumer (LSC) makes a $400 purchase. His debt remains unpaid and undisputed. He eventually receives a collection letter requesting payment of the debt which he rightfully owes. Mr. LSC, upon receiving a debt collection letter that contains some minute variation from the statute’s requirements, immediately exclaims “This clearly runs afoul of the FDCPA!” and-rather than simply pay what he owes-repairs to his lawyer’s office to vindicate a perceived “wrong.” “[T]here comes a point where this Court should not be ignorant as judges of what we know as men.” Watts v. State of Ind., 338 U.S. 49, 52, 69 S.Ct. 1347, 93 L.Ed. 1801(1949).

Conclusion

As we see increased judicial scrutiny of damages and materiality in FDCPA cases, collection agencies and debt buyers must likewise continue to be vigilant in examining each FDCPA complaint to ascertain whether the allegations satisfy these important elements.

To hear John discuss this issue in further detail, please listen to his recent audio podcast here.

John K. Rossman is a shareholder and Chair of the Creditors’ Remedies Practice Group at Moss & Barnett, P.A. Mr. Rossman is a nationally acclaimed authority on the Fair Debt Collection Practices Act and the labyrinth of laws that impact the debt industry. He is a counselor and advisor to national and international companies and noted for his intelligent, creative and successful representation of collection agencies, debt buyers, creditors and fellow attorneys in cases across the country.

This publication is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario. If you have a legal question, consult with an attorney. The reader of this publication will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney. No attorney-client relationship is formed by the publication or reading of this document. Moss & Barnett, A Professional Association, assumes no liability for typographical or other errors contained herein or for changes in the law affecting anything discussed herein.