Third Circuit holds that only “material” representations by a debt collector are actionable under the FDCPA
July 24, 2015
Joining a national trend, the United States Court of Appeals for the Third Circuit recently held that a plaintiff must allege more than just a misleading representation to prevail on a claim under the Fair Debt Collections Practices Act (FDCPA). Rather, a plaintiff must allege that the representation at issue was “material” in the sense that it would impact the decision-making process of the least sophisticated debtor.
In Jensen v. Pressler & Pressler, the attorneys for a debt collector, after obtaining a default judgment in a New Jersey state court against a debtor who failed to pay her credit card debt, served the debtor with a subpoena in aid of collection. Under the New Jersey rules, an attorney may issue a subpoena in the name of the clerk of the New Jersey Superior Court. When the attorneys prepared the subpoena, though, they mistakenly used the name of a person who was not – and never had been – a clerk of the Superior Court.
The debtor brought a putative class action in the United States District Court for the District of New Jersey alleging that the debt collector and its attorneys violated provisions of the FDCPA that prohibit those collecting debts from (a) using false, deceptive, or misleading representations to collect debts from a consumer, and (b) falsely representing that a document used to collect a debt is “authorized, issued or approved by any court …” The district court granted summary judgment in favor of the debt collector and its attorneys on the ground that the misidentification of the clerk was not a material false statement.
On appeal, the Third Circuit affirmed, joining the Fourth, Sixth, Seventh, and Ninth Circuits in holding that only material representations are actionable under the FDCPA. The Court began by noting that the “least sophisticated debtor” standard governs claims under the FDCPA. Under that standard, Courts “focus on whether a debt collector’s statement in a communication to a debtor would deceive or mislead the least sophisticated debtor.” Whether the statement at issue is literally true or false is not determinative. Rather, “debt collection communications must be assessed from the perspective of the least sophisticated consumer regardless of whether a communication is alleged to be false, misleading, or deceptive.” Therefore, the Court held, “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.”
Applying the materiality standard to the facts before it, the Court held that the misidentification of the clerk in the subpoena “could not possibly have affected the least sophisticated debtor’s ‘ability to make intelligent decisions.’” As for the debtor’s alternate argument – that, by misidentifying the clerk, the defendants violated the FDCPA by falsely representing that the subpoena was authorized by a court – the Third Circuit held that, because attorneys in New Jersey are authorized to act as agents of the clerk when issuing subpoenas, the subpoena was validly issued regardless of the misidentification of the clerk.
* Joshua Won, Temple University School of Law Class of 2017, assisted with the preparation of this post.