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SD Fla. Holds No FDCPA Violation for Naming Payment Processor, Lender in Debt Validation Notice

The U.S. District Court for the Southern District of Florida recently granted summary judgment in favor of a defendant debt collector in a putative class action alleging violations of sections 1692g and 1692e of the federal Fair Debt Collection Practices Act (FDCPA), holding that the “debt validation notice” letter at issue was neither confusing nor misleading under the applicable least sophisticated consumer standard.

In so ruling, the Court held that naming the payment processing company with whom the consumer had dealt, as well as the bank that had actually issued the credit at issue, did not violate the FDCPA.

A copy of the opinion in Maximiliano v. Simm Associates, Inc. is available at:  Link to Opinion.

The plaintiff consumer sued a debt collector that sent him a demand letter, alleging that the letter failed to name the creditor to whom the debt was owed, and claiming abusive and misleading practices in supposed violation of FDCPA sections 1692g(a)(2) and 1692e.

The demand letter showed one entity as the “Client” on whose behalf the debt collector sent it, and another entity as the “Original Creditor.”

The “Client” was the credit-arm of a national Internet-based payments company that “allows consumers to make online purchases without using a credit card by offering an open-ended credit plan” from the entity listed as the “Original Creditor.”

The “Original Creditor” was a bank that offered the line of credit, but the product was branded on the “Client” company’s website with the name of the “Client.” In this case, the bank named as the “Original Creditor” was still the entity to whom the debt was currently owed.  Just like an ordinary credit card, the Original Creditor company paid the merchant for the consumer then looked to the consumer for repayment.

The plaintiff alleged that only by clicking through to a “FAQ” link could a consumer understand that the actual creditor providing the line of credit was the bank, not the website owner “Client.” Other “FAQ’s” and screens throughout the online application process mentioned only the “Client’s” name. The terms and conditions did, however, state that while the product was called by the “Client’s” name, the consumer’s agreement was with the bank.

The consumer made payments through the website or by mailing a check to the “Client” rather than the bank.

The debt collector moved for summary judgment, arguing that “the demand letter does not fail to name the creditor to whom the debt is owed under § 1692g(a)(2) and it does not otherwise contain any misleading or false statements in violation of § 1692e.”

The Court first explained the purpose of the FDCPA as eliminating “abusive debt collection practices to ensure that debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent state action in protecting consumers against debt collection abuses.” It then explained that “[i]n an FDCPA claim, a plaintiff must prove that: ‘(1) the plaintiff has been the object of collection activity arising from consumer debt; (2) the defendant is a debt collector as defined by the FDCPA; and (3) the defendant has engaged in an act or omission prohibited by the FDCPA.’”

Because the first two elements were undisputed, the only issue before the Court was whether the defendant debt collector “engaged in an act or omission that the FDCPA prohibits.”

The Court next explained the legal standard applied in evaluating FDCPA claims as requiring the Court to adopt “the ‘least sophisticated consumer’ perspective, which assumes the consumer ‘posses[es] a rudimentary amount of information about the world and a willingness to read a collection notice with some care.’ … Using this standard, the FDCPA protects ‘naïve consumers’ while at the same time ‘prevent[ing] liability for bizarre or idiosyncratic interpretations of collections notices by preserving a quotient of reasonableness.’”

The Court then addressed each claim.

As to the section 1692g claim, the Court rejected the plaintiff’s argument that the defendant debt collector violated this section because the demand letter failed to identify the “current creditor,” instead agreeing with the defendant that the letter disclosed the actual creditor — the bank — while also describing the “Client” as the party the consumer would recognize.

Reasoning that because when “[c]onfronted with whether a creditor’s identity was adequately disclosed under the FDCPA, the Eleventh Circuit recently held that ‘a debt collector may use the creditor’s full business name, the name under which the creditor usually transacts business, or a commonly used acronym[,]” the Court concluded that “from the perspective of the least sophisticated consumer receiving the demand letter at issue, [the defendant debt collector] identified the name under which [the bank] transacted business with [the “Client’s”] account holders, such as Plaintiff.”

The Court relied upon a 2015 Southern District of Florida case in which the creditor issued a “private-label” credit card that the plaintiff used to purchase tires. The demand letter listed the tire retailer/seller as the creditor instead of the card issuer, but the Court in that case granted summary judgment in the debt collector’s favor because the least sophisticated consumer would understand that the reference to the tire retailer meant that the debt collector was trying to recover the consumer’s debt arising from his or her purchase of tires.

Because the demand letter at issue “allowed the consumer to easily identify the nature of the debt by disclosing [the online payments company] as [the debt collector’s] client, [the bank] as the original creditor, the amount of the debt, and the [online payment company’s] account number[,]” it “left no room for confusion in the eyes of the least sophisticated consumer.”

The Court rejected the plaintiff’s argument that the debt collector violated section 1692g by not disclosing the name of the “current creditor” because “[n]owhere in §1692g is there a requirement that such verbiage be used.  All that is required is that the debt collector disclose the creditor to whom the debt is owed and … the Court finds that [the debt collector] adequately satisfied this requirement.”

Turning to the section 1692e claim, the Court reasoned that, because it had already found that “the demand letter adequately identified the creditor to whom the debt is owed” and under the case law only abusive and material misrepresentations or omissions are actionable rather than “mere technical falsehoods that mislead no one[,] … even accepting that there exists a hyper-technical FDCPA violation here, the Court’s review of the demand letter leads it to conclude that it is not material as there is nothing misleading about its content. There is nothing that would influence the consumer’s decision to pay the debt or otherwise cause an unsophisticated consumer to be concerned about paying the incorrect creditor.”

This was particularly true, the Court noted, because since the beginning of the relationship, the consumer dealt only with the “Client” online payment provider, not the bank. “For that reason, the least sophisticated consumer receiving the letter at issue would not be concerned about the possibility of being defrauded or paying the incorrect creditor.”

Because the letter was “neither confusing or misleading to the least sophisticated consumer[,] … the Court [found] as a matter of law that there does not exist a violation of § 1692g.”

The Court accordingly granted the defendant debt collector’s motion for summary judgment.

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Hector Lora has substantial experience in all phases of complex commercial litigation, including motion practice, written discovery, depositions, mediations, bench and jury trials, and appellate practice. For more than a decade, his practice has focused extensively on the defense of civil enforcement actions filed by the FTC, as well as real estate litigation, and contested mortgage and condominium lien foreclosures and foreclosure of security interests under UCC Article 9. Hector also has substantial experience in advising a variety of types of businesses regarding their compliance with applicable federal and state laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida.

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