A debt collector sent a letter to a consumer stating: “We can’t change the past, but we can help with your future.” The letter contained three payment options that were described as “discounts,” though one was merely a payment plan for the full balance. The letter advised “[i]f you pay your full balance, we will report your account as Paid in Full. If you pay less than your full balance, we will report your account as Paid in Full for less than the full balance.”
The consumer filed a complaint in the U.S. District Court for the Eastern District of Pennsylvania alleging the letter was false, deceptive, and misleading in violation of § 1692e of the federal Fair Debt Collection Practices Act. The trial court granted the debt collector’s motion to dismiss after determining the letter was not confusing or misleading.
On appeal before the U.S. Court of Appeals for the Third Circuit, the consumer argued the phrase “We can’t change the past, but we can help with your future” was a false and deceptive promise of financial benefit because it could be interpreted to mean, inaccurately, that reporting a payment to a credit reporting agency would improve her credit score. While the Court noted that “this might not be the most appropriate reading of the Letter,” it agreed it could be so read by the least-sophisticated consumer.
A copy of the decision in Knight v. Midland Credit Mgmt. is available here: Link to Opinion.
The consumer also contended the letter was false, deceptive, and misleading because it was unclear whether “we will report your account” meant it would be reported to the original creditor, the credit reporting agencies or both. The Court did not find this interpretation to be “bizarre or idiosyncratic,” particularly given the prominent listing of the original creditor in the letter.
The Court also agreed with the consumer that “the letter could be misleading as to when a debtor’s account will be reported as ‘Paid in Full’ or ‘Paid in Full for less than the full balance’ because all three of the options were described as “discounts.” Thus, a least sophisticated consumer could reasonably believe the payment plan option was, instead, a settlement option.
Finally, the consumer argued using “Paid in Full” in conjunction with “Paid in Full for less than the full balance” was misleading. The Court again sided with the consumer, explaining that without clarifying language it was unclear that the reporting statuses were different, especially considering the capitalization of “Paid in Full” used in both phrases.
This case demonstrates just how carefully all letters must be reviewed to ensure there are no inadvertent inaccuracies or double meanings when read in a hyper-technical fashion.