WHAT'S WRONG WITH THIS DUNNING LETTER?
xxxxx COURT SQUARE
HATTIESBURG, MS 09567
June 16, 1995
Creditor: Memorial Hospital
Dear Mr. and Mrs. Adams:
AS OF THIS DATE YOU HAVE NOT RESPONDED TO OUR EFFORTS TO RESOLVE PAYMENT
OF THE ABOVE CAPTIONED DEBT ON A VOLUNTARY BASIS. THEREFORE, BE ADVISED,
THIS LAW FIRM HAS PREPARED A LAWSUIT ON BEHALF OF OUR CLIENT, WHICH WILL
BE FILED AGAINST YOU EXACTLY FIVE (5) DAYS FROM THE DATE OF THIS LETTER
IF WE HAVE NOT HEARD FROM YOU WITHIN THAT PERIOD OF TIME. THE COSTS OF
THE LAWSUIT WILL BE CHARGED TO YOU, ALONG WITH STATUTORY INTEREST. ONCE
JUDGMENT HAS BEEN ENTERED, IT IS OUR INTENT TO PROCEED WITH COURT
ORDERED ATTACHMENT AND GARNISHMENT OF ALL WAGES, PROPERTY, AND OTHER
FINANCIAL ASSETS, ALL AT ADDITIONAL EXPENSE TO YOU.
Deceptive Statements or Threats are Common FDCPA Violations
The federal Fair Debt Collection Practices Act (FDCPA) provides that
"[a] debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any debt.
.". 15 U.S.C. 1692e. Yet deceptive threats are among the most common
violations of the FDCPA.
Deception Standards Developed Under the Federal Trade Commission Act
This FDCPA section borrows the legal concept of deception from the FTC
Act. 15 U.S.C. 45. Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th
Cir. 1985). See also Baker v. G.C. Services Corp., 677 F.2d 775, 778
(9th Cir. 1982); National Consumer Law Center, Fair Debt Collection
126.96.36.199, 188.8.131.52, Ch. 8 (Boston: NCLC 1991 & 1994 Supp) (using FTC law
for private action and complaints). Courts construing this section
should find decisions and principles of construction under the FTC Act
persuasive. The proscription of deception developed by the FTC and the
courts since deception was prohibited by the FTC Act in 1938 is quite
broad and approaches a requirement of merchants of honest openness and
truthful frankness when dealing with consumers.
Many of the elements of common law fraud are irrelevant to an action for
deception. There is no requirement that an intent to deceive be
established. National Consumer Law Center, Unfair and Deceptive Acts
and Practices 4.2.4 (Boston: NCLC 1991). Knowledge of a statement's
falsity is not a necessary element to establish deception. National
Consumer Law Center, Fair Debt Collection 4.2.5 (2d ed. 1991 and
Supp.). Good faith is not a defense. National Consumer Law Center,
Fair Debt Collection 4.2.6 (Boston: NCLC 1991 and Supp.). But cf. Id.
7.5. The fact that a practice is customary does not prevent it from
being deceptive. National Consumer Law Center, Unfair and Deceptive
Acts and Practices 4.2.8 (Boston: NCLC 1991).
The "capacity" or "tendency" to deceive is sufficient so that actual
deception need not be shown except to establish damages. Id. 4.2.9.
See also National Consumer Law Center, Fair Debt Collection 184.108.40.206
(Boston: NCLC 1991 and Supp.). Thus "puffing" is not a defense unless
the deception has no capacity to deceive. National Consumer Law Center,
Unfair and Deceptive Acts and Practices 4.2.9 (Boston: NCLC 1991).
The concept of deception protects even the ignorant, unthinking and the
credulous, least sophisticated consumer. Id. 4.2.11. See also Jeter
v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir. 1985); National
Consumer Law Center, Fair Debt Collection 5.1, 5.7.3 (Boston: NCLC
1991 and Supp.). The materiality of the deception may be inferred,
and showing detrimental reliance is unnecessary. National Consumer Law
Center, Unfair and Deceptive Acts and Practices 4.2.12 (Boston: NCLC
Truth is not a defense to a claim of deception. Literally true
statements, partial truths, and ambiguous statements are deceptive if
the statement is subject to an interpretation or contains an implication
with the capacity to deceive. Id. 4.2.13; Tashof v. FTC, 437 F.2d 707
(D.C. Cir. 1970) (representation of "easy credit" deceptive, where
seller extended credit liberally but regularly used harsh collection
tactics, including garnishment); Sunshine Art Studios, Inc. v. FTC, 481
F.2d 1171 (1st Cir. 1973) (use of name of shell corporation deceptively
created false impression that a third party collector was involved).
The failure to disclose information is deceptive if necessary
qualifications are not made, material information is omitted or the
disclosures made are too inconspicuous. National Consumer Law Center,
Unfair and Deceptive Acts and Practices 4.2.14 (Boston: NCLC 1991);
Simeon Management Corp. v. FTC, 579 F.2d 1137 (9th Cir. 1978) (weight
loss clinic's ads deceptive although they contained no false facts but
did not disclose that the injection of a drug found not safe and
effective for obesity was part of clinic's program); Tashof v. FTC, 437
F.2d 707 (D.C. Cir. 1970) (failure to disclose credit charges and terms
in contracts); J.B. Williams Co. v. FTC, 881 F.2d 884 (6th Cir. 1967)
(Geritol ads must disclose that iron deficiency anemia is not the cause
of most tiredness); Benrus Watch Co. v. FTC, 352 F.2d 313 (8th Cir.
1965), cert. denied, 384 U.S. 939 (1966) (representing "fully
guaranteed" or "guaranteed" watch without conspicuously disclosing $1.00
service charge is deceptive); Brite Mfg. Co. v. FTC, 347 F.2d 477 (D.C.
Cir. 1965) (failure to conspicuously disclose foreign origin of
watchbands deceptive); Waltham Watch Co. v. FTC, 318 F.2d 28 (7th Cir.),
cert. denied, 375 U.S. 944 (1963) (deceptive to fail to disclose that
Waltham clocks are no longer manufactured by Waltham Watch Co. and to
not disclose the country of origin); Bice v. Merchants Adjustment
Service, Clearinghouse No. 41,265 (S.D.Ala. 1985) (deceptive not to
disclose exemption when threatening execution on personal property).
See also Anderson, FTC Informal Staff Letter (Nov. 18, 1988). But cf.
Sakuma v. First Nat'l Credit Bureau, Clearinghouse No. 45,756 (D.Hawaii
1989) (collector not required to make a disclaimer about its lack of
license in the consumer's state and its inability to collect there).
The FDCPA Deception Standard Builds on FTC Act
The FDCPA standard of deception builds on the FTC Act standard existing
at the time the FDCPA was enacted. Jeter v. Credit Bureau, Inc., 760
F.2d 1168 (11th Cir. 1985); Baker v. G.C. Services Corp., 677 F.2d 775,
778 (9th Cir. 1982). The FDCPA was intended to protect the
unsophisticated consumer from statements with a capacity to deceive.
Id.; National Consumer Law Center, Fair Debt Collection 5.1 (Boston:
NCLC 1991 and Supp.). See also Crossley v. Lieberman, 90 B.R. 682 (E.D.
Pa. 1988) ("The rules of the game have changed. An attorney pursuing a
debtor . . . is required to be truthful"); Henderson v. Credit Bureau,
Inc., Clearinghouse No. 45,349 (W.D.N.Y. 1989); Rosa v. Gaynor, 784 F.
Supp. 1 (D.Conn. 1989) ("The FDCPA does not distinguish among debtors
determining that only those with a certain amount of education or a
certain knowledge of commercial or legal practices are worthy of
protection."); Johnson v. Statewide Collections, Inc., 778 P.2d 93 (Wyo.
1989) (least sophisticated consumer is standard).
Violations of this section need not be intentional to be actionable,
although the Act, see 15 U.S.C. 1692k(c) discussed in National
Consumer Law Center, Fair Debt Collection 6.11.1 (Boston: NCLC 1991
and Supp.), see also Littles v. Lieberman, 90 B.R. 700 (E.D. Pa. 1988)
(statutory damages of $100.00 appropriate where the collector was
careless and his knowledge was imputed), provides a complete defense to
a collector for unintentional errors in certain situations. The FDCPA
is generally written as a strict liability statute, see National
Consumer Law Center, Fair Debt Collection 5.1.1 (Boston: NCLC 1991 and
Supp.), although some courts have balked at this approach. See text
accompanying National Consumer Law Center, Fair Debt Collection notes
389.1 to 389.7 (Boston: NCLC 1991 and Supp.). 15 U.S.C. 1692e(10),
discussed in Id. 5.7.12., explicitly includes "attempts" to collect a
Proof of detrimental reliance or of actual damage is not required to
establish liability for statutory damages, e.g., Jeter v. Credit Bureau,
Inc., 760 F.2d 1168 (11th Cir. 1985) (actual deception of plaintiff
relevant to damages but not liability), but cf. Miller v. Mikell, 17
Clearinghouse Rev. 585 (No. 34,362) (N.D.Ill. 1982) (upon denying the
collector's motion for summary judgment, court stated that whether the
consumers were deceived or relied upon the communication are remaining
material factual questions), but proof that the deception caused damage
would be required to recover actual damages. The misrepresentation need
not be a factual one, but may be a misrepresentation of the consumer's
legal rights. Juras v. Aman Collection Service, Inc., 829 F.2d 739 (9th
Cir. 1987) (misrepresenting state university's legal rights and
obligations to withhold student transcripts); Prillerman v. Weltman,
Weinberg & Assocs., Clearinghouse No. 42,629, 21 Clearinghouse Rev. 507
(N.D. Ohio 1987) (consent decree) (collection law firm agreed to provide
additional notice of exemptions and not misrepresent the rights of
judgment debtors to property exempt from levy); West v. Costen, 558 F.
Supp. 564 (W.D.Va. 1983) (collector violated 15 U.S.C. 1692e(2)(A) &
(B) by attempting to collect an illegal $15 service charge on bad checks
without disclosing that the charge had been added to the amount demanded
and by implying the charge was lawful); FTC Official Staff Commentary
807(10), 4, discussed in National Consumer Law Center, Fair Debt
Collection 3.2.5 (Boston: NCLC 1991 and Supp.) supra [reprinted in Id.
Appx. J]. See also Michael, FTC Informal Staff Letter (Sept. 22, 1988)
(letter overstating a consumer's liability under a dishonored check
statute may be deceptive under 15 U.S.C. 1692e(2) & (10), and
An Objective Standard of Deception Is Applied to Protect the
Unsophisticated Consumer or Debtor
The courts apply an objective standard of deception, the "least
sophisticated" or "unsophisticated" consumer standard, so that proof of
actual deception is neither required nor relevant to the determination
of a collector's liability. Swanson v. Southern Oregon Credit Service,
869 F.2d 1222, 1225-28 (9th Cir. 1988); Jeter v. Credit Bur., Inc., 760
F.2d 1168, 1172-75 (11th Cir. 1985); Baker v. G.C. Services Corp., 677
F.2d 775, 778 (9th Cir. 1982); Johnson v. Eaton, 873 F.Supp. 1019 (M.D.
La. 1995); Dutton v. Wolhar, 809 F.Supp. 1130 (D.Del. 1992); Beattie
v. D.M. Collections, Inc., 745 F.Supp. 383, 392 (D.Del. 1991); Kimber
v. Federal Financial Corp., 668 F. Supp. 1480, 1486-87 (M.D.Ala. 1987);
United States v. Central Adjustment Bureau, Inc., 667 F.Supp. 370, 375
(N.D. Tex. 1986), aff'd on other grounds, 823 F.2d 880 (5th Cir. 1987).
For a discussion of the courts early disagreement on the applicable
standard, see Annot., What Constitutes False, Deceptive, or Misleading
Representation or Means in Connection with Collection of Debt Proscribed
by Provisions of Fair Debt Collection Practices Act (15 U.S.C.
1692(e)), 67 A.L.R. Fed. 974 (1984).
The U.S. Court of Appeals for the Eleventh Circuit in Jeter v. Credit
Bureau, Inc., 760 F.2d 1168 (11th Cir. 1985), expressly rejected the
standard employed by the district court, see also Blackwell v.
Professional Business Servs., 526 F.Supp. 535 (N.D. Ga. 1981), of
whether a reasonable consumer would be mislead or deceived, and applied
the "least sophisticated consumer" standard to the deception analysis,
760 F.2d at 1177, utilizing the FTC standard. Id. at 1172-75. It
reasoned that that Congress' intent in enacting the FDCPA -- as
explicitly stated at 15 U.S.C. 1692(a) & (b) and as found in the Act's
legislative history -- was to strengthen the federal protections for
consumers. It would thwart this legislative intent to adopt a less
protective standard for the FDCPA than the FTC Act. As more recently
explained in Clomon v. Jackson, "The basic purpose of the least-
sophisticated consumer standard is to ensure that the FDCPA protects all
consumers, the gullible as well as the shrewd." 988 F.2d 1314 (2d Cir.
1993). See also Bentley v. Great Lakes Collection Bureau, 6 F.3d 60 (2d
Cir. 1993); Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d
1222 (9th Cir. 1988).
The Seventh Circuit has adopted essentially the same standard, but
relabelled it (on grammatical grounds) the "unsophisticated consumer
standard." Gammon v. GC Services, 27 F.3d 1254 (7th Cir. 1994) (debt
collector's written statement that: "We provide the systems used by a
major branch of the federal government and various state governments. .
. . You must surely know the problems you will face later if you do not
pay," was sufficient to provide the basis for a claim upon which relief
could be granted under 15 U.S.C. 1692e). See Vaughn v. CSC Credit
Services, Inc., 1995 WL 51402 (N.D.Ill. 1995). One district court
applying the unsophisticated consumer standard has held that it is
substantially the same as the least sophisticated consumer test. Avila
v. Van Ru Credit Corp., 1995 WL 55255 (N.D. Ill. 1995).
Deception in the Specific Letter
In the June 16 letter at the beginning of this article, it was deceptive
to threaten suit in five days when in fact suit was not filed for two
months, and suit was not intended at time it was threatened. The
threats of garnishment and attachment misrepresented those remedies by
not mentioning exemptions that protect wages and other property from
seizure and by suggesting that the loss of all property was inevitable.
Oglesby v. Rotche, 1993 WL460841 (N.D.Ill. 1993).
There are hundreds of decisions under the FDCPA considering the
deceptiveness of statements in dunning letters, and nearly all of the
decisions are favorable to the consumer advancing the claim. See
National Consumer Law Center, Fair Debt Collection Appx.H.2.4. (Boston:
NCLC 1991 and Supp.) This should be one of the primary areas of inquiry
and analysis for lawyers in this area.
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