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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.

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WHAT'S WRONG WITH THIS DUNNING LETTER?

xxxxxxx
xxxxx COURT SQUARE
HATTIESBURG, MS 09567
June 16, 1995

Creditor: Memorial Hospital
$4000
Acct. No.388890-4

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.

Sincerely,

xxxxxxx
________________________________________________________________

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 5.7.1.1, 5.7.1.2, 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 5.7.1.3 (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 1991).

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 debt.

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 possibly (7)).

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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