Under The FDCPA, A Threat To Take Illegal Action May Be So Clear That A Plaintiff Need Not Present Extrinsic Evidence That An Unsophisticated Consumer Would Interpret It So
RUTH v. TRIUMPH PARTNERSHIPS (August 17, 2009)
Triumph Partnerships purchases defaulted debt. Its sister company, Triumph Asset Services ("TAS"), is a debt collection agency. In early 2006, TAS sent letters out to a number of individuals who owed debts purchased by Triumph. The letter notified the recipient that Triumph had purchased the debt and that TAS was attempting to collect it. Sent with the notice was a separate document from Triumph stating that it collected and could share certain information about the debtor. It also provided an opportunity for the debtor to “opt out,” or instruct Triumph not to share certain information. Alice Ruth was one of the recipients of the letter. Ruth brought a class action against Triumph and TAS, alleging that the mailing violated the Fair Debt Collection Practices Act ("FDCPA") in that it made a false statement in connection with the collection of a debt and threatened to take illegal action. The district court granted summary judgment to the defendants, concluding that Ruth was required to present extrinsic evidence to prove that an unsophisticated debtor would consider the notice a communication in connection with the collection of a debt and would view it as a threat to take illegal action. Ruth appeals.
In their opinion, Judges Ripple, Sykes and Lawrence reversed and remanded. The Court first addressed Triumph's argument that it was not a "debt collector" and therefore not subject to the FDCPA. Citing its recent McKinney decision, the Court rejected that argument. Under McKinney (see my earlier post), the FDCPA status of a party that attempts to collect a debt that it acquired from another party depends on whether the debt was in default at the time it was acquired. Since the debts here were in default at the time they were acquired by Triumph, Triumph is a debt collector. The Court moved to the heart of the matter -- whether the mailing violated the FDCPA as a matter of law. The FDCPA violation has two elements -- the notice had to be sent "in connection with the collection of any debt" and the notice had to be false, misleading or had to threaten to take an illegal action. With respect to the "in connection with" element, the Court concluded, in a matter of first impression, that the standard is an objective one and need not be proven by extrinsic evidence. On the facts of the case, the Court stated that any reasonable fact finder would conclude that the notice was sent in connection with the attempt to collect a debt. With respect to the false/deceptive/illegal action element, the Court stated that Ruth must do more than prove a false statement -- she must prove that the statement would mislead or deceive an unsophisticated consumer. She need not, however, offer extrinsic evidence on that point in every case. Extrinsic evidence is required in those situations where the statement is possibly misleading or deceptive. Here, the Court concluded that a consumer could reach only one reasonable conclusion -- that the defendants claimed a right to disclose certain information. Since the defendants conceded that such a sharing, without consent, would have violated the FDCPA, the notice was an illegal threat as a matter of law. Finally, the Court had to address defendants' bona fide error defense. That defense protects a debt collector from liability when a violation is unintentional, is the result of a bona fide error and occurs notwithstanding the defendant's maintenance of reasonable procedures to avoid the error. That Court concluded that the defense is available for errors of law, if at all, when the debt collector relies on the opinion of an attorney or other expert in the field. Although Triumph claimed it relied on a pamphlet prepared by an attorney, the Court concluded that that was well short of the "reasonable procedures" required by the FDCPA.
