Plaintiffs have won one in the ongoing litigation wars over whether the identity of the original creditors in debt collection letters is material, and hence should be included.
On January 2, the United States District Court for the District of Utah granted summary judgment in favor of the plaintiffs-debtors, finding that the defendant-debt collector committed a “material” violation of the Fair Debt Collection Practices Act by failing to identify the plaintiffs’ original creditors in an “IQ letter,” listing the total amount owed by the plaintiffs for multiple accounts. The Court also denied the defendant’s motion for summary judgment on the bona fide error defense, finding a genuine dispute of material fact exists as to whether the debt collector implemented procedures to avoid the error alleged.
In Moore v. Express Recovery Service, Inc., the plaintiffs–debtors alleged that Express Recovery Service, Inc. (“ERS”), a debt collector, used false or deceptive means to collect a debt in violation of § 1692e(10) of the FDCPA by failing to disclose the names of the plaintiffs’ original creditors on an IQ letter. The parties filed cross-motions for summary judgment on two issues: (1) whether the alleged violation is “material,” and thus actionable, under the FDCPA, and (2) even if material, whether ERS’ bona fide error defense precludes liability.
First, the Court held that ERS’ failure to name the plaintiffs’ creditors in the IQ letter “amounts to a material violation of the FDCPA” because it could mislead the “least sophisticated debtor.” While the Tenth Circuit has not directly addressed the materiality requirement, the Third, Seventh, and Ninth circuits have held that a violation must be “material” to be actionable under § 1692e – i.e., a mere technicality is not enough. In quoting Jensen v. Pressler & Pressler, 791 F.3d 413, 421 (3rd Cir. 2015)), the Moore Court reasoned that a statement “is material if it is capable of influencing the decision of the least sophisticated debtor.”
Following these circuits, the Court held that the letter could mislead the least sophisticated debtor because he would not be able to verify the debt or amount owed without the original creditors’ names. The Court also rejected ERS’ argument that the alleged violation could not be material because the plaintiffs knew the identity of the original creditors and had spoken with ERS regarding the accounts the day before the IQ letter was mailed, emphasizing that the least sophisticated debtor is an objective – not subjective – standard. In other words, under the FDCPA, it makes no difference whether the plaintiffs were actually misled (or not).
Second, the Court rejected ERS’ bona fide error defense to liability under the FDCPA, finding a dispute of fact exists as to whether ERS maintained procedures reasonably adapted to avoid the error alleged. The Court held that testimony from ERS’ corporate representative was not enough to prove, as a matter of law, that ERS “maintained” such procedures (i.e., “actually employed or implemented” them) because the representative could not provide an explanation for the error, nor point to written policies.