In Hopkins v. Collecto, Inc., the Third Circuit Court of Appeals affirmed the dismissal of a putative class-action complaint, alleging that by itemizing interest and collection fees for a “static debt,” the letter violated the Fair Debt Collection Practices Act (FDCPA) by falsely implying that interest and fees could accrue and thereby increase the amount of the debt over time.

After Randy Hopkins allegedly failed to pay a bill, the account was referred to collections. The debt collector sent Hopkins a letter that itemized the principal balance, interest, fees and collection costs, and a total balance due. The letter identified interest and collection costs as “$0.00” for each, leaving the total balance the same as the principal.

Hopkins sued, arguing that because the bill was a “static debt,” it could not or it was not intended to accrue interest or collection fees over time, and thus the letter was false or misleading in violation of Section 1692e of the FDCPA. The District of New Jersey dismissed, stating that it neither “leave[s] the least sophisticated consumer in doubt of the nature and legal status of the underlying debt” nor “impede[s] the consumer’s ability to respond or dispute collection.”

In assessing the case under both the “unsophisticated debtor” and the “least sophisticated debtor” standards, the Third Circuit noted that they were “functionally equivalent” and affirmed. See also Jensen v. Pressler & Pressler, 791 F.3d 413, 419 (3d Cir. 2015) (“sometimes referred to as the ‘least sophisticated consumer’ or ‘unsophisticated debtor’ standard”).

The court first reviewed cases from the Fifth and Seventh circuits, where similar collection letters were sent and noted that the letters “spoke only about the past and thus was not misleading about the future when it listed a debt as including $0.00 in interest and fees.” The court rejected Hopkins argument that the “unsophisticated debtor” standard is not as forgiving as the “least sophisticated debtor,” and it noted that the First, Fifth, and Seventh circuits analyze FDCPA claims from a similar vantage.

The court also stated it would affirm even if it were confined to the “least sophisticated debtor” standard. Under Third Circuit case law, the “least sophisticated debtor,” although gullible, “does not subscribe to bizarre or idiosyncratic interpretations of collection notices.” The Third Circuit approved the district court’s reliance of Second Circuit decisions that determined the “least sophisticated consumer” would not be misled by a dunning letter listing interest and charges as separate line items, even though the amounts accrued explicitly reflect $0.00.

As previously reported, the Consumer Financial Protection Bureau (CFPB) filed an amicus brief in support of the debt collector and warned that adopting Hopkins’ argument could result in discouraging debt collectors from providing accurate itemizations, adding that the CFPB has, in fact, proposed requiring collectors to itemize interest and fees that compromise a debt. The Third Circuit noted that the CFPB promulgating Regulation F seemingly condoned itemizing interest and fees in the manner that the debt collector had done.

This decision may be the nail in the coffin for claims based on letter itemizations with $0.00 balances. It also confirms that courts will assume that even the “least sophisticated debtor” will be deemed to possess a “quotient of reasonableness” consistent with a “willingness to read with care.” Further, it confirms that practitioners can look to persuasive authority from other circuits assessing FDCPA claims under the “least sophisticated consumer,” “least sophisticated debtor,” or “unsophisticated debtor” standards.