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False Representation Must be Material to Violate FDCPA, Eighth Circuit Rules

The U.S. Court of Appeals for the Eighth Circuit recently ruled that a debtor must show that a debt collector's alleged false representation was material for it to be a "false, deceptive, or misleading representation" in violation of the Fair Debt Collection Practices Act (FDCPA). In applying a materiality standard to alleged violations of FDCPA Section 1692e, the Eighth Circuit joined the U.S. Courts of Appeal for the Third, Fourth, Sixth, Seventh, and Ninth Circuits.

In Hill v. Accounts Receivable Services, LLC, the defendant had sued the plaintiff in state court seeking payment of an unpaid medical debt that the medical services provider had assigned to the defendant. During a hearing before a state conciliation court, the plaintiff challenged the authenticity of the documents submitted by the defendant purporting to document the assignment. The conciliation court ruled in the plaintiff's favor, finding that the defendant had not shown an entitlement to relief.

The plaintiff then sued the defendant in federal district court, alleging that the defendant had violated FDCPA Section 1692e, which prohibits a debt collector's use of "any false, deceptive, or misleading representation" to collect a debt, including a "threat to take any action that cannot be legally taken or that is not intended to be taken." According to the plaintiff, the defendant violated Section 1692e by making false statements in the documents it submitted to the conciliation court. In addition, because the defendant lacked authentic documentation to establish ownership of the debt, the plaintiff claimed that defendant's state court lawsuit itself was a "threat to take action that cannot be legally taken" in violation of Section 1692e.

The plaintiff also alleged that the defendant had engaged in unfair practices in violation of FDCPA Section 1692f, which prohibits a debt collector from using "unfair or unconscionable means" to collect a debt. The district court granted the defendant’s motion for judgment on the pleadings and dismissed the plaintiff's complaint.

In affirming the district court, the Eighth Circuit observed that the plaintiff did not "deny that his family received medical care from [the provider] or that [the provider] assigned the debt to [the defendant]."Citing its own 2012 decision that "explained that a debt collector's loss of a collection action—standing alone—does not establish a violation of the [FDCPA by having brought 'an action that cannot legally be taken,']" the Eighth Circuit ruled that the defendant's "inadequate documentation of the assignment did not constitute a materially false representation, and the other inaccuracies in the exhibits are not material." In support of that ruling, the Eighth Circuit cited a 2009 Seventh Circuit decision that stated that the FDCPA's purpose is to help consumers make intelligent choices and that "immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect)."

The defendant had also alleged that the defendant's claim in its state court lawsuit for statutory interest under Minnesota law violated FDCPA Section 1692f's prohibition of the use of "unfair or unconscionable means" to collect a debt. Under Section 1692f, such means include "the collection of any amount…unless such amount is expressly authorized by the agreement creating the debt or permitted by law." The Eighth Circuit observed that the Minnesota Supreme Court had not yet decided whether the defendant would be entitled to pre-verdict interest under the Minnesota statute it had relied on for its statutory interest claim and that the statute did not prohibit the defendant from recovering such interest. According to the court, "the fact that [the plaintiff] may have had a valid legal defense to the application of the statute does not mean that [the defendant] attempted to collect interest that is not permitted by law."

Copyright © by Ballard Spahr LLPNational Law Review, Volume VIII, Number 124


About this Author

Kaplinksy, partner, New York, finance

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

Christoper Willis, Partner, Ballard Spahr law firm, Consumer Financial Services Litigation attorney

Christopher J. Willis is Practice Leader of the firm's Consumer Financial Services Litigation Group. He devotes his practice to assisting financial services institutions facing government investigations and examinations, counseling them on fair lending risk and compliance assessments, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Mr. Willis also chairs the firm's Fair Lending Task Force. His clients span the financial services industry and include banks and non-banks, mortgage banking lenders and servicers, debt collectors and buyers, third-party service providers, student lenders and servicers, and auto finance companies.

Stefanie Jackman, Ballard Spahr law firm, Partner, financial services institutions lawyer

Stefanie H. Jackman devotes her practice to assisting financial services institutions facing government investigations and enforcement actions, as well as defending them in individual and class action lawsuits. Ms. Jackman regularly handles matters arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA. Ms. Jackman represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party...

Culhane, Ballard, Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing,...