United States District Court, E.D. Pennsylvania
Fair Debt Collection Practices Act prohibits a debt collector
from using false, deceptive, or misleading representations in
collecting a debt. The Act also prohibits unfair or
unconscionable means to collect or attempt to collect a debt.
To protect consumers, we evaluate the clarity of debt
collection communications from the prospective of the
"least sophisticated debtor." But we also presume a
debtor with a basic level of understanding who has read the
communication with care. A debtor cannot fabricate or imagine
misleading permutations of clear representations. A debt
collector could never communicate if it needed to eliminate
all attenuated permutations and imagined ambiguities in its
debt collection letter. The goal is to communicate clearly so
the debtor understands her debt and how to resolve the debt.
After careful review of the debt collection letter challenged
by a debtor today, we grant the debt collector's motion
to dismiss in part without prejudice for the debtor to timely
file a third amended complaint under Fed. R.
Civ. P. 11.
Knight allegedly owed $944.08 on a personal credit card
issued by Capital One Bank, N.A. Midland Credit Management,
Inc. sent a letter to Ms. Knight attempting to resolve her
outstanding account balance by offering her three options: a
discount of either 40% or 20% or a monthly installment
payment plan. The top of the letter reads "Did y u
forg t somethi g?" in large print. Ms. Knight's
Midland current account balance is listed directly
below. The letter also lists the name of Ms.
Knight's original creditor, Capital One, her original
Capital One account number, and the name of the current owner
of the account, Midland Funding, LLC.
middle section of Midland Credit's letter is titled,
"We can't change the past, but we can help with your
Credit then advised Ms. Knight to "KNOW YOUR
OPTIONS." Option 1 offers Ms. Knight a 40% discount
off her current balance with a payment due date on August 19,
2016. Option 2 offers Ms. Knight a discount of
20% and requires payments to be made over a six month
period. Option 3 offers a monthly installment
payment plan with payments as low as $50 per
month. Option 3 does not offer a percentage
discount off Ms. Knight's current balance.
Credit encouraged Ms. Knight to call to accept one of three
payment options offered in the letter. Midland
Credit highlights one of the three options, a 40% discount
off Ms. Knight's current balance. The section
concludes with Midland Credit explaining, "After
receiving your final payment, we will consider the account
paid.*"The asterisk directs Ms. Knight to the
bottom of the letter where Midland Credit explains, "If
you pay your full balance, we will report your balance as
Paid in Full. If you pay less than your full balance, we will
report your account as Paid in Full for less than the full
Knight now sues Midland Credit claiming its letter is false,
deceptive, and misleading, and violates § 1692e(10) of
Credit moves to dismiss Ms. Knight's Second Amended
Complaint. Midland Credit argues its letter is not
misleading or deceptive to the "least sophisticated
debtor." We grant Midland Credit's motion to dismiss
because Ms. Knight fails to state a claim under the Act.
dismiss Ms. Knight's § 1692e(10) claim for failing
to state a claim.
Knight claims Midland Credit's letter violated §
1692e(10) because the letter is false, deceptive, and
misleading. Ms. Knight claims the use of the word
"report" is ambiguous as to who Midland Credit will
report her account status. Ms. Knight claims the letter is
ambiguous because it is unclear when Ms. Knight's debt
would be categorized "Paid in Full" or "Paid
in Full for less than the full balance." Ms. Knight
claims the term "Paid in Full for less than full
balance" is confusing. Ms. Knight also claims the
language "We can't change the past, but we can help
with your future" is false and misleading. Midland
Credit argues its letter is not false, deceptive, or
misleading to the "least sophisticated debtor."
prohibits the use of deception in the debt-collection
process. Section 1692e(10) prohibits "[t]he
use of any false representation or deceptive means to collect
or attempt to collect any debt or to obtain information
concerning a consumer." Communications potentially
giving rise to claims under the Act are analyzed from the
perspective of the "least sophisticated
debtor." This standard is lower than the standard
of a reasonable debtor. "A communication that would not
deceive or mislead a reasonable debtor might still deceive or
mislead the least sophisticated debtor." Although the
"least sophisticated debtor" standard is a low
standard, it "prevents liability for bizarre or
idiosyncratic interpretations of collection notices by
preserving a quotient of reasonableness and presuming a basic
level of understanding and willingness to read with
care." The least sophisticated debtor must read
a debt collection notice in its entirety. "A debt
collection letter is deceptive where it can be reasonably
read to have two or more different meanings, one of which is
inaccurate." Whether a communication violates the Act
is a question of law.
Midland Credit's use of the word "report" is
not false, deceptive, or misleading.
Knight claims the word "report" is ambiguous as to
who Midland Credit will report her account status at the time
of her final payment. Ms. Knight claims "report"
could mean Midland Credit will report the information to her
original creditor, a credit reporting agency, or both. Ms.
Knight claims this confusion is material because it affects
the consumer's decision of whether to pay off the debt.
Ms. Knight explains "one consumer may not be worried
whether Capital One Bank learns of payment because the
consumer does not intend to do business with this bank again,
while another consumer may so intend." Midland
Credit argues when the letter is read in its entirety,
"report" clearly means reporting account
information to credit reporting agencies.
Credit sent Ms. Knight the letter in an attempt to encourage
her to make payments on her Capital One debt. Depending on
Ms. Knight's payment selection, Midland Credit explained
it would report her account as "Paid in Full" or
"less than the full balance." Read in context, it
would be a "bizarre and idiosyncratic
interpretation" to conclude Midland Credit would report
the satisfaction of Ms. Knight's debt to anyone other
than a credit reporting agency. Even the "least
sophisticated debtor" understands outstanding debts and
payments on those debts impact a debtor's credit report.
Ms. Knight's argument a debtor may be more or less
inclined to pay a debt depending on whether a report is sent
to a creditor or credit reporting agency is entirely
speculative. We have no basis, and Ms. Knight offers none, to
find a debtor would more likely pay a bill based on who she
pays. In an era of general awareness of credit scores,
including nationally broadcast advertising and applications
for mobile devices providing instantaneous credit scores, we
have no reason to find the recipient of a paid bill will make
a difference. This is not a decision as to whether to pay
cash to one handyman vendor over another hoping one will come
back the next time you need help. Ms. Knight is facing a
credit card debt to Capital One. In this context, the least
sophisticated debtor standard recognizes the recipient of the
payment will report the payment for credit purposes. Ms.
Knight's challenge to the word "report" fails.
Midland Credit describes when Ms. Knight's debt will be
reported "Paid in Full" or "Paid in Full for
less than the full balance."
Knight argues Midland Credit's letter is false,
deceptive, and misleading because it is ambiguous when her
account will be reported as "Paid in Full" or
"Paid in Full for less than the full amount."
Midland Credit argues its letter is clear as to which payment
options allow Ms. Knight to settle her debt by paying less
than her full account balance and which option requires Ms.
Knight to pay her full account balance. We agree with Midland
collection letter which offers a debtor the chance to settle
debts by paying less than the full account balance and offers
to report such discounted settlements as paid in full is
misleading. In Michael, the plaintiff
received a debt collection letter which stated he could
settle his debt by paying an amount less than the full
balance, and this payment would be considered settlement in
full for the accounts. The plaintiff claimed this statement
was false and misleading as debts settled for less than the
full amount are reported to credit bureaus as settled for
less than the full amount. The court found the plaintiffs
allegation sufficient to survive dismissal.
the letter in Michael, Midland Credit's letter
clearly and correctly distinguishes when a debt will be
reported "Paid in Full." Midland Credit's
letter explains the account will be reported "Paid in
Full" if Ms. Knight pays her "full
balance." Ms. Knight's current balance is
specifically identified in the top center of the
letter. Midland Credit further explains if less
than the full balance is paid, the account will be reported
"Paid in Full for less than the full
balance." Critically, Midland Credit connects
these explanations to the sentence providing, "After
receiving your final payment, we will consider the account
paid. The status of the account as "Paid
in Full" or "less than the full balance" is
determined at the time of Ms. Knight's final
1 and 2 offer discounts from Ms. Knight's current balance
of 40% and 20% off respectively. These offers clearly
allow Ms. Knight to settle her account at less than her
current balance. At the time of final payment under these
options, Ms. Knight will have paid 40% or 20% less than her
current balance, and her debt would be "Paid in Full
less than the full balance." Option 3 offers Ms. Knight
a monthly installment payment plan. Unlike Options 1 or 2,
Option 3 does not have language indicating a percentage
discount off Ms. Knight's balance. At the time
of final payment under Option 3, Ms. Knight's account
will be paid in its entirety.
would be reaching a "bizarre and idiosyncratic
interpretation" of Midland Credit's letter to
conclude Option 3 allowed payment less than the full balance
when Option 3 lacks any discount language as included in
Option 1 and Option 2. The only reasonable interpretation for
the least sophisticated consumer is Options 1 and 2 will
result in Ms. Knight's account being reported as
"Paid in Full for less than the full amount" and
Option 3 will result in Plaintiffs debt being reported as
"Paid in Full." Ms. Knight's challenge to the
language "Paid in full" or "Paid in full for
less than the full amount" fails.
Midland Credit's use of the phrase "Paid in Full for
less than the full balance" is not false, deceptive, or
Knight argues Midland Credit's use of the phrase
"Paid in Full for less than the full balance" is
"a center of confusion" for a debtor. Ms. Knight
claims the least sophisticated debtor does not understand the
phrase and "does not ...