Afewerki v. Anaya Law Group, 9th Cir., 8/18/17
The Fair Debt Collection Practices Act (FDCPA) forbids debt collectors from making false statements when attempting to collect debts from consumers. False statements are only actionable when they are material. Statements are material when they would cause the hypothetical “least sophisticated investor” to suffer disadvantage when charting a course in response to the collection effort–not a rigorous requirement. In this case, a creditor hired a law firm to sue debtor, and correctly informed the attorneys that the outstanding debt was $26,916 and that the interest rate was 9.65%. In drafting the state court complaint, the law firm incorrectly alleged that the underlying debt was $29,916 and that the interest rate was 9.965%. When it realized its mistake, the law firm almost immediately filed corrections to the complaint. The debtor nonetheless filed a federal lawsuit against the law firm alleging violations of the federal and state fair debt collection laws. On motion for summary judgment, the district court granted law firm’s motion, holding that the errors in the state complaint were not material. Held: Reversed.
Here, the complaint was fixed long before trial, and there is no evidence that debtor paid any of the debt, let alone more than was owed. Moreover, in opposition to summary judgment, debtor provided no evidence that he would have acted differently in response to the lawsuit–he hired an attorney to defend the case–had the original complaint contained no errors. In other words, he wasn’t misled or harmed in any way.
In FDCPA litigation, none of that matters. As far back as 1982, the Ninth Circuit concluded that the FDCPA does not ask whether an individual plaintiff was actually misled by a communication. To make out a violation, it is enough to posit that the hypothetical least sophisticated investor might have been misled. The court also noted that a consumer possesses a right of action where the defendant’s conduct has not caused pecuniary or emotional harm. In this case, it was not hard for the court to posit that a hypothetical “least sophisticated investor” might have paid the entire balance, which was $3,000 more than it owed. Of course, that didn’t actually happen in this case.
If the FDCPA creates standing and a cause of action for hypothetical musings about what might have been, then the FDCPA is antithetical to common sense.