Appeals Court Upholds Dismissal of FDCPA Suit, While Tackling Issues With ‘Least Sophisticated Consumer’ Standard

The Court of Appeals for the Tenth Circuit has upheld the dismissal of a Fair Debt Collection Practices Act case, ruling that an alleged false or misleading communication must be material in order to be considered a violation of the statute, but also took a deep dive on the different definitions that have been created by courts related to the “least sophisticated consumer” and a “reasonable consumer” that make this opinion worth the read.

A copy of the ruling in the case of Tavernaro v. Pioneer Credit Recovery can be accessed by clicking here.

The plaintiff filed suit, alleging a packet of information that the defendant sent to the plaintiff’s employer violated Sections 1692e and 1692f of the FDCPA because the front page of the packet displayed the logo of the creditor to whom the debt was owed, instead of using the defendant’s own information, which wasn’t mentioned until the middle of the second page. A District Court judge granted the defendant’s motion to dismiss for failure to state a claim, ruling that the letter in question was not misleading.

The Appeals Court agreed with the District Court judge, ruling that “a reasonable consumer would not be misled,” because the letter identifies the creditor as “the holder of a defaulted federally insured student loan,” states that the letter “is an attempt, by a debt collector, to collect a debt,” and clarifies that the defendant “is assisting” the creditor “with administrative activities associated with this administrative wage garnishment.”

“In other words, the letter makes clear that ECMC owns the debt, Pioneer is a debt collector helping ECMC with the collection of the debt, and the letter is an attempt to collect the debt,” the Appeals Court wrote. “Even assuming a reasonable consumer would believe ECMC and not Pioneer sent the letter, Mr. Tavernaro fails to demonstrate how that would frustrate the reasonable consumer’s ability to respond intelligently.”

Perhaps more interestingly, though, is the section in the ruling on whether courts that have applied a “least sophisticated consumer” standard in evaluating FDCPA claims have been doing so incorrectly. Should materiality be measured from the perspective of an “unsophisticated consumer” or a “reasonable consumer” the court asks.

Noting that the reasonable consumer standard is used by the Federal Trade Commission and in the Truth in Lending Act, the court also points out that while many have referenced the “least sophisticated consumer” in their rulings, few actually use that perspective.

“In applying the least sophisticated consumer standard, courts typically begin by noting the least sophisticated consumer is not an expert but then quickly explain he is not actually the least sophisticated consumer,” the Appeals Court wrote. “In reality, the nebulous least sophisticated consumer standard is simply a misnomer. A few circuits, recognizing problems with the least sophisticated consumer standard, instead look to the ‘unsophisticated consumer.’ ”

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