Wow. The U.S. Court of Appeals either cut a break to the Defendant in Federal Home Loan Mortgage Corp v Lamar or it is signaling a new direction in the enforcement of the Fair Debt Collection Practices Act, against the consumer ("FDCPA").
In this case, Federal Home Loan foreclosed on the debtor's mortgage through its counsel, Lerner, Sampson and Rothfuss (LS& R). LS&R did not send out a separate validation notice as required by the FDCPA at 15 USC 1692g. The FDCPA requires a debt collector to send the consumer a notice of the debtor's rights to dispute a debt within 30 days, amongst other things. In this case, LS&R simply put the validation notice language in the complaint for foreclosure that it filed with the court. While the validation notice language informed Lamar that she had 30 days to dispute the debt, in reality she only had 20 days to file an answer to complaint disputing the debt. Ms. Lamar contended that putting the validation language in a complaint without reconciling language to explain the difference between the 30 day right to dispute the debt and the 20 day duty to file an answer to the complaint would confuse the least sophisticated consumer. This is an excellent point. The court agreed with neither Ms. Lamar nor with me.
Notices under the FDCPA use the Least Sophisticated Consumer Standard. Under the FDCPA, "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." Courts have interpreted this provision in light of "the least sophisticated consumer." This means that if a notice would tend to confuse "the least sophisticated consumer," then the notice is confusing and violates the FDCPA. Notice that under general negligence law, we use the standard of the "reasonably prudent person." This is a much more sophisticated and intelligent person. However, when enforcing the FDCPA, the court use a much lower standard to determine whether the FDCPA has been violated. This is not to insult us as consumers. Rather, the courts use this lower standard so make the FDCPA enforceable in more cases than it would otherwise be enforced with the higher standard.
Back to our story.....As a debt collector, this case is very welcomed news in our community. As a consumer, I would be very scared. The Act requires debt collectors to give certain notices to the debtors. The Act also requires debt collectors to communicate very clearly with consumers such that even the least sophisticated consumer would understand the communication from the debt collector. With these two simple rules, I don't understand how the court could have ruled that putting a 30 day validation notice into a complaint that only gives a consumer 20 days to respond would NOT confuse a least sophisticated consumer. The Court of Appeals would not have any part of this argument. It believes that the least sophisticated consumer must simply think a little harder. The court ruled:
The least sophisticated consumer, with a careful reading of the language in the
Summons and Complaint, including the statutorily required notice, would understand
that there were two different time periods within which she must act, and that the
time periods run at the same time, from the day after the Summons and Complaint
is received.
In my opinion, this ruling ignores the very nature of the least sophisticated consumer. If he were able to read pleadings that carefully and develop the understanding that there are two different time periods involved, then would this consumer really be "the least sophisticated"? I doubt it.
Moral of the Story? Good question! So what the court doing when it made this ruling? Was the Sixth Circuit ratcheting up the I.Q. of the least sophisticated consumer or merely going away from that standard and moving towards a reasonably prudent person standard? Or was the court merely signaling to us that it has seen enough creative FDCPA lawsuits at the trial level, the likes of which were never contemplated by Congress and simply wanted to push the pendulum in the other direction? I think it may be a little too early to tell. I do, believe, however, that this case is a harbinger of the court's direction rather than an isolated anomaly.
