The FDCPA and the Least Sophisticated Consumer Standard
Posted: Thursday, November 17, 2016
Consumer debtors can thank the Second Circuit for its ruling in Avila, et al. v. Riexinger & Associates, LLC, when the least sophisticated consumer standard got a little less sophisticated earlier this year. In this Fair Debt Collection Practices Act (“FDCPA”) case the court held that a debt collector cannot presume that a consumer understands the most elementary rules of debt collection.
In Avila the plaintiffs received collection letters from the defendant collection agency Riexinger & Associates, LLC. The notices both stated the current balance owed, but did not disclose that the balance would continue to accrue interest and that if payment was not made, the collection agency would charge late fees. The plaintiffs filed suit against the agency alleging the letter violated the FDCPA based on the fact that it was misleading because it only stated the “current balance” and neglected to state that the balance would accumulate interest and additional fees. The plaintiffs both argued that they believed the balance would remain the same regardless of when payment was made on the debt, but in fact, interest was accruing on the account. Thus, when they went to make their payment, they found out that they owed more than the original letter advised.
The trial court dismissed the complaint finding that a debt collector did not have to disclose the fact that there is interest and late fees added to a debt and the current balance does not remain static as the consumer should know that the account bears interest. The plaintiffs appealed the dismissal and the Appellate Court addressed the question of whether to comply with the FDCPA does a debt collector need to disclose in a collection letter that the current balance will accrue interest and late fees over time.
In considering the plaintiffs claim, the Court reviewed two principals to make its decision. First, the FDCPA is a consumer minded statute, meaning that it was enacted to protect consumers from abusive and misleading collection tactics. And second, the FDCPA is based on the least sophisticated consumer standard, meaning a debtor must be considered uninformed, naive, or trusting. Using these two principals, the Court determined that the letter from the collection agency was in violation of the statute. An unsophisticated consumer reading the collection letter stating only the current balance with no language about interest and late fees could assume that the amount due would remain the same regardless of when payment was made on the debt. Many believe that when the account is charged off, there is no more interest accruing. Failure to include language notifying the debtor that the balance could accumulate over time is misleading and violates the purpose of the FDCPA.
If you believe your rights have been violated under the FDCPA and you would like the advice or assistance of counsel, contact SmithMarco P.C. for a completely free case review.