Consumer Finance Litigation

In Swann v. Dynamic Recovery Solutions, LLC, No. 4:18-CV-1000-VEH, 2018 WL 6198997 (N.D. Ala. Nov. 28, 2018), the Northern District of Alabama dismissed a putative class action case alleging a letter seeking to collect a time-barred debt violated the Fair Debt Collection Practices Act ("FDCPA").

The plaintiff, Susan Swann ("Plaintiff"), alleged that defendants Dynamic Recovery Services, LLC ("DRS") and Jefferson Capital Systems, LLC ("JCS") violated § 1692e and §1692f of the FDCPA. See generally id. Section 1692e prohibits debt collectors from "'us[ing] any false deceptive, or misleading representation or means in connection with the collection of any debt.'" Id. at *3 (quoting Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1258 (11th Cir. 2014)). Section 1692f forbids the "'use [of] unfair or unconscionable means to collect or attempt to collect any debt.'" Id. (quoting Crawford, 758 F.3d at 1258)).

According to Plaintiff, DRS sent her a letter attempting to collect a debt on behalf of JCS after the statute of limitations for collecting the debt had expired. The letter stated DRS was contacting Plaintiff on behalf of JCS regarding a debt. See id. at *2. The letter provided several payment plans through which Plaintiff's account could be "resolved" and the debt would be marked "satisfied." See id. The letter also contained a disclaimer that advised Plaintiff "[t]he law limits how long you can be sued on a debt. Because of the age of your debt [JCS] will not sue you for it." Id. The disclaimer further warned that "[JCS] may report or continue to report [the debt] to the credit reporting agencies as unpaid." Id.

Plaintiff claimed the letter violated the FDCPA because the "disclaimer was ineffective because a) they failed to foreclose the possibility that DRS would/could not sue on the debt; b) they failed to foreclose that [JCS] could not legally sue . . . ; c) they falsely claimed that payment would result in benefits." Id. at *5. Plaintiff asserted that the ineffective disclaimers constituted materially false or misleading statements in violation of § 1692e and materially unfair or unconscionable means in violation of § 1692f "which 'would lead any consumer to believe that they had to pay this debt to avoid being sued, credit reported or having to pay the full amount at some point in the future[.]" Id. Defendants moved to dismiss Plaintiff's claims for failure to state a claim, and the court granted Defendants' motion.

First, the court determined both claims "[were] due to be dismissed to the extent they [were] based on the threat of negative credit reporting." Id. at *5. The court explained nothing in Plaintiff's complaint could "plausibly establish" that the statements regarding credit reporting in the letter were false, misleading, unfair, or unconscionable. See id. The court, therefore, dismissed both claims "to the extent that they allege a violation of the FDCPA based on a threat of reporting the debt as unpaid." Id.

The court then turned to whether the letter violated § 1692e by threatening litigation to collect on a time-barred debt. The court noted there was no explicit threat of litigation in the letter and Plaintiff's complaint focused on the ineffective language of the letter's disclaimer. See id. The court, however, explained that disclaimers are not "required in a letter attempting to collect on a time-barred debt" but "are included to offset other language in the letter which may . . . threaten litigation." Id. at *6. Since Plaintiff did not assert that the letter threatened litigation, the court found Plaintiff's claims that the letter improperly threatened litigation should be dismissed. Id.

Plaintiff also argued that the "resolve" and "satisfaction" language in the letter could be a threat of litigation to the least sophisticated consumer. Id. Though the argument only appeared in Plaintiff's brief and was not included in her complaint, the court analyzed the alleged problems with the letter's "resolve" and "satisfaction" language by comparing the letter's language to the "settlement" language that was at issue in McCamey v. Capital Management, Services, LP, No. 5:17-CV-1429-UJH-VEH, 2018 WL 3819828 (N.D. Ala. Aug. 10, 2018). Unlike the "settlement" language at issue in McCamey, the Swann court's detailed analysis found that no definition of either "resolve" or "satisfaction" had a litigation connotation. See generally id. Thus, the court concluded that, unlike "settlement," there could not be reasonable meanings of either "resolve" or "satisfaction" that would suggest litigation. See generally id. Accordingly, the court concluded the letter could not have confused the least sophisticated consumer and Plaintiff's § 1692e claim was due to be dismissed. See generally id.

The court further determined that, even if the "resolve" and/or "settlement" language was confusing, the disclaimer sufficiently clarified that the Plaintiff could not be sued. See generally id. The court explained that Defendants' disclaimer used the language "will not sue," which is the same language used by the Federal Trade Commission ("FTC") and Consumer Financial Protection Bureau ("CFPB") in consent decrees. See id. at *11-12. The court explained "the fact that the two agencies charged with enforcing the FDCPA mandated the language used by the Defendant serves to reinforce its finding that the language does not constitute a false representation or a deceptive means of collecting the debt." Id. at *12. The court also found that the disclaimer did not suggest that DRS could sue the Plaintiff if JCS did not. See id. at *13. The court explained that the letter must be read as a whole. See id. Thus, DRS's repeated references to JCS as its client made it clear JCS owned the account and there was nothing in the letter to suggest DRS would sue the Plaintiff for failure to pay. See id. The court further observed, "basic logic dictates that since JCS cannot sue 'because of the age of the debt,' DRS cannot either." Id. Thus, the court concluded "that the least sophisticated consumer would not read this language as implying that DRS could sue when JCS could not" and Plaintiff's § 1692e claim was due to be dismissed. Id. at *13.

Plaintiff also attempted to argue that the letter violated the FDCPA because the letter's language regarding satisfying and closing the account falsely claimed that payment would result in benefits to Plaintiff. Id. The court determined that even assuming the language at issue implied a benefit, the implication was not a false representation because paying off the debt would result in a benefit. Id. Specifically, the court found the Plaintiff would be benefitted by paying because Defendants would stop reporting the debt as unpaid to credit bureaus. Id. Thus, the court concluded the language did not violate the FDCPA.

Finally, the court dismissed Plaintiff's § 1692f claim because pursuant to Eleventh Circuit precedent, "a plaintiff cannot succeed on a section 1692f claim if it is based on the same facts as a failed 1692e claim." Id. at *14. Since Plaintiff's § 1692e claim failed to state a claim for the reasons discussed above, the court concluded Plaintiff's § 1692f claim, which was based on the same allegations of misconduct, also failed to state a claim and was due to be dismissed. See id.