The United States Court of Appeals for the Ninth Circuit ruled against an ARM firm Friday in their appeal over a class action suit that alleged violations of the Fair Debt Collection Practices Act (FDCPA) in the language of their collection letters.

In the case, Johnny Gonzales, et al., v. Arrow Financial Services, the plaintiff argued that a letter sent by Arrow offering settlement of a health club debt misled the debtor into believing the firm would report the debt to a credit reporting agency.

In 2002, Arrow purchased a portfolio of old debts owed to health clubs. The firm sent collection letters to 40,000 California residents in 2004 attempting to collect. The letters offered settlements of 50 percent of the total debt and a line that became central to the suit: “if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.” Gonzales sued under the FDCPA because he learned that the debt was too old to report.

Arrow’s defense hinged on the use of the word “if.”

The company argued that it was not threatening to report the debt, but merely stating what would happen if it did. It also noted that the statement was entirely accurate. But the appeals court did not buy that logic, writing, “We emphasize that a literally true statement can still be misleading.”

The court upheld a lower court ruling in favor of the class. The original award of $225,500 to the 40,000 class members appears to have been upheld as well.

But one judge on the three-judge panel dissented, writing that the $225,500 award was duplicative in nature and threatened the liability restrictions of the FDCPA.

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