Two recent reported cases from United States district courts remind the ARM industry that Fair Debt Collection Practices Act (FDCPA) litigation over letters is still alive and flourishing.  

Neither involved a dispositive decision; in both cases the defendants had moved the court to dismiss the litigation under Federal Rule 12(b)(6) of the Federal Rules of Civil Procedure.  In both cases the court denied the request. The cases -- and costs of defense -- continue.

Editor’s Note: A 12(b)(6) motion is based upon the argument that the complaint fails to state a claim upon which relief may be granted. In deciding a motion to dismiss pursuant to 12(b)(6), a district court is “required to accept as true all factual allegations in the complaint and draw all inferences in the facts alleged in the light most favorable to the plaintiff. 

Pollak v. Firstsource Advantage, LLC

The first case is Pollak v. Firstsource Advantage, LLC (Case No. 15-6046, U.S. District Court for the District of New Jersey, March 16, 2017).

A copy of the court’s opinion can be found here

In Pollak, Firstsource Advantage, LLC (Firstsource) was functioning as a third-party debt collector for its client, American Express. On October 15, 2014, defendant sent plaintiff a letter on its letterhead.  That letter requested that plaintiff send the total amount due on the account to Firstsource at 205 Bryant Woods South, Amherst, New York 14228, and invited plaintiff to call Firstsource at 1-877-420-5095 to discuss various payment options. The letter also included: “This is a communication from a debt collector. This is an attempt to collect a debt and any information will be used for that purpose.” 

Several months later, plaintiff received two additional letters relating to the account (the Settlement Offer Letters). The Settlement Offer Letters “each offered the plaintiff to resolve his account for sixty percent (60%) of his balance” but stated, “In order to accept this offer, please call American Express at 1-877-443-0144.”

Both Settlement Offer Letters are on American Express letterhead, “display the distinctive square shaped American Express logo, and even displayed an encircled ‘R’ to denote the use of a registered trademark” on both the letters themselves and the detachable payment stubs. The Settlement Offer Letters were also signed “Sincerely, American Express Global Collections.” 

Plaintiff alleged that the “numerous and explicit references to ‘American Express’ are meant to instill in the recipient that the Settlement Offer Letters were actually created and sent by the alleged original creditor, American Express.” However, plaintiff alleged the Settlement Offer Letters were, in fact, “sent by defendant, a third-party debt collector, who sent the Settlement Offer Letters as American Express in an effort to evade compliance with state and federal debt collection laws.” Unlike the October letter, the Settlement Offer Letters do not bear Firstsource’s name, nor do they state they are being sent by a debt collector and that any information obtained would be used for purposes of attempting to collect a debt. 

Finally, plaintiff alleged that, when calling the phone number identified in the Settlement Offer Letters, “1-877-443-0144, the plaintiff and any other caller are greeted by an individual identifying themselves as a representative of American Express.” However, plaintiff alleges, “upon information and belief, individuals . . . calling the phone number of 1-877-443-0144 are in fact speaking to representatives and employees of the Defendant, and those employees have no employment or affiliation with American Express.” Plaintiff also claims his “counsel called American Express directly, and American Express advised that the phone number of 1-877-443-0144 actually belonged to Defendant.” 

The crux of plaintiff’s complaint was that Firstsource violated various provisions of the FDCPA, including: Section 1692e (making any “false, deceptive, or misleading representation”); Section 1692e(9) (“use or distribution of any written communication . . . which creates a false impression as to its source, authorization, or approval”); Section 1692e(10) (“use of any false representation or deceptive means to collect or attempt to collect any debt”); Section 1692e(14) (“use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization”); and Section1692e(11) by failing to disclose that each communication was an attempt to collect a debt by a debt collector and that any information would be used for that purpose. 

In denying Firstsource’s motion to dismiss the court wrote: 

“Accepting plaintiff’s allegations as true, the Court finds these alleged misrepresentations and omissions would be likely to deceive or mislead the least sophisticated debtor. Accordingly, Firstsource’s Motion to Dismiss is DENIED.” 

Cuenca v. Harris & Harris, Ltd

The second case is Cuenca v. Harris & Harris, Ltd (Case No. 16-05385, U.S. District Court, Northern District of Illinois, March 31, 2017).

A copy of the court’s Memorandum and Order in this case can be found here.   

In Cuenca the facts are very simple. Harris & Harris, Ltd (Harris) sent a letter to Cuenca which stated, in part: 

“If this debt is not paid, our client(s) may exercise their various options to enforce collection. At this point, the choice is still yours… please respond accordingly.” 

On May 19, 2016, Cuenca filed this lawsuit alleging that Harris’s letter violated the FDCPA by falsely threatening to sue her. Cuenca’s complaint alleged that “Cuenca believed that Harris’s client intended to sue her. However, Harris’s client does not sue consumers for medical debts.” 

Harris moved to dismiss under Rule 12(b)(6) on the grounds that the statement was not a threat to sue (and therefore could not be false). 

From the court’s Memorandum and Order: 

“The FDCPA prohibits a debt collector from making a “threat to take any action that cannot legally be taken or that is not intended to be taken.” FDCPA claims are judged by the “objective unsophisticated consumer standard.” An unsophisticated consumer “may tend to read collection letters literally, [but] he does not interpret them in a bizarre or idiosyncratic fashion.” Whether a collection letter is confusing is generally a question of fact; dismissal as a matter of law is appropriate only where “it is apparent from a reading of the letter that not even a significant fraction of the population would be misled by it.” 

Harris argued that the language in its letter was not a threat of litigation. 

The court determined: 

“It is not, however, necessary to resolve the question of whether the dunning letter sent to Cuenca constitutes a “threat” of litigation. That frames the inquiry too narrowly. Rather, the relevant issue is whether, threat or not, Harris’s statement would likely mislead an objective unsophisticated consumer about the possibility that Harris’s client would sue her to collect the debt.

At this stage of the litigation, Cuenca need only state a plausible claim. The Court finds that the statement that a debt holder “may exercise their various options to enforce collection” could plausibly be interpreted by an unsophisticated consumer as a threat of potential litigation.”

insideARM Perspective

It is important to remember that both of these cases are still pending. In neither case has there been any final determination that the letters in question violated the FDCPA. The standard for deciding a motion to dismiss under Rule 12(b)(6) is much different than the standard to ultimately decide the case. But, the two cases also show the risk and litigation expense involved in FDCPA cases involving letters. 

insideARM contacted David Schultz from the law firm of Hinshaw & Culbertson LLP regarding the Cuenca case. Mr Schultz represents Harris & Harris, Ltd. Schultz commented,

“We respect the judge and the decision. However, the ruling only denied a motion to dismiss. It did so using the fairly low standard of whether the claim was "plausible."  It did not endorse the theory. We look forward to prevailing on the merits.” 

insideARM will continue to monitor both cases and will report on future developments. 



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