2nd Circuit: Collection letter failed to properly identify creditor in violation of FDCPA

Courts Appellate Second Circuit FDCPA Debt Collection

On April 3, the U.S. Court of Appeals for the Second Circuit reversed and vacated the dismissal of an FDCPA action against a debt collector (defendant), holding that a collection letter failed to identify the correct creditor to whom a debt was owed. The consumer (plaintiff) alleged that the defendant sent him a collection letter concerning a private-label credit card account offered by a merchant. The defaulted debt originally was owned by one national bank and later acquired by a different national bank. The collection letter, however, identified the merchant (the servicer of the account) and the original credit grantor, but failed to disclose the current creditor. The plaintiff filed a class-action complaint alleging that the defendant violated Section 1692g of the FDCPA by not properly identifying the name of the creditor to whom the debt was owed, and violated Section 1692e by making a “false or misleading communication in connection with a debt.” The district court granted the defendant’s motion for judgment on the pleadings and dismissed the complaint, concluding that the merchant, as servicer, was the creditor to whom the debt is owed and that the failure to name the current creditor “would not have materially affected a consumer’s decision-making process.”

On appeal, the 2nd Circuit concluded that, because the cardmember agreements between the merchant, the current creditor, and the plaintiff clearly acknowledge that the national bank—and not the merchant—is the creditor, the defendant violated Section 1692g by not naming the correct creditor in the letter. With respect to the plaintiff’s Section 1692e claim, the appellate court determined that “it is far from clear that [the defendant’s] failure to identify [the current creditor] constituted a materially misleading statement under Section 1692e.” In fact, the appellate court stated that “it might be argued that if [the defendant] had identified [the current creditor] and not [the merchant], such an action ‘likely would have caused confusion.’” (Emphasis in the original.) However, the 2nd Circuit determined that the claim should not have been dismissed because the district court erroneously concluded that the merchant was the creditor to whom the debt was owned, and that the district court failed to address whether the defendant’s failure to identify the current creditor was a materially misleading statement under Section 1692e. The appellate court vacated the district court’s judgment and remanded the case for further proceedings.