The United States Court of Appeals for the Third Circuit recently affirmed a District Court’s finding that a debt collection letter that itemizes a “static” debt as including “$0.00” in interest and fees, despite the fact that the debt cannot accrue interest and fees, does not violate the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”). See Hopkins v. Collecto, Inc., 2021 WL 1345203 (3d Cir. Apr. 12, 2021). In the case, the owner of a particular debt employed a debt collector to send a collection letter to Debtor which itemized the debt as “Principal- $1088.34” and “$0.00” in both “Interest” and “Fees/Collection Costs,” for a total balance of $1,088.34. Debtor filed a putative class action complaint against both the lender and the debt collector in the District Court for the District of New Jersey, claiming that the letter violated the FDCPA. Debtor’s argument was that the debt could not or was not intended to accrue interest or collection fees, and by assigning a “$0.00” to those columns, the letter falsely implied to a debtor that interest and fees might accrue over time and increase the amount of the debt in the future. The lender and debt collector moved to dismiss the Debtor’s complaint, and the District Court dismissed the complaint with prejudice. Debtor appealed.
On appeal, the Third Circuit affirmed the District Court’s dismissal. The court noted that in the Third Circuit, the compliance of a debt collection letter with the FDCPA is determined from the perspective of the “least sophisticated debtor.” The Court then summarized decisions from the Seventh and Fifth Circuits which found that listing a balance of zero for interest and fees on static debts were not materially misleading, as simply raising an open question about the future assessment of other charges would not mislead an unsophisticated customer into thinking it was certain that such an assessment would happen. Debtor attempted to distinguish this law from the law applied in the Third Circuit, as the Seventh and Fifth Circuits use an “unsophisticated debtor” standard to evaluate FDCPA claims while the Third Circuit uses a “least sophisticated debtor” standard. The Court rejected this reasoning for two reasons. First, the Court stated that that the two approaches, despite using slightly different language, are “functionally equivalent,” and the Third Circuit’s approach does not imply a higher standard of scrutiny used to evaluate FDCPA claims as opposed to other circuits. Second, the Court stated that even “were we constrained to focus on a hypothetical debtor less savvy than the ‘unsophisticated debtor’, we would still affirm [the dismissal of the Complaint].” “The least sophisticated debtor of our case law, though gullible,” the Court explained, “does not subscribe to bizarre or idiosyncratic interpretations of collection notices.” Here, the Court found that “even the least sophisticated debtor understands that collection letters—as reflected by their fonts, formatting, contents, and fields—often derive from templates and may contain information not relevant to his or her situation.” This debtor, the Court found, would understand that the “$0.00” balance in the interest/fees columns of a collection letter was likely the product of such a form letter, and any contrary interpretation that the reflection of such a balance implied that Debtor “needs to pay off the debt post haste” was not supported by “FDCPA case law[, which] does not support attributing to the least sophisticated debtor simultaneous naïveté and heightened discernment.” Given the foregoing, the Court found that Debtor had failed to state a claim, and affirmed the District Court’s dismissal of Debtor’s complaint.