Confusion is Not a Basis for Claiming Violation of Fair Debt Collection Practices Act

Confusion is Not a Basis for Claiming Violation of Fair Debt Collection Practices Act

On April 26, 2024, the United States Court of Appeals of the Third Circuit vacated judgement of the District Court of New Jersey in an appeal filed for alleged violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 for failure to plead a concrete injury. Martha Osorio v. Transworld Systems Inc., No. 22-2013 (3d Cir. 2024)

Plaintiff filed a putative class action pleading that the collection letter sent by the Transworld Systems Inc. (TSI) failed to expressly state the details of the creditor and thereby confused her as to who placed the debt with TSI and to whom the debt is actually owed, thus making the letter false, deceptive, or misleading.

Defendant called for dismissal of the complaint under Rule 12(b)(6) due to failure of the Plaintiff to state a claim upon which relief can be granted. However, a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations[1]. Plaintiff’s obligation to provide the “grounds” of his “entitlement to relief” requires more than “labels and conclusions”, and a formulaic recitation of the elements of a cause of action is not sufficient[2]. The Appellate Court has previously held that a relief sought must be “plausible on its face” by the facts alleged by the complainant.[3]

The Court while relying on precedents observed that in order to invoke the federal jurisdiction of the appellate court under Article III, plaintiff must show an “injury in fact”. A key component of such injury is that it is “concrete and particularized” and “actual or imminent”. While an intangible injury such as confusion can and may qualify an injury, but it is not sufficient to invoke the jurisdiction of federal court and the injury must have a “close historical or common-law analogue” and “based over a statutory violation”[4].

Further, the FDCPA does not require that the creditor to whom the debt is owed be labelled as ‘current creditor.’ It simply requires the notice contain the ‘name of the creditor to whom the debt is owed.’[5] The defendant had unambiguously identified the name of the creditor and the letter did not mention any other name that might lead the complainant to be confused nor did the complainant deny the existence of any such debt.

A similar position was analysed by the court in Molina v. AR Res., Inc., Civil Action No: 17-6573-SDW-SCM, 4-5 (D.N.J. Feb. 22, 2018), “This is more than sufficient to satisfy § 1692g(a)(2). See, e.g., Macelus v. Capital Collection Serv., Civ. No. 17-2025 (RBK/JS), 2017 WL 5157389, at *3 (D.N.J. Nov. 7, 2017) (holding that a letter containing the name of the creditor and the amount owed did not violate the FDCPA); Hammett v. Alliance One Receivables Mgmt., Inc., Civ. No. 11-3172, 2011 WL 3819848, at * 4-5 (E.D. Pa. Aug. 30, 2011) (finding that the use of the word “client” would not confuse the least sophisticated debtor, especially when coupled with “the account number and the amount of outstanding principal”)

Thus, the Appellate Court did not attribute any fault to the Defendant for the mere confusion suffered by the Complainant. As a result, the court vacated the judgment of the District Court.

[1] Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994)

[2] Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932 (1986)

[3] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)

[4] TransUnion LLC v. Ramirez, 594 U.S. 413, 417 (2021).

[5] Ward v. I.C. Sys., Inc., No. 19-20064, 2020 WL 3604093, at *5 (D.N.J. July 2, 2020); Smith v. Simm Assocs., Inc., No. 17-769, 2018 WL 4705840, at *3 (E.D. Wis. Sept. 30, 2018), aff’d, 926 F.3d 377 (7th Cir. 2019); Blair v. Fed. Pac. Credit Co., LLC, No. 20-4100, 2021 WL 4398665, at *5 (D.N.J. Sept. 27, 2021)