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Ninth Circuit Continues Trend throughout the Country That a False Statement by a Debt Collector Must Be Material in Order for There to Be a Violation

In Afewerki v. Anaya Law Grp., 9th Cir., 15-cv-56510, 8/18/17, the Ninth Circuit held that false statement by a debt collector must be “material” to be actionable under the FDCPA and clarified its interpretation of materiality. In Afewerki the defendant law firm, Anaya Law Group, filed a complaint in California state court for an alleged unpaid credit card debt. The California complaint overstated the principal sum due by $3,000 and overstated the applicable interest rate by .315 percent. Upon receiving the complaint, the debtor’s attorney filed a bill of particulars which then led Anaya Law Group to file a notice of errata correcting the errors. Thereafter, the debtor filed a complaint in federal court against the Anaya Law Group for alleged violations of the Federal Debt Collection Practices Act (“FDCPA”) and California’s Rosenthal Fair Debt Collection Practices Act. The district court granted Anaya Law Group’s motion for summary judgment, concluding that the errors in the complaint were not “material.” The district court reasoned that the mistakes were not “material” because had a default judgment been granted against the debtor the creditor would have still need to establish the amount owed prior to the entry of judgment.

The FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. Specifically, 15 U.S.C. § 1692e(2) prohibits “[t]he false representation of the character, amount, or legal status of any debt.” The Ninth Circuit Court noted that the text of the FDCPA does not establish either the least sophisticated debtor standard or the materiality requirement, nor does the statute define these terms. It has been well established that in evaluating the tendency of language to deceive, that courts should look not to the most sophisticated readers but to the least. Baker v. G. C. Servs. Corp., 677 F.2d 775, 778 (9th Cir. 1982). Accordingly, “[i]f the least sophisticated debtor would likely be misled by a communication from a debt collector, the debt collector has violated the [FDCPA].” Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 934 (9th Cir. 2007).

In addition to the least sophisticated consumer standard, the Ninth Circuit adopted a materiality requirement. In Donohue v. Quick Collect, Inc., 592 F.3d 1027 (9th Cir. 2010), the Ninth Circuit held that false but non-material representations are not likely to mislead the least sophisticated consumer and therefore are not actionable under the FDCPA. The Ninth Circuit reasoned that material representations, are those that could cause the least sophisticated debtor to suffer a disadvantage in charting a course of action in response to the collection effort. In contract, immaterial false representations, are those that are literally false, but meaningful only to a hyper-technical reader. Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1121 (9th Cir. 2014).

In reversing the district’s court entry of summary judgment entered in favor of Anaya Law Group, the Ninth Circuit Court held that the overstatement of the principal due in the state court complaint and overstatement of the interest was material. Additionally, the Ninth Circuit noted that the fact that the debt collector corrected its mistake after the debtor challenged it did not mean that a less sophisticated debtor would have been so lucky. Instead, the least sophisticated debtor in Afewerki’s position, concerned of being sued, may well have paid the amount demanded in the complaint and would have overpaid by approximately $3,000.

Credit card litigation regularly involves debtors having a default judgment entered against them. The debtor receives a summons for a small claims or county court matter and fails to attend a required hearing and/or file a timely notice of appearance which usually results in the entry of a default judgment against the debtor. The debtor doesn’t recognize that there has been a judgment entered against them until collection efforts are commenced on the judgment. It is imperative that debtors involved in credit card litigation retain competent counsel to determine that the subject debt is a valid and accurate debt. In circumstances where counsel can determine that the debt collector is seeking inflated amounts of principal or interest, the debtor will most likely have a viable FDCPA claim against the debt collector. The FDCPA claim can be utilized either as a negotiation tool in seeking to obtain a negotiated resolution for the underlying debt or can be filed as a separate lawsuit. The FDCPA provides that a successful Plaintiff can recover statutory damages up to $1,000, actual damages, and reasonable attorney’s fees.

Sweeney Law, P.A. Regularly Represents Debtors in Debt Collection Litigation

Brendan A. Sweeney, Esq., of Sweeney Law, P.A., The Florida Debt Warrior, regularly represents individuals that have had their consumer rights violated by banks and other financial institutions. Brendan A. Sweeney, Esq., has been recognized as a Florida Legal Elite Rising Star Attorney in Consumer Law in 2014, 2015, 2016 and 2017, and is a member of the National Association of Consumer Advocates. If you have any debts that are in collection or are involved in any debt collection litigation then contact Sweeney Law, P.A. at 954.440.3993 immediately to protect your rights. www.sweeneylawpa.com.

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