This article previously appeared on Maurice Wutscher's Consumer Financial Services Blog and is republished here with permission.
The U.S. Court of Appeals for the Eighth Circuit recently joined with the Third, Fourth, Sixth, Seventh, and Ninth Circuits in applying a materiality standard to section 1692e of the federal Fair Debt Collection Practices Act (FDCPA).
In doing so, the Eighth Circuit affirmed the trial court’s order granting judgment in favor of a debt collector and against a borrower.
A copy of the opinion in Hill v. Accounts Receivable Services, LLC is available at: Link to Opinion.
On Oct. 30, 2015, a debt collector filed suit in Minnesota state court against a borrower for unpaid medical bills and statutory interest under Minnesota Statutes § 334.01. As a defense, the borrower challenged the assignment of the debt to the debt collector.
The trial court found in the borrower’s favor and issued a judgment on its standard form. The judgment contained a checked box finding that “Plaintiff has not demonstrated an entitlement to relief and recovers zero.” The judgment had no other factual or legal findings.
The borrower then filed an action against the debt collector alleging the debt collector’s conduct in the underlying suit violated the FDCPA.
Specifically, the borrower alleged that the debt collector violated 15 U.S.C. § 1692e by using “false, deceptive, or misleading representation or means in connection with the collection of any debt.” Further, the borrower alleged that the debt collector threatened “to take any action that cannot legally be taken or that is not intended to be taken” in violation of 15 U.S.C. § 1692e(5). Finally, the borrower claimed that the debt collector violated 15 U.S.C. § 1692f, by using “unfair or unconscionable means to collect or attempt to collect any debt.”
The trial court found the debt collector’s alleged conduct to be immaterial and entered a judgment on the pleadings in favor of the debt collector. This appeal followed.
The Eighth Circuit observed that the Seventh Circuit previously addressed “whether a materiality standard applies to § 1692e.” Specifically, in Hahn v. Triumph Partnerships LLC, 557 F.3d 755 (7th Cir. 2009), the Seventh Circuit found that the FDCPA “is designed to provide information that helps consumers to choose intelligently, . . . immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect).” Id. at 757-58 (citations omitted). Further, because “[a] statement cannot mislead unless it is material, a false but non-material statement is not actionable.” Id. at 758.
The Eighth Circuit found the Seventh Circuit’s reasoning persuasive and joined the circuits that “applied a materiality standard to § 1692e.” Id. at 757-58; Elyazidi v. SunTrust Bank, 780 F.3d 227, 234 (4th Cir. 2015); Jensen v. Pressler & Pressler, 791 F.3d 413, 421 (3d Cir. 2015); Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 596 (6th Cir. 2009); Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1033 (9th Cir. 2010).
The borrower also argued that the debt collector made materially false representations by representing that the documents it submitted to the state trial court were authentic. The borrower did not deny that his family received the healthcare services at issue or that his healthcare provider assigned the debt to the debt collector. Instead, the borrower maintained that the documents the debt collector submitted did not establish the assignment and contained other false statements.
The Eighth Circuit rejected the borrower’s argument as “a debt collector’s loss of a collection action — standing alone — does not establish a violation” of the FDCPA. Hemmingsen v. Messerli & Kramer, P.A., 2 674 F.3d 814, 820 (8th Cir. 2012).
Further, just because “a lawsuit turns out ultimately to be unsuccessful” does not mean that filing the suit constitutes pursuing “an action that cannot legally be taken.” Id. (quoting Heintz v. Jenkins, 514 U.S. 291, 295-96 (1995)).
Here, the Eighth Circuit found that the debt collector’s failure to prove the assignment “did not constitute a materially false representation, and the other alleged inaccuracies in the exhibits are not material.”
The borrower also argued that the debt collector violated 15 U.S.C. § 1692f(1) by attempting to collect interest under Minnesota Statutes § 549.09 because the law does not permit the debt collector to collect interest. The Eighth Circuit rejected this argument for several reasons.
First, the debt collector’s complaint only sought interest pursuant to Minnesota Statutes § 334.01. Further, this is a Minnesota law question and the Minnesota Supreme Court has not decided the issue. Finally, “the text of § 334.01 does not prohibit [the debt collector] from recovering such interest.” Thus, although the borrower may have a defense that the statute does not apply, this does not mean that the debt collector “attempted to collect interest that is not permitted by law.”
The Eighth Circuit, therefore, affirmed the trial court’s decision.