KEITH P. ELLISON, District Judge.
Plaintiff Marjorie Carter ("Plaintiff") brings this putative class action
On January 7, 2015, Defendants (who are all "debt collectors" as defined by the FDCPA) sent Plaintiff a letter seeking to collect on a credit card debt. Compl. ¶¶ 28-30 (Doc. No. 1). The letter stated, in relevant part:
We would like to extend the following settlement offer:
Id. Ex. A (Doc. No. 1-1).
What the letter did not say was that the four-year statute of limitations on the debt had expired and that Defendants were thus time-barred from legally enforcing the debt.
A court may dismiss a complaint for "failure to state a claim upon which relief can be granted." FED.R.CIV.P. 12(b)(6). When a district court reviews the sufficiency of a complaint under Rule 12(b)(6), its task is inevitably a limited one. The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support her claims.
To survive a Rule 12(b)(6) motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has facial plausibility "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). While a complaint "does not need detailed factual allegations.... [the] allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citations omitted).
The Fair Debt Collection Practices Act (FDCPA) was "enacted to address the problem of debt collectors attempting to collect paid debts or attempting to collect debts by engaging in harassment and/or deceptive or unfair collection practices." Johnson v. Capital One Bank, No. CIV.A. SA00CA315EP, 2000 WL 1279661, at *1 (W.D.Tex. May 19, 2000). Section 1692e of the FDCPA broadly prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." This includes, but is not limited to, falsely representing "the character, amount, or legal status of any debt," § 1692e(2)(A); "threat[ening] to take any action that cannot legally be taken," § 1692e(5); and using any "false representation or deceptive means to collect or attempt to collect any debt," § 1692e(10). Additionally, § 1692f prohibits debt collectors from using "unfair or unconscionable means to collect or attempt
When evaluating whether a dunning letter violates § 1692e or § 1692f, the Court must view the letter from the perspective of an "unsophisticated or least sophisticated consumer."
In the Fifth Circuit, the issue of whether an unsophisticated consumer would perceive a collection letter as deceptive or unfair is a question of fact that, if well-pleaded, avoids dismissal on a Rule 12(b)(6) motion. See Gonzalez v. Kay, 577 F.3d 600, 605-06 (5th Cir.2009); see also Langley v. Weinstein & Riley, P.S., No. CIV.A. H-12-1562, 2013 WL 2951057, at *3 (S.D.Tex. June 14, 2013) ("[W]hether a debt collection letter, or a portion thereof, would mislead or deceive an unsophisticated or a least sophisticated consumer is a question of fact."); Karp v. Fin. Recovery Srvcs, Inc., No. A-12-CA-985 LY, 2013 WL 6734110, at *4 (W.D.Tex. Dec. 18, 2013).
Ms. Carter claims that Defendants engaged in an unfair and deceptive practice in violation of §§ 1692e, 1692e(2), 1692e(5), 1692e(10), and 1692f of the FDCPA by sending a dunning letter that fails to disclose to the debtor that the debt at issue is time-barred. Plaintiff alleges that this non-disclosure was compounded by the letter's offer to "settle" the debt. Defendants'
All courts agree that, where a debt collector seeks to collect on a time-barred debt, statements threatening to sue on the debt (or actions initiating suit) are sufficient to violate § 1692 of the FDCPA. See Castro v. Collecto, Inc., 634 F.3d 779, 783 (5th Cir.2011) (collecting cases). The issue raised by Defendants' Motion to Dismiss is whether the threatening of litigation is also necessary to violate § 1692, or whether, as Plaintiff contends, merely using the terms "settle/settlement" (without disclosing that the debt is time-barred) is sufficient for a violation, as it could mislead a debtor to believe that the stale debt is legally enforceable.
The Court finds that a debt collector's misrepresentation as to its right to sue on a debt is itself sufficient to violate § 1692; the statute imposes no additional requirement that the debt collector actually threaten to sue. This interpretation of § 1692 is the interpretation reached by both the Sixth and Seventh Circuits in recent decisions that are factually analogous to the instant case and that were decided, as here, at the Rule 12(b)(6) stage.
The Court recognizes that the Third and Eighth Circuits have reached a contrary interpretation of the FDCPA. See Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 32-33 (3d Cir.2011) ("[T]he FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts."); Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir.2001) ("[I]n the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid."). In addition, one district court in the Southern District of Texas has followed the Third and Eighth Circuits' construction of the statute, reaching the conclusion advocated by Defendants. See Daugherty v. Convergent Outsourcing, Inc., No. CIV.A. H-14-3306, 2015 WL 3823654, at *6 (S.D.Tex. June 18, 2015).
However, these courts reach an interpretation of § 1692 that the plain text of the FDCPA does not support. To conclude that § 1692 is violated only where the letter seeking collection of a time-barred debt actually threatens litigation is to confuse a sufficient condition for a necessary condition.
Having concluded that a debt collector's misrepresentation about the limitations period on a time-barred debt is sufficient to establish a violation of the FDCPA, the Court turns then to the question of whether Plaintiff's allegations as to the particular dunning letter received by Ms. Carter satisfy the pleading requirements under Rule 12(b)(6). Under the "facial plausibility" standard that a complaint must meet to survive a Rule 12(b)(6) motion, Iqbal, 556 U.S. at 678, 129 S.Ct. 1937, the question here is whether it is plausible that Defendants' letter could mislead an unsophisticated consumer into thinking that her debt is enforceable in court. More specifically, could a debt collector's "exten[sion] [of a] ... settlement offer" on a debt — where there is no indication that the statute of limitations has run — plausibly be read by an unsophisticated consumer to imply that payment could be compelled through litigation? See Compl. Ex. A (Doc. No. 1) (emphasis added).
The Court finds it plausible that an unsophisticated consumer could believe that an offer of settlement on a debt (where there is no disclosure that the debt is time-barred) implies that the debt collector has a right to sue on the debt. Both the Sixth and Seventh Circuits have concluded that "an unsophisticated consumer could be misled by a dunning letter for a time-barred debt, especially a letter that uses
Furthermore, the federal agencies tasked with enforcing the FDCPA — the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) — have concluded that "`consumers can be misled or deceived when debt collectors seek partial payments on stale debt.'" Plaintiff's Opp. to Defs.' Mot. Dismiss 19 (Doc. No. 11) (quoting Brief of Amici Curiae FTC and CFPB Supporting Affirmance, Delgado v. Capital Management Servs., L.P.); see also id. 12-17 (discussing numerous reports, amici curiae briefs, and enforcement actions filed by the FTC and CFPB); Compl. ¶¶ 42-46 (same). The FTC has found that "most consumers do not know or understand their legal rights with respect to the collection of time-barred debt, so attempts to collect on stale debt in many circumstances may create a misleading impression that the consumer could be sued." FEDERAL TRADE COMM'N, THE STRUCTURE AND PRACTICE OF THE DEBT BUYING INDUSTRY 47 (Jan. 2013) (citing FEDERAL TRADE COMM'N, REPAIRING A BROKEN SYSTEM: PROTECTING CONSUMERS IN DEBT COLLECTION LITIGATION AND ARBITRATION (2010)). Although the Court is not compelled to defer to the agencies' view,
In addition to the agencies' findings, Plaintiff also submits a research study published by Plaintiff's disclosed expert witness, Psychology Professor Timothy Goldsmith, which explains why "the fact that a debt is time-barred is material to the least sophisticated consumer" and why its nondisclosure may therefore be misleading and unfair. Plaintiff's Opp. to
For all of these reasons, the Court finds that Ms. Carter has stated plausible claims for relief under 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5), 1692e(10), and § 1692f. An unsophisticated consumer, faced with a dunning letter that (1) omits the fact that the debt is time-barred and (2) offers a "settlement" on the debt, could infer a legally enforceable obligation to pay the debt, when in truth no such obligation exists. It is therefore plausible that an unsophisticated consumer could view such a letter as false, deceptive, or misleading, in violation of § 1692e; as a false representation of the character or legal status of the debt, in violation of § 1692e(2); as implicitly threatening to take an action that cannot legally be taken (i.e., suing the consumer), in violation of § 1692e(5); as a false representation or deceptive means to collect a debt, in violation of § 1692e(10); or, as an unfair or unconscionable means to collect a debt, in violation of § 1692f.
For the reasons set forth above, Defendants' Motion to Dismiss (Doc. No. 10) is
The same flaw — mistaking a sufficient condition for a necessary condition — is found in Defendants' and the Daugherty court's heavy reliance on the Fifth Circuit's opinion in Castro v. Collecto, Inc., 634 F.3d 779, 783 (5th Cir.2011). Defendants, like the Daugherty opinion, cite Castro for the proposition that "[i]n the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid." Defs.' Mot. Dismiss 5 (Doc. No. 10). See also Daugherty, 2015 WL 3823654, at *5 ("The Fifth Circuit appears not to have expressly decided this issue but, in a different context, Judge Dennis writing for the court [in Castro] cited Freyermuth and quoted its holding that `[i]n the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid.'" (citing Castro, 634 F.3d at 783)). Although Castro did quote Freyermuth approvingly, the Castro court cited Freyermuth not to take a position on the question at issue here and in Freyermuth — i.e., whether threatening litigation on a time-barred debt is necessary to make out a § 1692 claim. Rather, the Fifth Circuit cited Freyermuth for the entirely uncontroversial proposition that "[t]hreatening to sue on time-barred debt may well constitute a violation of the FDCPA." Castro, 634 F.3d at 783. In any event, even this proposition was stated merely as dicta. Castro never reached the issue of whether a debt collector threatening to sue on time-barred debt would constitute a violation of the FDCPA because the court instead held that the debt was not time-barred. See id. at 781.
