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Why Your Letters Should Be Written for the Least Sophisticated Consumer

  • Written by Debra J. Ciskey

ciskey debra jOne would think that as we enter the 40-year anniversary of the passage of the Fair Debt Collection Practices Act, norms for language in collection letters would be established and letters would not be the subject of litigation. However, as long as we have disagreement in the Circuit Courts, we will continue to experience controversy over letters. I have chosen several letter-related issues that were of concern in 2016.

The collection of time barred debt, especially when letters offer settlements without notification to consumers that the debt is time barred and that payment of the debt could result in revival, continues to be controversial. The Third and Eighth Circuits, encompassing Pennsylvania, New Jersey and Delaware, hold that in 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. The Fifth, Sixth and Seventh circuits have held that collection letters offering to settle time-barred debts without disclosing the status of the debt can be misleading and therefore violate the FDCPA even if they do not expressly threaten litigation. The most recent case, decided in the Fifth Circuit, (Daugherty v. Convergent Outsourcing, Inc.) cited the FTC’s “Repairing a Broken System” report on debt collection litigation and arbitration, published in 2010, and enforcement actions in which debt collectors were required to inform consumers the debt collector cannot sue on a time barred debt, and to inform consumers that providing a partial payment might revive the collectors ability to sue on the balance. The Fifth, Sixth, and Seventh circuits rely heavily on the least sophisticated consumer standard, asserting that most consumers are not aware of the effect of the statute of limitations on debt and the fact that even a small payment can revive a debt that may be ineligible for collection by litigation.

In an effort to save expense or expedite communications to consumers, it is a common practice to use a backer on collection notices that provides notification of all state-required disclosures in which the debt collector is licensed or may contact consumers. These backers are sometimes not clear about the extent to which disclosures required by state law or regulation may be applicable to each individual consumer. In a 2016 case in Kansas, a debt collector lost its motion to dismiss in a case in which its backer did not clearly disclose that the Massachusetts disclosure relating to a consumer’s right to cease communication by a debt collector at his place of employment was applicable to Massachusetts consumers only. The court agreed with plaintiffs’ contention that the placement, bold font and all uppercase letters presentation of the notification could lead consumers to believe the disclosure applies to all consumers, not only residents of Massachusetts. The court provided examples from other decisions which were decided for the debt collectors in which they presented the state law requirements in a chart, clearly identifying the language that was applicable to residents of a certain state only. The least sophisticated consumer standard was applied to the scenario. The court said the least sophisticated consumer could be misled to believe the disclosure applies to all consumers, not just Massachusetts residents. Because the Massachusetts disclosure places an “in writing” requirement on consumers to permanently cease calls to them at their place of employment and the federal FDCPA does not, the prominence of the Massachusetts disclosure without an accompanying label can be a misrepresentation.

The reliance of the least sophisticated consumer standard remains the common thread in collection notice cases. Time, effort and care must be expended when revising existing notices or writing new collection notices. Just as you would when developing a presentation for new hires as compared to a presentation for clients, consider the audience for your letter. Make the assumption the letter will be examined under the least sophisticated consumer standard.

• Are you avoiding the use of industry or accounting jargon?

• Are you spelling out abbreviations, even those that you think are very common—for example, as you delineate which disclosures are applicable to residents of specific states, are you spelling out the name of the state?

• Is your attorney or compliance officer reviewing your new or revised letters?

• Who else can put eyes on your notices—for example, someone who might represent the least sophisticated consumer demographic?

Be sure you have a policy that describes the steps you take to ensure that your letters say what they mean and mean what they say, and document that you have followed the process for every revision or new letter you introduce.

There is an old adage in the collection industry that says, “letters don’t collect money, collectors collect money.” Rather than do what you have always done, take some time here at the beginning of the New Year to review your letters, retire those that are not profitable, and examine each one from a risk perspective. Sometimes letters cost more than they collect.


Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.