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Tenth Circuit Adopts “Reasonable Consumer” Standard to Determine Materiality Under FDCPA


The standard courts should use to determine whether an alleged Fair Debt Collection Practices Act (FDCPA) violation is material remains unsettled. According to a recent Tenth Circuit decision, however, the standard should be that of the “reasonable consumer,” not the “least sophisticated consumer.” In other words, “the inquiry is whether the reasonable consumer could reasonably interpret the representation to have multiple meanings, one of which is untrue.”

In Tavernaro v. Pioneer Credit Recovery, Inc., the plaintiff defaulted on his student loan payment, and the account was sold to Educational Credit Management Corporation (ECMC), a federal student loan guarantee agency, which then contracted with Pioneer Credit Recovery, Inc. (Pioneer) to help collect the debt. Pioneer sent the plaintiff’s employer a packet containing an order to withhold earnings. The packet’s first two pages contained information about the alleged debt and ordered the employer to garnish the plaintiff’s wages. The first page prominently displayed ECMC’s name and logo and declared ECMC “is the holder of a defaulted federally insured student loan debt.” Near the middle of the second page, it stated that Pioneer is assisting ECMC “with administrative activities associated with this administrative wage garnishment.” The plaintiff sued for damages under the FDCPA, 15 U.S.C. §1692e-f, alleging that Pioneer employed deceptive and unfair means to collect the debt by making it appear that ECMC sent the correspondence. The district court, applying the least sophisticated consumer test, granted Pioneer’s motion to dismiss. The plaintiff appealed.

The Tenth Circuit began its analysis by acknowledging that the proper standard for determining whether statements are materially misleading is unsettled, noting that even the Supreme Court in its most recent FDCPA case, Sheriff v. Gillie, stated: “[It] has yet to decide ‘whether a potentially false or misleading statement should be viewed from the perspective of the least sophisticated consumer … or the average consumer who has defaulted on a debt.’” The appellate court continued its analysis, finding that the reasonable consumer standard had been utilized successfully by courts in false advertising and Truth in Lending Act cases. At the same time, courts have found the least sophisticated consumer standard to be vague and difficult to apply.

“Using the reasonable consumer to assess materiality is consistent with other consumer protection laws and provides courts and litigants with a comparable and familiar standard. And it is sufficiently protective of consumers, whether sophisticated or not.”

Employing this standard, the Tenth Circuit found that no reasonable consumer would be misled by Pioneer’s correspondence. “[T]he letter makes clear that ECMC owns the debt, Pioneer is a debt collector helping ECMC with the collection of the debt, and the letter is an attempt to collect the debt.”

Whether other circuit courts of appeal will adopt the reasonable consumer standard remains to be seen. Troutman Pepper will continue to monitor the decision and provide insights on broader implications in the near future.



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