Consumer Finance Litigation

For many of the claims asserted under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p (the "FDCPA"), courts are required to apply the "least sophisticated consumer" standard in evaluating the claim, an "objective" test that assesses the alleged violation from the perspective of the hypothetical "least sophisticated consumer." See Landeros v. Pinnacle Recovery, Inc., 692 F. App'x 608, 612-13 (11th Cir. 2017); see also Leonard v. Zwicker & Assocs., P.C., 713 F. App'x 879, 881-82 (11th Cir. 2017). But as the Eleventh Circuit again made clear earlier this month in Lait v. Medical Data Systems, Inc., No. 18-12255, 2018 WL 5881522 (11th Cir. Nov. 9, 2018), the so-called "least" sophisticated consumer is not as incompetent as the label suggests, nor is the "objective" standard that governs the test as indifferent to a plaintiff's individual knowledge as some courts have at times assumed.

In Lait, the Eleventh Circuit considered the appeal of the dismissal of the plaintiff's complaint for failure to state a claim under section 1692g of the FDCPA, which in relevant part requires a debt collector to send to the debtor "a written notice containing . . . the name of the creditor to whom the debt is owed." See 15 U.S.C. § 1692g(a)(2). According to the plaintiff, the defendant in the case, Medical Data Systems, Inc. ("MDS"), had violated this requirement by sending him a collection letter that "failed to 'meaningfully convey the name of the creditor'" for his debt, a medical debt that he had incurred at the hospital "Medical Center Enterprise" years earlier. See 2018 WL 5881522, at *1. More specifically, the plaintiff argued, first, that "it is plausible that [MDS] misidentified his creditor" in the letter (and therefore he had stated a valid claim under Rule 8 of the Federal Rules of Civil Procedure) because the letter did not expressly identify any entity using "the descriptive term 'creditor.'" See id. at *1-2. Second, the plaintiff asserted that even if the name of his creditor technically appeared somewhere in the letter, the letter still violated section 1692g(a)(2) because the creditor's name was not "effectively" conveyed such that "the least sophisticated consumer would understand his creditor's identity" after reading it. See id. at *2-3. In particular, he maintained that while the letter identified Medical Center Enterprise as the "Facility Name" that corresponded to his medical debt, the "least sophisticated consumer" would not understand that reference to mean that Medical Center Enterprise is also "the creditor to whom the debt is owed." See id. at *3; see also Lait v. Med. Data Sys., Inc., No. 1:17-cv-378, 2018 WL 1990513, at *4-5 (M.D. Ala. Apr. 26, 2018). The district court rejected both arguments and dismissed the case with prejudice. On appeal, the Eleventh Circuit affirmed.

In rejecting the plaintiff's initial argument that "it is plausible that [MDS] misidentified his creditor" in the letter in that he had alleged incurring the debt at Medical Center Enterprise, but had not alleged that Medical Center Enterprise (or any other entity) was the current creditor for the debt, the Eleventh Circuit explained that the argument "confuses the relevant inquiry." See 2018 WL 5881522, at *2. Specifically, the court credited the plaintiff's argument that "'it is always conceivable that a debt collector has misidentified the creditor,'" but noted that "[t]he problem for Lait is that his complaint did not actually allege a misidentification." See id. As a result, the Eleventh Circuit recognized that the plaintiff's argument was, in essence, an attempt to manufacture a claim based not on the well-pleaded facts alleged in his complaint, but a mere theory devoid of any factual matter to support it, and thus plainly insufficient to "'show[]'" an "'entitlement to relief.'" See id. (emphasizing that "on a motion to dismiss, a court evaluates the plausibility of a claim based on the allegations in the complaint, not the plausibility of a scenario that, if alleged, might have supported the claim") (internal citation omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 677-70 (2009) (citations omitted).

The Eleventh Circuit then turned to the plaintiff's second argument that MDS's letter "failed to meaningfully convey the name of his creditor" under the "least sophisticated consumer" standard, and in so doing continued to refine the parameters of the "objective" component on which the standard is based. Notably, the Eleventh Circuit has previously emphasized its intent to "generally resist[] tailoring the 'least sophisticated consumer' standard to the individual consumer," often noting that "[t]he inquiry is not whether the particular plaintiff-consumer was deceived or misled," but "'whether the 'least sophisticated consumer' would have been deceived' by the debt collector's conduct." Cf. Bishop v. Ross Earle & Bonan, P.A., 817 F.3d 1268, 1275 (11th Cir. 2016) (citation omitted); see also Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1258 (11th Cir. 2014) (citation omitted). In Lait, however, the court rejected the plaintiff's argument regarding what the "least sophisticated" consumer would understand about MDS's letter specifically because of the individual knowledge that the plaintiff alleged having prior to receiving the letter: "Lait did not receive this letter in a vacuum; rather, he acknowledges that Medical Data Systems sent it to collect on a purported debt he incurred during treatment at a hospital called 'Enterprise Medical Center.'" See Lait, 2018 WL 5881522, at *3. "Armed with that knowledge" and the sophistication that even "'[t]he least sophisticated consumer' can be presumed to possess . . . about the world'" (as well as the fact that "the only other entity referenced in the letter [wa]s [MDS], which explicitly identified itself as the collection agency"), the Eleventh Circuit held "there is no argument to be had that the least sophisticated consumer would think his creditor was anyone other than the hospital listed, Medical Center Enterprise," and thus affirmed the dismissal of the case, with prejudice. See id.

Given the Eleventh Circuit's significant reliance on the individual knowledge that the plaintiff in Lait had at the time he received MDS's letter, the court's basis for affirming the district court's decision could - at first glance - be viewed as somewhat of a departure from its prior rulings on the "least sophisticated consumer" standard. But in truth, the court's reasoning is simply a nuanced application of the standard, a recognition that any relevant "background knowledge" that an individual plaintiff possesses can and should be considered when assessing the FDCPA violation alleged. Indeed, while a plaintiff's subjective reaction to a debt collector's conduct is irrelevant under the "least sophisticated consumer" standard, what the hypothetical "least sophisticated consumer" would understand about the context of the dispute at issue is not. See id. (concluding that "[a] consumer who had been a patient at a hospital would surely understand the hospital to be the creditor when its name was listed next to the amount of the debt"). In other words, the Eleventh Circuit's decision in Lait is less a departure from prior rulings than a more thorough depiction of what the "objective" component of the "least sophisticated consumer" standard is in part designed to preserve, "'a quotient of reasonableness.'" See id.; Landeros, 692 F. App'x at 613 (citation omitted); see also Leonard, 713 F. App'x at 882 (citation omitted).