“Legal Action” Through the Eyes of the Least Sophisticated Consumer


In Fariasantos v. Rosenberg & Associates, LLC (Case No. 3:13cv543), a consumer brought a putative class action under the Fair Debt Collection Practices Act (the “FDCPA”) against a law firm. The consumer alleged that the law firm’s form collection letter violated the FDCPA by threatening to take any action that cannot be legally taken. More specifically, the consumer alleged that the collection letter: (1) made false and unintended threats to file civil actions in court in connection with the collection of home loan debt; and (2) misdisclosed the FDCPA’s cornerstone thirty day validation notice rights to the consumer by failing to make an accurate and truthful disclosure of the FDCPA’s provision that “unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” The consumer further alleged that the use of the term “legal action” in the collection letter violated the FDCPA because the law firm intended only to pursue a non-judicial foreclosure and not a lawsuit.

In response to the lawsuit, the law firm filed a motion to dismiss. In evaluating the motion to dismiss, the court was required to accept all well-pleaded allegations in the lawsuit as true and draw all reasonable factual inferences from those facts in the consumer’s favor. The lawsuit alleged that the lender did not refer the consumer’s loan to the law firm to filing a lawsuit and the law firm did not intend to file a lawsuit against the consumer.   In denying the law firm’s motion to dismiss, the court noted that Virginia is a “nonjudicial foreclosure state and thus, foreclosure in Virginia does not require judicial intervention.” Under the “least sophisticated consumer” standard, a statement is false or misleading if it can be reasonably read to have two or more meanings, one of which is inaccurate. The court further noted that the fact that “legal action” could mean a foreclosure and not a traditional lawsuit is not dispositive and the test is the “capacity for the statement to mislead” the least sophisticated consumer. The test is not whether the statement is actually misleading given an attorney’s understanding of the phrase “legal action.”   The court concluded that the law firm’s collection letter is open to the interpretation that a lawsuit is imminent because it is couched in terms of an anticipated future outcome and not mere possibility.

Also subject to the motion to dismiss was the consumer’s allegation that the collection letter’s failure to include the language “by the debt collector” or other similar language violated the FDCPA. In denying the motion to dismiss as to this count, the court found that the collection letter’s failure to state who would assume the debt’s validity did not comply with the FDCPA and no other language in the collection letter clarified or cured this omission.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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