Multiple Interpretations and Credit Reporting: Third Circuit District Court Dismisses Plaintiff’s First Amended Complaint in FDCPA Case

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In Knight v. AR Res., Inc., a Third Circuit district court granted a defendant’s motion to dismiss a plaintiff’s first amended complaint in a Fair Debt Collection Practices Act (FDCPA) case. In its holding, the court emphasized that where there are multiple interpretations of language in a collection letter, neither of which are inaccurate and which reflect an outcome that could come to pass, the language is not false, misleading, or deceptive under the FDCPA.

In Knight, the plaintiff incurred a financial obligation to Union Emergency Med Assoc. (Union Emergency); Union Emergency hired the defendant to collect the debt; and the defendant sent a collection letter, stating in relevant part: “Please be advised that our client is a credit reporting client. Your credit report may have a negative impact if we do not hear from you.”

The plaintiff subsequently filed a putative class action in June 2020, alleging that the letter violated Section 1692e of the FDCPA as (1) it implies that “both [d]efendant and Union Emergency ‘will be credit reporting, which is threatening and deceptive to the least sophisticated consumer'”; and (2) that the statement — “Please be advised that our client is a credit reporting client” — is deceptive because “it is not clear whether either company will actually report to a credit reporting agency.”

The defendant filed a motion to dismiss in July 2020, which the court granted (without prejudice) in March 2021. Specifically, the court reasoned that “‘while the Letter could conceivably have two different meanings, neither is inaccurate,'” and it reasoned that the plaintiff failed to allege that the defendant “did not actually intend to make a negative credit report or could not legally do so.” The plaintiff amended her complaint — adding allegations that (1) ‘”[i]t is unlawful for both [d]efendant and [Union Emergency] to report the same debt twice to the credit bureaus … because it deceptively implies that the consumer is liable for two separate debts instead of one”; and (2) “‘language in the Letter threatening a negative credit report of the debt by [Union Emergency] is deceptive because [Union Emergency] never had any intention of following through with that threat.”

The defendant filed the instant motion to dismiss, which the court granted. The court held that the plaintiff’s new allegations failed to cure the deficiencies in the complaint.

First, regarding the plaintiff’s allegations that the letter violated the FDCPA by implying that the debt may be reported by either the defendant or Union Emergency, the court reasoned that it is “not unlawful for two entities to report the same debt,” and the plaintiff still failed to show how either reading of the letter is inaccurate or how the distinction of who would report the plaintiff’s account is material.

Second, the plaintiff alleged that the letter language stating, “Please be advised that our client is a credit reporting client,” was deceptive and violated the FDCPA because Union Emergency never intended to report the plaintiff’s debt. However, the court emphasized Third Circuit precedent in Bordeaux v. LTD Fin. Servs., L.P. that holds “where a letter ‘accurately reflect[s] an outcome that could come to pass, [it] cannot be viewed as “false and misleading” even to the least sophisticated debtor.'”

Accordingly, the court granted the defendant’s motion to dismiss the case without prejudice — giving the plaintiff 30 days to file a second amended complaint.

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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