Over time, since the enactment of the Fair Debt Collection Practices Act (the “FDCPA”), the overwhelming majority of Circuit Courts have adopted a “least sophisticated consumer” or “unsophisticated consumer” test when evaluating whether a debt collector’s communications or actions with respect to collecting a debt were deceptive or unlawful. But in a recent appellate decision, the Tenth Circuit Court of Appeals held that a “reasonable consumer” test should be applied, deviating from the standard set forth by other courts.
In Tavernaro v. Pioneer Credit Recovery, Inc., Tavernaro borrowed under a student loan and later defaulted on the debt. The debt was thereafter sold to ECMC, who hired Pioneer to assist with debt collection efforts. In February of 2020, Pioneer sent a garnishment packet to Tavernaro’s employer which included ECMC’s information as holder of the debt, but later stated that Pioneer was acting to collect on ECMC’s behalf. Tavernaro later sued under the FDCPA, claiming that the materials were deceptive and that Pioneer tried to make it appear as if the garnishment packet, including the Order for Withholding of Earnings, was authored by ECMC as opposed to Pioneer. The trial court granted Pioneer’s motion to dismiss for failure to state a claim on the basis that the facts alleged were insufficient to find that the Order for Withholding of Earnings was materially deceptive. The Tenth Circuit upheld the lower court’s decision but embarked on further analysis of the appropriate standard to determine whether a representation made by a debt collector is materially misleading.
In its holding, the Tenth Circuit noted that the U.S. Supreme Court had, relatively recently, left unanswered the question of “whether a potentially false or misleading statement should be viewed from the perspective of ‘the least sophisticated consumer’ or an ‘average consumer who has defaulted on a debt.’” Sheriff v. Gillie, 578 U.S. 317, 136 S. Ct. 1594 (2016) (the Court declining to rule on this issue because it found that the communications at issue were truthful). The Tenth Circuit further reasoned that the “least sophisticated consumer” and “unsophisticated consumer” standards adopted by other federal circuits are vague, difficult to apply, and that if the legislature intended for such a standard to be applied, then it would have expressly included that standard within the text of the FDCPA. It did not, so therefore, the Tenth Circuit applied the “reasonable” consumer/person standard so often applied by other agencies and courts when determining whether an alleged misrepresentation was material to that consumer. In applying the two-part reasonable consumer test, the Court first considered “whether the reasonable consumer could reasonably interpret the representation to have multiple meanings, one of which is untrue” and then, if so, “whether the reasonable consumer would have his ability to intelligently respond frustrated” by the misrepresentation. Applying this standard to the Tavernaro facts, the Court concluded no reasonable consumer would be materially misled by the subject garnishment communications.
In adopting the “reasonable consumer” standard, the question of what standard ought to be applied has certainly been made ripe for Supreme Court review by the Tenth Circuit, if it was not already. We will continue to monitor subsequent cases for relevant updates.