Sheriff and the FDCPA’s Materiality Requirement

by Jeff Sovern

Yesterday the Supreme Court decided the Sheriff case.  One oddity about the case has to do with whether immaterial misrepresentations give rise to liability under the FDCPA.  Several circuits have held that misrepresentations have to be material to generate FDCPA liability.  See, e.g., Donohue v. Quick Collect, Inc., 562 F.3d 1027 (9th Cir. 2010).  That is consistent with the materiality requirements under common law fraud and the FTC Act.  On the other hand, the FDCPA imposes liability for technical violations of the statute even if the consumer overlooks the statements in question, making a materiality requirement seem inconsistent with the overall tenor of the statute. In footnote six of the Sheriff opinion, the Supreme Court declined to say whether immaterial misrepresentations give rise to FDCPA liability :

Because we conclude that the letters sent by petitioners were truthful, we need not consider the parties’ arguments as to whether a false or misleading statement must be material to violate the FDCPA, or whether a potentially false or misleading statement should be viewed from the perspective of "the least sophisticated consumer," . . .  or "[t]he average consumer who has defaulted on a debt" . . . .

Seems straightforward enough.  But now read note four:

Although respondents argued below that Sarah Sheriff’s inaccurate use of the "special counsel" designation also violates the FDCPA, they have not pursued that argument before this Court. In any case, the letter merely conveyed the debtor’s remaining balance, without any suggestion of followup action. Sarah Sheriff’s misstatement of her title thus qualifies as an immaterial, harmless mistake.

So in note six they're not deciding if the FDCPA includes a materiality requirement, but one of the reasons they give for there not being liability in note four is immateriality.  They give two other reasons for not imposing liability in that note, but one is that the mistake was harmless. OK, but wasn't the mistake harmless because it was immaterial–meaning that's just saying the same thing a different way?  And if the sole reason for not finding liability on this point is that the consumer didn't pursue it, why include the second sentence in the note? 



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