FDCPA Update: Eighth Circuit Holds Collection Agency’s FCRA “Disputed Debt” Compliance Is Not Debt Collection Activity Under To The FDCPA.

In McIvor v. Credit Control Services, Inc., — F.3d —, No. 14-1164 (8th Cir. Dec. 14, 2014), plaintiff alleged Credit Control Services violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e(8), by failing to communicate that a debt was “disputed.”  Plaintiff alleged that she disputed a $242 debt to Credit Control by making an online report to consumer reporting agency TransUnion.  Further, TransUnion contacted Credit Control to investigate the dispute, but Credit Control failed to report the debt as “disputed.”

The Minnesota district court granted Credit Control’s motion to dismiss because plaintiff failed to plausibly allege the Credit Control’s communication with TransUnion was both “false, deceptive, or misleading” and “in connection with the collection of any debt.”

Plaintiff appealed.  The Eighth Circuit Court of Appeals affirmed, and held a claim under 15 U.S.C. § 1692e(8) for “false, deceptive, or misleading representation or means, in connection with the collection of any debt”, the debt collector’s action was both  “false, deceptive, or misleading” and “in connection with the collection of any debt.”  A false statement does not violate § 1692e if it would not mislead “an unsophisticated consumer.”  Here, the recipient of Credit Control’s false statement was TransUnion – not the consumer-plaintiff.  The challenged statement did not have the potential to mislead TransUnion, because it already knew the debt was disputed.  Thus, TransUnion was not misled or deceived and plaintiff did not plausibly allege Credit Control’s communication was “false, deceptive, or misleading.”

Importantly, the Eighth Circuit also joined the Third, Sixth and Seventh Circuits in holding that the phrase “in connection with the collection of any debt” encompasses more than simply a debt collector’s demands for payment made to the consumer.  For a communication to be in connection with the collection of a debt, “an animating purpose of the communication must be to induce payment by the debtor.”  The court rejected plaintiff’s argument that any communication about a debt from a debt collector to a consumer reporting agency is always intended to facilitate collection.  Because the only “animating purpose” for Credit Control’s communication with TransUnion is compliance with the reinvestigation procedures required by the Fair Credit Reporting Act and not “to include payment by” plaintiff, her claims were properly dismissed.

This case is significant for several reasons.  First, the Eighth Circuit now requires FDCPA claims to plausibly allege the communication was “false, deceptive, or misleading” and “in connection with the collection of any debt.”  The court’s interpretation of the phrase “in connection with the collection of any debt” requires the communication’s purpose to be to induce payment by the debtor.  The distinction between mandatory and permissive reporting requirements under FCRA are now critical; where FCRA reporting is mandatory, the “animating purpose” is not to collect a debt and thus not subject to FDCPA § 1692e.

We will continue to monitor decisions impacting FDCPA defense.  If you have any questions about this, or any other matter, please contact Bob Kuderer or Tom Brock.