Providing a consumer multiple settlement options in one letter is not misleading or deceptive- even where one offer is featured more prominently than the other. Further, according to New Jersey District Court Judge Esther Salas, when reviewing multiple offers, the “least sophisticated debtor is expected to perform simple math.”

In Shoulars v. Halsted Financial Services, LLC (Case No: 21-16560, Dist. Ct. NJ), Halsted sent the consumer an initial demand letter which included a text box in the top right corner stating, “40% off your balance.” After identifying the creditor, the letter offered to settle for a lump sum payment. The amount listed in that offer was a 40% discount on the balance. The following line of the letter stated in the event the consumer “cannot take advantage of the above offer” Halsted would accept a settlement payable in monthly installments. The amount listed in the second offer was a 20% reduction. The standard disclosures were listed directly below the settlement offers.

The consumer filed a class action lawsuit alleging the letter overshadowed and contradicted the validation period and was false, deceptive, and misleading, thus violating Fair Debt Collection Practices Act (FDCPA). Halsted contended the letter complied with the FDCPA and moved to dismiss the suit.  

In its September 12, 2022 opinion, the court found that the offers did not overshadow or contradict the validation notice because the disclosures were on the front page, were the same size and font as the rest of the letter, and did not suggest the consumer had to pay her debt before the end of the validation period. The multiple offers did not violate the FDCPA because the second, less discounted, offer explicitly stated that it was an alternative if the consumer was unable to take advantage of the first offer. By performing basic math, the consumer should have been able to determine the monthly installment settlement offer was less of a discount than the lump sum payment settlement offer; thus there was nothing misleading about it. 

Regarding the opinion, Halsteads’ General Counsel Brian Glass remarked, “Of course, we are extremely pleased with the result obtained by Peter Siachos and Stephanie Imbornone of Gordon, Rees, Scully and Mansukhani.  Judge Salas dismissed this case with prejudice and reasoned that there was no need to allow the Plaintiff a second chance to amend its complaint if it would be futile, because the claims were based entirely on a singular letter.  All our letters are vetted in a multi-faceted approach, by industry professionals, to ensure compliance with Regulation F, the FDCPA, as well as state and local regulations.  The Court’s decision bolsters Halsted’s commitment to compliance, and helping consumers navigate the repayment of their debts in a fair and ethical manner.”

Read the full opinion here.

insideARM’s Perspective

While this is certainly a nice win for the industry, it is important to note that this case involved a pre-Regulation F initial demand, and it is a district court opinion with potentially limited reach. In other words, while it is undoubtedly a valuable case for the industry, operations professionals can still expect their compliance colleagues to analyze changes to initial demand notices. That said, the reasoning provided by Judge Salas brings some common sense to the "least sophisticated consumer" standard and makes clear that even the least sophisticated consumer cannot ignore the plain meaning of words on the page. 

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