The U.S. Supreme Court has unanimously held that an independent contractor to the Ohio Attorney General did not mislead consumers in violation of the Fair Debt Collection Practices Act (FDCPA) when it used the Attorney General's letterhead in correspondence with consumers in collecting debts owed to the state. Nor did the use of Attorney General letterhead violate the FDCPA's prohibition on debt collectors' use of a name other than their "true name" in debt collection communications.

Under Ohio law, delinquent debts owed to state-owned entities including hospitals and universities are assigned to the Attorney General for collection. The Attorney General, in turn, hires "special counsel" to collect the debts on the state's behalf, directing them to send debt collection letters to consumers using Attorney General letterhead. The defendants in Sheriff v. Gillie sent letters on the Attorney General's letterhead as required and also included in their signature blocks their own contact information, the identities of their law firms, an indication that they were either "special" or "outside" counsel to the Attorney General, and a note indicating that they were debt collectors. The plaintiffs claimed the letters violated the FDCPA because they were false and misleading, because they falsely represented that they were from the state, and because they used a name other than their "true name."

The defendants argued at the district court level that none of this matters because, as "special counsel" to the Attorney General, they were agents of a state and thus exempt from the FDCPA. They also argued that the letters were not misleading because they accurately reflected the defendants' status as agents of the Attorney General. The District Court agreed and granted the defendants' motion for summary judgment. The Sixth Circuit, however, reversed, holding that the defendants were not agents of the state because they were only "independent contractors." The Sixth Circuit also held that there was a factual issue as to whether the letters were misleading and thus remanded the case for trial.

The Supreme Court reversed the Sixth Circuit. In doing so, the Court, as it put it, "pretermitted" this "state actor" argument and assumed arguendo that the defendants were not officers of the state. Even so, and despite the CFPB's amicus brief in favor of the plaintiffs, the Court unanimously held that the defendants did not violate the FDCPA because the letters were not misleading. Use of the letterhead accurately reflected the defendants' relationship with the Attorney General while the information in the signature blocks provided accurate non-misleading information about who was sending the letter.

Consumer advocates will argue that this case hasn't changed anything and should be applied narrowly to entities acting on behalf of the state. But it has broader implications, demonstrating that the overall impression of the letter matters in determining whether a letter is false and misleading under the FDCPA. Too often, plaintiffs harp on specific words or images and claim they are misleading, citing "confused" consumers. The Supreme Court was not swayed by that reasoning and instead, as support for that contention, gave the letter a reasonable reading and found that it was not misleading, regardless of the fact that some consumers claimed to be confused. Significantly, the Court stated that where the relevant facts are undisputed, application of the FDCPA to a challenged written communication to determine if it is false and misleading "is a question of law."

In addition, the Court clarified the prohibition on using something other than a debt collector's "true name," a heretofore undefined term in the FDCPA. The Court held that the FDCPA's prohibition means that "[a] debt collector may not lie about his institutional affiliation." In this case, the Court found that the defendants did not misrepresent their institutional affiliation because they were indeed affiliated with the Attorney General. This was especially so, the Court found, because the letters both identified who the defendants were working on behalf of and identified themselves as the ones with whom consumers would interact.

Attorneys in Ballard Spahr's Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).

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