Labeling Requirements Under the FDCPA
Plaintiff Smith believed she had grounds for a lawsuit based on the verbiage used on a notice. What are labeling requirements under the FDCPA? A new piece of litigation sheds some light.
Smith received a letter notifying her of outstanding debt. The letter identified PayPal Credit as the client and Comenity Capital Bank as the “original creditor.” This is because, according to court documents, “Comenity Capital Bank is the actual creditor, [but] the bank holds itself out as PayPal Credit in its transactions with consumers and thus would be more familiar with the PayPal name.”
Plantiff was not aware of this method, and so filed a lawsuit under the FDCPA with 2 sides. The first was that Simm failed to list the current creditor. The second was that the letter was false, deceptive or misleading.
The court sided with Simms, finding that the notice stated the creditor information appropriately. Keeping in mind the “least sophisticated consumer,” the court still determined the labeling requirements were met. They determined that based on the letter, it was clear the debt was owed to Comenity.
In Simms case, it was argued the FDCPA does not require the “current creditor” listed in their labeling requirements. The court agreed. It was also found no issue with listing both entities on the notice. In their words, PayPal “properly identified the current creditor because the “least sophisticated consumer” is unlikely to know that Comenity is actually providing the credit line.”
What It Means for You
This case provides insight into FDCPA labeling requirements when listing the creditor. This case confirms an earlier case, Maximiliano v. Simm Associates, that settled a similar dispute. It came down to recognizing the value in helping the consumer recognize the debt by identifying both creditors.