Carrasquillo v. National Credit Systems, Inc.

Background

Shey Carrasquillo sued National Credit Systems, Inc. (NCS) and the Law Office of Brett M. Borland, P.C. (Borland) under the Fair Debt Collection Practices Act, a federal law that prohibits false, misleading, and unfair debt-collection practices. She alleged violations of 15 U.S.C. §§ 1692e, 1692f, and 1692g.

According to the amended complaint, a Massachusetts state court entered an $1,867.56 judgment against Carrasquillo in August 2022 for a debt owed to Faxon Commons Apartments. Carrasquillo later sent four money orders totaling $1,623 as partial payment. She believed the remaining debt was $260.54 plus applicable interest.

Faxon contracted with NCS and Borland to collect the remaining debt. NCS sent Carrasquillo a letter dated October 30, 2023, stating that she owed $5,534.20. Two days later, Borland sent a letter stating that she owed $3,922.20. Both letters referred to the same creditor and client account numbers and suggested that the amounts had been verified or validated. Carrasquillo alleged that the debt was later reported on her credit report, lowering her credit score.

Carrasquillo also alleged that the letters caused her confusion, distress, anxiety, embarrassment, humiliation, difficulty sleeping, and an increased heart rate. She said she spent time and money trying to clarify the debt and protect herself from the collection efforts.

Defendants’ Motion

NCS and Borland moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that Carrasquillo lacked standing—that is, the concrete injury required for a federal court to hear the case. They also moved under Rule 12(b)(6), arguing that the amended complaint did not adequately state a claim.

Standing

The court rejected the standing argument. It explained that a plaintiff cannot establish standing based only on a statutory violation and must allege a concrete harm connected to the defendants’ conduct.

The court found that Carrasquillo had alleged several concrete harms: spending time and money to clarify the debt, a likely increase in the debt from interest during the dispute, a lower credit score and related reputational harm, and physical and emotional effects caused by fear of owing thousands of dollars. The court concluded that these allegations were sufficient to establish standing. It therefore denied the motion to dismiss under Rule 12(b)(1).

Whether Carrasquillo Stated FDCPA Claims

The court also denied the Rule 12(b)(6) motion. It explained that the FDCPA prohibits false or misleading representations about the character, amount, or legal status of a debt and prohibits attempts to collect amounts not authorized by an agreement or permitted by law. A plaintiff does not need to allege that the debt collector acted intentionally because the FDCPA is a strict-liability statute. The alleged statement must, however, be materially false or misleading to the least sophisticated consumer, meaning a consumer with less-than-average knowledge or experience.

The defendants argued that their stated balances were correct and that the letters were not materially misleading. The court treated the alleged debt amounts as true at this stage and held that the defendants’ factual arguments were more appropriate for summary judgment, which is decided after the parties have had an opportunity to develop the evidence.

The court found that Carrasquillo plausibly alleged that both letters sought incorrect amounts and represented that those amounts were verified or validated. Even if the defendants’ explanation—that the balances decreased because of payments or disputes—were true, the letters could still mislead a least sophisticated consumer into believing that the consumer owed significantly more than expected. The court also noted that a collection notice can be misleading when it has more than one reasonable interpretation and at least one interpretation is inaccurate.

Finally, the court rejected the defendants’ argument that one defendant could not be responsible for the other’s conduct. Carrasquillo alleged that each defendant independently violated the FDCPA by sending its own collection notice. She did not rely on agency or vicarious-liability theories.

Disposition

The court denied the defendants’ motion to dismiss under Rule 12(b)(1) and Rule 12(b)(6). The Clerk of Court was directed to terminate the motion at ECF No. 38.