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Deceptive Settlement Agreements and the FDCPA

In Hunter v. Capital Mgmt. Servs., LP, 13-CV-719C, 2013 WL 6795630 (W.D.N.Y. Dec. 19, 2013), Plaintiff sued Capital Management Services, for amongst other things, violation of the Fair Debt Collection Practices (FDCPA). The Court allowed Plaintiff's claim to proceed and denied the defendant's motion to dismiss the action. The FDCPA, specifically 15 U.S.C. § 1692e, is aimed at protecting consumers from false, deceptive, or misleading representation or means in connection with the collection of any debt. The statute seeks to help consumers by enumerating a long list of unacceptable practices in hopes of broadening the scope for that protection. The Court applied the most widely accepted test based on the "least sophisticated consumer" standard for determining whether a collection letter violates the FDCPA.

The Court concluded that Capital Management Services did violate the statute by falsely and deceptively inducing Ms. Hunter to enter into a settlement agreement which it did not intend to adhere to and/or intended to breach. The company sent a letter to Plaintiff on June 10, 2013 containing a false settlement offer which it revoked after the plaintiff had accepted it. After the Court applied the least sophisticated consumer standard and accepted the truth of plaintiff's allegations which plausibly give rise to an entitlement to relief under the FDCPA, the Court dismissed Capital Management Services' motion to dismiss the case.