In Gonzales v. Arrow Financial Services, LLC, — F.3d —-, 2011 WL 4430844 (9th Cir. 2011), the Court of Appeals for the Ninth Circuit found that a debt collector’s dunning letters violated the FDCPA, and that recovery could be awarded under both the Rosenthal Act and the FDCPA. 


In 2002, Arrow purchased a portfolio of debts owed to health clubs. All of these debts were more than seven years old; accordingly, pursuant to the Fair Credit Reporting Act, 15 U.S.C. § 1681c(a)(4), none of these debts could be reported to a credit reporting agency.  Nevertheless, Arrow’s collection letters included language found in California’s CCRAA that ““NOTICE TO CALIFORNIA RESIDENTS: As required by law, you are hereby notified that a negative credit report reflecting on your credit record may be submitted to a credit reporting agency if you fail to fulfill the terms of your credit obligations.”  On January 28, 2005, Gonzales filed suit on behalf of himself and a putative class, claiming violations of the FDCPA and the Rosenthal Act, because the letter would likely cause recipients to believe that their failure to pay the debts would result in negative credit reports.  The district court certified a class to include 39,727 similarly situated Californians, and designated Gonzales as the class representative. On June 8, 2007, the district court granted summary judgment to Gonzales on the issue of liability under the FDCPA and the Rosenthal Act.    The district court then held a jury trial to determine the amount of damages. The court instructed the jury that class members could receive separate statutory damages pursuant to the FDCPA and the Rosenthal Act claims. The jury awarded Gonzales $250 on the FDCPA claim and an additional $250 on the Rosenthal Act claim. It awarded the class members $112,500 on the FDCPA claim and $112,500 on the Rosenthal Act claim. The total damages awarded were $225,500.


The Court of Appeals affirmed the district court’s summary judgment order, finding deceptive the letters’ statements regarding credit reporting.  “To the least sophisticated debtor, the phrase “if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled” suggests two possibilities. It suggests the possibility that Arrow was not reporting the debt to a credit reporting agency, and would accordingly make no further report in the event of settlement. But the phrase also suggests that, under some set of circumstances applicable to the recipient, Arrow could and would report the account.” 


As to damages, the Court of Appeals confirmed that the Rosenthal Act permits class actions. 


Every court to have considered the issue has held that class actions may proceed under the amendment to the Rosenthal Act, notwithstanding the contradictory “individual action” language in § 1788.30. See Palmer v. Stassinos, 233 F.R.D. 546, 548 (N.D.Cal.2006); Abels v. JBC Legal Grp., P.C., 227 F.R.D. 541, 548 (N.D.Cal.2005); Edstrom v. All Servs. & Processing, No. C04–1514 BZ, 2005 WL 645920, at *4 (N.D.Cal. Feb.22, 2005); McDonald v. Bonded Collectors, LLC, 233 F.R.D. 576, 577 (S.D.Cal.2005). In addition, although not expressly considering the issue, this court and at least two California courts have entertained class actions brought under the Rosenthal Act. See Irwin v. Mascott, 370 F.3d 924, 927–28 (9th Cir.2004); Fireside Bank v.Super. Ct., 40 Cal.4th 1069, 56 Cal.Rptr.3d 861, 155 P.3d 268, 271 (Cal.2007); Asset Acceptance, LLC v. Hansen, 2d Civ. No. B208548, 2009 WL 840047 (Cal.Ct.App. Apr.1, 2009). In light of the clear statutory language, unequivocal legislative history, and the unanimous agreement of the courts, we hold that the Rosenthal Act permits class actions.” 


The Court of Appeals also held that damages could be recoverable under both the Rosenthal Act and the FDCPA. 


We also reject Arrow’s argument that recovery under state and federal law contravenes the FDCPA’s implied ban on cumulative recovery. Simply put, there is nothing in the FDCPA from which to imply a per se prohibition on class recovery under both state and federal law. The only limit on class recovery under the FDCPA is that statutory damages for the class cannot exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector. 15 U.S.C. § 1692k. This limit is intended to ensure that “punishment[is] meted out according to a business’s ability to absorb the penalty.” Sanders v. Jackson, 209 F.3d 998, 1002 (7th Cir.2000).FN15 Those concerns are not at issue in this case. Here, the total damages awarded were $225,500: significantly less than the statutory limit. In this case, permitting recov-ery under the Rosenthal Act and the FDCPA is not inconsistent with section 1692k of the FDCPA.