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U.S. Supreme Court Ruling May Threaten Consumer Protection Laws


A recent ruling by the U.S. Supreme Court may jeopardize consumer protection statutes like the Fair Debt Collection Practices Act. In Reed v. Town of Gilbert, Arizona, the U.S. Supreme Court struck down an ordinance that limited signs announcing church services in favor of ones promoting political candidates. Instead of striking down the ordinance on established First Amendment principles, Justice Thomas expanded the types of laws that can be subjected to the “strict scrutiny” test under the First Amendment. When a law is subjected to strict scrutiny, the government must show that it is narrowly tailored to serve compelling state interests. It is not a test that many laws pass.

The Court’s ruling expands the definition of “content-based” laws to include those that single out any topic for regulation. The FDCPA regulates specific types of speech. In particular, it prohibits debt collectors from making false or misleading representations, and prohibits them from using threatening or offensive speech when collecting debts. Whether the FDCPA’s content-based provisions would stand up to the strict scrutiny test has not yet been tested. However, the legislative history of the FDCPA does demonstrate that Congress had a specific state interest in mind when it sought to regulate the speech of debt collectors. In particular, Congress sought to level the playing field for both consumers and debt collectors that did not employ abusive collection tactics. Congress saw that abusive debt collection practices harm consumers in many ways. It sought to prevent those harms by specifically limiting the speech of debt collectors.

However, the FDCPA does not prevent debt collectors from engaging in speech. It instead imposes a “time, place, and manner” restriction on when, where, and how debt collectors may communicate with consumers. It’s also worth noting that the act of collecting debts, while requiring speech, is more so conduct than it is speech. Given that debt collection can be described as commercial conduct, it should not be subject to a standard like the strict scrutiny test. Traditionally, commercial conduct enjoys very little Constitutional protection; it is subject to what is called the rational basis test. If the state can prove that the law is rationally related to a legitimate government purpose, then it will pass constitutional muster. Congress has the power to regulate commerce between the states, so many acts of debt collection may also fall under that power.

Until cases adopting Reed make their way through the courts, it is impossible to tell what impact this case may have on many laws. Hopefully, its impact will be tempered by courts that seek to undo the result of Reed: removing the distinction between content-based and subject-matter restrictions on speech.