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If a user types a couple of lines right after each other in chat, the avatar grows to it's maximum size.
So does the hat.
Because of the size of the mask and the short length of the name, the name gets hidden by the hat.
This can't possibly be by design.
I actually like the fact that the hat can hide some things (as long as they're not critical). It's part of what makes hats special, compared to just changing the avatar. And since you probably know the name in chat anyway, and worst case you can just click the avatar to find out, I don't have a problem with this.
