Tuesday, January 19, 2021

FYI: 6th Cir Holds Non-Compliance With IRS Regs on "Qualified Education Loans" Not Relevant to Dischargeability

The U.S. Court of Appeals for the Sixth Circuit recently held that loans incurred by a debtor to pay university tuition were "qualified education loans" under the Bankruptcy Code and thus were not dischargeable.

 

In so ruling, the Sixth Circuit rejected the debtor's arguments that:

 

-  "[I]mporting a definition from a separate statutory context should entail importing any attendant regulations as well;" and therefore that

 

-  The "loans are not qualified education loans because she never filed an IRS Form W-9S expressly certifying that the loans were incurred to pay 'qualified higher education expenses' and she never received a Form 1098-E that would follow that certification".

 

A copy of the opinion is available at:  Link to Opinion

 

The debtor took out 5 loans from a national bank totaling $76,049. The loan documents reflected that they were "[f]or students attending 4-year colleges and universities" and required the school to "certify the student applicant's year, enrollment status, loan amount (not to exceed the cost of education when combined with other financial aid), and recommended disbursement dates." The loans were disbursed directly to the university.

 

The debtor paid for several years and the loans were assigned to a new owner. The debtor filed a voluntary Chapter 7 bankruptcy petition and "listed the five … loans as dischargeable, claiming that they were not excepted under 11 U.S.C. § 523(a)(8)" and  then filed an adversary proceeding seeking an order that the loans were dischargeable.

 

The parties filed cross-motions for summary judgment and the bankruptcy court granted the loan owners' motion. The debtor appealed and the district court affirmed the  bankruptcy court. The debtor then appealed to the Sixth Circuit.

 

On appeal, the Court explained that subsection 523(a)(8)(B) "was enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 … [and] expanded to private loans § 523(a)(8)'s existing discharge exception for government-and-non-profit-backed educational loans. … Subsection (8)(B) defines qualified education loans by cross-reference to the tax code which in turn defines them, in relevant part, as: 'any indebtedness incurred by a taxpayer solely to pay qualified higher education expenses.'"

 

The Court agreed with the parties that it "should look to the initial purpose of [debtor's] loans, rather than their actual uses, to determine whether they fall within the scope of (8)(B)."

 

First, the Court pointed out, "the statutory definition of qualified education loan specifically focuses on whether the loan was 'incurred … to pay' qualified higher education expenses, rather than on its ultimate uses." In addition, "allowing debtors to discharge their student loans simply because they misuse the funds for non-educational expenses would not further Congress' goal of preserving the financial integrity of the student loan system."

 

The Court then analyzed the purpose to the loans by construing the loan documents, concluding that "[t]he bankruptcy court correctly concluded that the sole purpose of the … loans was to pay the cost of attendance at [university] minus the maximum amount of other financial aid [debtor] received."

 

The Court rejected the debtor's argument that the debtor's and university's status as 'eligible' were in dispute because the debtor "forfeited any dispute as to these facts by failing to raise them below." In addition, the debtor failed "to point to any evidence in the record, beyond the allegations in her complaint, that creates a dispute regarding these facts."

 

The Court also rejected as irrelevant to the issue of whether the loans are dischargeable the debtor's argument that "her non-receipt of IRS 1098-E forms and [the university's] failure to certify three of the five loans are also material facts."

 

The debtor's argument that the "loans are not qualified education loans because she never filed an IRS Form W-9S expressly certifying that the loans were incurred to pay 'qualified higher education expenses' and she never received a Form 1098-E that would follow that certification" fared no better. The Court reasoned that debtor "offers no authority for the general proposition that importing a definition from a separate statutory context should entail importing any attendant regulations as well, let alone any support for doing so in this specific context."

 

In short, the tax regulations relied upon by the debtor "have nothing to do with bankruptcy."

 

The Court affirmed the judgment of the bankruptcy court, concluding that because the "undisputed evidence in the record thus establishes that [debtor] incurred the … loans solely to pay her qualified higher education expenses at [university][,] … the loans are qualified education loans under 11 U.S.C. § 523(a)(8)(B)" and were not dischargeable.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Sunday, January 17, 2021

FYI: 7th Cir Upholds Dismissal of Two FDCPA Class Action Cases on Spokeo/Standing Grounds

The U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of consumers' claims that a collection letter used false, deceptive, or misleading representations, or otherwise unfair or unconscionable methods to collect a debt, in supposed violation of sections 1692e and 1692f of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (FDCPA).

 

Affirming the trial court's judgment on different grounds, the Seventh Circuit concluded that the bare procedural violation alleged by the letters' recipients failed to satisfy the "injury-in-fact" requirement to confer standing under Article III, as the consumers' complaint did not allege that the purported FDCPA violations injured them in any concrete way, tangible or intangible.

 

A copy of the opinion is available at:  Link to Opinion

 

In March 2017, a debt collector ("Debt Collector") sent a dunning letter to a consumer ("Consumer 1") regarding debt related to medical services.  The letter included the statement ""You want to be worthy of the faith put in you by your creditor … . We are interested in you preserving a good credit rating with the above creditor."

 

In August and September 2017, another consumer ("Consumer 2") received three similar dunning letters from the Debt Collector, which, respectively, included the following statements: (1) "Your creditor is interested in you preserving a good credit rating with them"; (2) "You do not want to lose our confidence. You want to be worthy of the faith put in you by your creditor …" and; (3) "[y]our creditor has placed your bill for collection. To avoid errors and to clear your credit record with the above creditor, send or bring your payment to our office, or pay online … ."

 

Consumer 1 and Consumer 2 (collectively, the "Consumers"), both represented by the same law firm, filed nearly identical class-action lawsuits against the Debt Collector alleging that the collection letters violated the FDCPA by containing false, deceptive or misleading statements in violation of § 1692e, and that the statements amount to an unfair or unconscionable means of collecting a debt in violation of § 1692f.

 

The Debt Collector moved to dismiss the Consumers' complaints, arguing that the complaint was untimely and failed to state a claim, and challenging the Consumers' standings.  The trial court judge concluded that the Consumers had standing and timely filed suit, but dismissed the complaints for failing to state a claim, holding as a matter of law that the statements within the collection letters did not violate §§ 1692e or 1692f. 

 

The Consumers appealed, and the Seventh Circuit consolidated the cases because they presented identical questions of law.

 

On appeal, the Seventh Circuit initially discussed the Consumers' Article III standing to bring their claims in federal court.  As you likely recall, to establish standing, a plaintiff has the burden to establish that it has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial ruling." Spokeo, 136 S. Ct. at 1547.  

 

Many disputes about standing —- including this one -- turn on the "injury in fact" requirement: that a plaintiff must demonstrate that he or she suffered 'an invasion of a legally protected interest' that is 'concrete and particularized' and 'actual or imminent, not conjectural or hypothetical.'" Id. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). 

 

The Seventh Circuit further noted that particularization is generally easy to understand—that it must "affect the plaintiff in a personal and individual way."  Lujan, 504 U.S. at 560 n.1; however, the concrete requirement can be trickier, as a concrete must be "real ,.. not abstract," but not necessarily tangible.  Spokeo, 136 S. Ct. at 1548-49.  In the context of a statutory violation, the injury-in-fact requirement of Article III is not satisfied for a "bare procedural violation" of a statute when the plaintiff has not alleged a concrete personal violation form the violation.  Id.

 

To analyze whether the Consumers met this threshold, the Seventh Circuit turned to recent rulings applying Article III standing analysis to violations of section § 1692g of the FDCPA. 

 

In Casillas v. Madison Avenue Associates, 926 F. 3d 329 (7th Cir. 2019), the plaintiff alleged that a collection letter violated section 1692g of the FDCPA by failing to inform her that if she wished to exercise her right to dispute the debt or demand verification of the creditor's identity, she had to do so "in writing" as § 1692g(a)(4) requires.  There, the Court concluded that because the consumer did not allege any injury or concrete harm by receiving a letter with an incomplete validation notice, that she lacked standing to sue.  Casillas, 926 F. 3d. at 339. 

 

However, in Lavallee v. Med-1 Solutions, 932 F. 3d 1049 (7th Cir. 2019), the collection letter received by the plaintiff did not provide any of the disclosures required by section § 1692g(a), which resulted in actual harm to the plaintiff from the statutory violation in that the debt collector sued her in state court to collect the outstanding debt.  Lavallee, 932 F.3d at 1053.  Because the plaintiff in Lavallee alleged that she "would have exercised her statutory rights [to dispute the debt and demand verification], thereby halting the collection litigation" if the debt collector had complied with its FDCPA notice obligations, the appellate court concluded that the plaintiff adequately plead a concrete injury to confer Article III standing.

 

Turning back to the case at bar, the Seventh Circuit concluded that the Consumers only generally alleged that certain statements in the collection letters were false, deceptive, or misleading, or unfair and unconscionable, but neither complaint alleged harm—or even an appreciable risk of harm—from the claimed statutory violation. 

 

Although the Consumers attempted to distinguish Casillas by arguing that their claims were raised under sections §§ 1692e and 1692f of the FDCPA, while Casillas alleged violations of section 1692g, the Seventh Circuit was not persuaded that the distinction made Casillas inapplicable or altered the Article III calculus. 

 

Because the Consumers failed to allege that the Debt Collector's FDCPA violation injured them in any concrete way as required under Article III, the Seventh Circuit concluded that their suits should have been dismissed for lack of standing. 

 

Accordingly, the Court modified the judgments to reflect a jurisdictional dismissal, and affirmed the trial court's judgment as modified.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

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Thursday, January 14, 2021

FYI: CFPB Issues Taskforce Report on How to Improve Consumer Protection in the Financial Marketplace

Last week the Consumer Financial Protection Bureau released its report from the Taskforce on Federal Consumer Financial Law. It is just shy of 900 pages and includes some 100 recommendations that, if implemented, would broaden the CFPB's regulatory oversight powers.

 

Noteworthy among the recommendations is that the CFPB be given the authority to license and regulate financial technology companies.

 

A day after the report's release, the Office of the Comptroller of the Currency issued a statement in which it endorsed the "need for federal charters" for fintechs but said that the regulatory responsibility for that task belongs with the OCC.

 

Key Recommendations as Stated by the Taskforce

 

-  Authorize the CFPB to issue charters or licenses to nondepository fintech companies, payments processors, and other financial service providers that provide lending, money transmission, and payment services.

 

-  Expand access to the payment system by unbanked and underbanked consumers and ensure consistent treatment by applying the same rules to similar products.

 

-  Research consumer credit reporting issues that arise in connection with a consumer's bankruptcy.

 

-  Consider the benefits and costs of preempting state law where conflicts can impede the provision of valuable products and services, such as regulation of fintech companies.

 

-  The CFPB and prudential regulators should eliminate overlapping examination subject areas and reconcile inconsistent examination standards that unnecessarily expend multiple resources and can cause confusion.

 

-  Dialogue with state regulators to bridge knowledge gaps and streamline regulation.

 

-  Exercise caution (a recommendation for the CFPB, Congress, and other federal and state regulators) in restricting the use of nonfinancial alternative data, which can be very useful indicators of creditworthiness.

 

-  Clarify the obligations of CRAs and furnishers with respect to disputes under the Fair Credit Reporting Act.

 

-  Assess periodically the accuracy and completeness of consumer credit reports.

 

-  Work with other agencies to create a unified regulatory regime for new and innovative technologies providing services similar to banks.

 

- Establish an independent review of the Bureau's regulatory cost-benefit analyses by staffing an office of the cost-benefit analysis at the Bureau.

 

Link to CFPB's January 2021 Press Release

Link to Volume 1 of the report

Link to Volume 2 of the report

 

Quick Background Recap

 

Back in October of 2019, the Bureau announced its Taskforce on Federal Consumer Financial Law to "examine the ways to harmonize and modernize federal consumer financial laws."

 

The goal was to "identify the gaps in knowledge" by doing some research to improve a consumer's understanding of the industry or to see whether there were some inconsistencies in existing regulations. A charter was created; money was allocated for the taskforce and additional CFPB personnel. The taskforce was to begin in January of 2020 and provide a report by January of 2021.

 

Link to the October 2019 announcement

Link to the January 2020 announcement

Link to the Taskforce page

Link to the charter

 

The Inspiration: the 1968 Commission and 1972 Report

 

The idea of this taskforce was inspired by the National Commission on Consumer Finance, which was a commission created under Title IV of the Consumer Credit Protection Act of 1968. 

 

A glance at the NCCF report is like a trip back in time. Link to the original 1972 report.

 

The 1968 Commission was to deliver a report by January 1971 – the report was published in five editions between 1972 and 1973 – regarding the following topics:

 

-  The adequacy of consumer credit arrangements at reasonable rates.

-  The adequacy of existing supervisory and regulatory mechanisms to protect the public from unfair practices and ensure the informed use of consumer credit.

-  The desirability of federal chartering of consumer finance companies, or other federal regulatory measures.

-  The present taskforce was more than just inspired by the idea of the 1968 Commission, many of the same recommendations made by the NCCF in 1973 are essentially recited and woven into the new report, including a significant portion dedicated to recommendations rejected in the wake of the NCCF report such as restrictions on wage garnishment, repossession, and default judgments.

 

Final Thoughts

 

At the time of the NCCF's report, the only legislation that existed under which the CFPB now has authority was Truth-In-Lending. Today, however, there is an extensive body of federal regulation of consumer financial services and an entire federal agency devoted to the subject.

 

Given this backdrop, the taskforce's remark that "federal supervision that was still a question at the time of the NCCF is now well evident," is not plausible. Yet it forms the foundation of what the report concludes is needed; namely, even greater regulation including oversight of new and yet to be discovered services and technologies that fall within its expansive view of what constitutes a consumer financial product or service.

 

As outlined in a recent study by the Mercatus Center at George Mason University, the impact of such outdated policies reduces the availability of financial services provided by small, innovative and community-based institutions.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

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Monday, January 11, 2021

FYI: 2nd Cir Holds Debtor Entitled to Bankruptcy Homestead Exemption for Non-Primary Residence

The U.S. Court of Appeals for the Second Circuit recently held that property in which a debtor's dependent son lived part-time with his father qualified for the so-called homestead exemption contained in section 522(d)(1) of the Bankruptcy Code, regardless of state law.

 

A copy of the opinion is available at:  Link to Opinion

 

The debtor and her former husband jointly owned a home that the former husband used as his primary residence. The debtor lived in an apartment in a nearby town with their son, who spent several days a week with the former husband at the subject property pursuant to the parties' parenting plan.

 

The attorney who represented the debtor in her divorce case sued her for unpaid fees and obtained a judgment for $70,943.40 plus interest, and recorded the judgment as a lien against the property.

 

The debtor filed bankruptcy, listed her interest in the property as exempt under 11 U.S.C. § 522(d)(1) and moved to avoid the judgment lien on the property. As you may recall, under § 522(b)(1), "[w]hen a debtor files for bankruptcy, she may 'exempt' certain interests from her 'estate,' thus removing them from the pool of assets available to satisfy her creditors."

 

Although the debtor admitted she didn't reside at the property, she argued that she was still entitled to the homestead exemption because her dependent son lived there part-time. The attorney creditor argued in opposition that "the term 'residence' in § 522(d)(1) should be read to mean 'primary residence.'"

 

The bankruptcy court granted the debtor's motion to avoid the judgment lien because her dependent son used the property as a "residence."

 

In so ruling, "the bankruptcy court rejected what it called the 'majority state law approach,' … [under which] courts interpret the word 'residence' in § 522(d)(1) by looking to the definition of 'homestead' under the relevant state's law, a definition which, in turn, often equates 'homestead' with 'primary residence.' … Instead, the bankruptcy court adopted what it called the 'minority plain meaning approach,' under which the terms 'residence' is interpreted, using traditional canons of construction, to include primary and non-primary residences."

 

The attorney creditor appealed to the district court, which "adopted the plain-meaning approach" and held that the debtor's interest in the property was exempt under § 522(d)(1) and the judgment lien was thus avoidable under § 522(f)(1)(A).

 

The creditor appealed to the Second Circuit, which affirmed the district court's judgment, concluding "that the term 'residence' in § 522(d)(1) covers both primary and non-primary residences."

 

The Second Circuit reasoned that the language of § 522(d)(1) "is unambiguous and the statutory scheme is coherent and consistent[,]" such that there was no need to engage in any further statutory construction by looking to how state law defined homestead.

 

"First and foremost, the ordinary meaning of the word 'residence' does not exclude non-primary residences. Unlike the concept of domicile, residence requires only 'bodily presence as an inhabitant in a given place,' and not a permanent intention to remain. … 'A person thus may have more than one residence at a time….' Congress's use of the standalone term 'residence' — as opposed to 'primary residence' or 'principal residence' — thus suggests that the homestead exemption is not limited to primary residences."

 

Because "[t]he text of the statute … militates quite clearly in favor of interpreting the term 'residence' in § 522(d)(1) to include both primary and non-primary residences[,]" and "Congress could have used the term 'homestead' or … 'principal residence' in § 522(d)(1), but it did not", the Second Circuit affirmed the judgment of the district court in favor of the debtor.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, Suite 603
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


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Friday, January 8, 2021

FYI: 6th Circuit Rejects 'Benign Language' Exception in FDCPA Envelope Disclosure Claim

The U.S. Court of Appeals for the Sixth Circuit recently held that the plain language of 15 U.S.C. 1692f(8), a provision of the federal Fair Debt Collection Practices Act (FDCPA) regulating what may be shown on an envelope when a debt collector communicates with a consumer by mail, does not include a "benign language" exception.

 

A copy of the opinion is available at:  Link to Opinion

 

A consumer appealed from a judgment entered against her after the district court granted a defendant's motion for judgment on the pleadings.

 

The consumer received a letter from the defendant demanding payment of a medical debt. The letter came in an envelope with two transparent glassine windows stacked on top of each other. Always visible through the lower window was the consumer's name and address. Likewise, always visible through the top window was an empty checkbox followed by the phrase "Payment in full is enclosed." Sometimes visible was also a second empty checkbox followed by "I need to discuss this further. My phone number is ___."

 

The consumer alleged that the visibility of the checkboxes and accompanying language "created the risk that anyone who caught a glimpse of Plaintiff's mail would recognize that she was receiving mail from a debt collector, causing her embarrassment and emotional distress." This, the consumer alleged, constituted a violation of 15 U.S.C. § 1692f(8), which prohibits a debt collector's use of "any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails…"

 

The defendant argued that Section 1692f(8) includes a "benign language" exception and that its letter did not violate the FDCPA because the markings were benign. The consumer argued that Section 1692f(8) should not be interpreted to include a "benign language" exception and, even if it did, the language visible through the glassine windows was not benign. The district court, noting a circuit split on the issue, agreed with the consumer, concluding that Section 1692f(8) should be read to include a "benign language" exception.

 

Because the appeal involved the interpretation of Section 1692f(8), the Court's task was to give effect to congressional intent. "If the language of the statute is clear, the court applies the statute as written." In re Corrin, 849 F.3d 653, 657 (6th Cir. 2017). However, where "the language is ambiguous or leads to an absurd result," courts may rely on extra-textual sources, such as legislative history or administrative guidance, to interpret a statute. Id.

 

On appeal, the consumer argued that the Court's interpretive task ends with the express text of the statute, which she maintained unambiguously forbids the markings visible through the glassine window. The defendant argued a literal reading of Section 1692f(8) would lead to absurd results, such that it is appropriate to go beyond the text of the statute and read a "benign language" exception – i.e., an exception for markings that do not indicate that a communication is from a debt collector – into the statute based on its legislative history and administrative guidance from the FTC.

 

Specifically, the defendant argued that Section 1692f(8) leads to an absurd result because it simultaneously endorses debt collectors' use of the mail to communicate with consumers while prohibiting debt collectors from including language and symbols on their envelopes that are necessary for communicating by mail – for example, the consumer's address and postage.

 

The Sixth Circuit noted a newly formed circuit split on this issue.

 

On one side, the Seventh Circuit has held that Section 1692f(8)'s plain text unambiguously prohibits markings on envelopes other than those "required for sending communications through the mail," the debt collector's return address, and, in limited circumstances, the debt collector's name. Preston v. Midland Credit Mgmt., Inc., 948 F.3d 772, 782, 784 (7th Cir. 2020).

 

On the other side, the Fifth and Eighth Circuits have held that Section 1692f(8) is ambiguous or that it leads to absurd results, invoking legislative history and administrative guidance to read a "benign language" exception into the statute. Strand v. Diversified Collection Service, Inc., 380 F.3d 316, 319 (8th Cir. 2004); Goswami v. American Collections Enterprise, Inc., 377 F.3d 488, 494 (5th Cir. 2004).

 

Here, the Sixth Circuit held that the consumer stated a claim for relief under Section 1692f(8) because its plain text forecloses a "benign language" exception. Relying on Preston, the Court noted that Section 1692f(8) "plainly sanctions the 'use of mails' to communicate with a debtor and therefore also sanctions the use of the language and symbols required for sending communications through the mail." Preston, 948 F.3d at 782.

 

"Put differently, the blanket prohibition on 'any language or symbol' is triggered only 'when communicating with a consumer by the use of the mail' and thus operates under the presupposition that the envelope used by the debt collector will employ those features necessary to facilitate its delivery. In this context, the provision's blanket prohibition is best understood as prohibiting 'any language or symbol' on the envelope other than 'language or symbols to ensure the successful delivery of the communication,' with a statutory carve-out for the debt collector's return address and its name (where the name does not indicate that the sender is a debt collector)."

 

The Sixth Circuit believed that its reading of Section 1692f(8) was fully consistent with the FDCPA's three stated purposes, more so than a "benign language" exception.

 

First, the Court believed that interpreting § 1692f(8) to exempt language and symbols that facilitate mail delivery serves to "eliminate abusive debt collection practices by debt collectors." 15 U.S.C. § 1692(e). In addition, prohibiting language and symbols on envelopes aside from what is required for efficient mail delivery furthers the purpose of preventing embarrassment resulting from conspicuous language visible on an envelope that indicates that the contents of the envelope pertain to debt collection.

 

Second, the Sixth Circuit believed that "interpreting § 1692f(8) to only language and symbols that facilitate mail delivery insures that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged." According to the Court, "[t]his reading of § 1692f(8) applies across the board to all debt collectors and provides an easy-to-follow, predictable rule." In contrast, "[a] more flexible approach to § 1692f(8) – like a 'benign language' exception – would incentivize gamesmanship, disadvantaging ethical debt collectors that are unwilling to push the limits of the rule in favor of their less scrupulous exceptions."

 

Third, the Court believed that its interpretation better "promotes consistent State action to protect consumers against debt collection abuses[,]" since bright-line rules are easier to apply consistently. 15 U.S.C. § 1692f(e). As the Court noted, "as more and more courts apply the 'benign language' exception it becomes increasingly difficult to reconcile the results."

 

According to the Sixth Circuit, "[r]easonable minds may differ as to whether markings on an envelope are benign, but there can be little disagreement as to whether markings on an envelope are required to facilitate mail delivery. Thus, the narrower reading of § 1692f(8) better promotes consistency in the enforcement of the FDCPA."

 

Accordingly, the Court reversed the judgment of the trial court and remanded for further proceedings consistent with its opinion.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, Suite 603
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

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