Tuesday, February 11, 2014

FYI: 7th Cir Affirms FDCPA Rulings in Favor of Debt Collectors on Debt Verification Notice Claims, Holds Other Statements Mere Non-Actionable Puffery

The U.S. Court of Appeals for the Seventh Circuit recently affirmed judgments in favor of several debt collectors in cases brought pursuant to 15 U.S.C. § 1692g(a)(4) of the federal Fair Debt Collection Practices Act (“FDCPA”).

 

In so ruling, the Seventh Circuit held that collection letters to debtors which stated that “[i]f you notify this office within 30 days from receiving this notice, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification,” but omitted the specific phrase “that the debt, or any portion thereof, is disputed,” did not violate the FDCPA  because any written request for verification of the debt constitutes a dispute for the purposes of the FDCPA.

 

Additionally, the Seventh Circuit held that the statement in a collection letter that “[w]e believe you want to pay your just debt” does not violate the FDCPA because it is mere puffery.

 

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

 

This action primarily concerns whether a letter sent to a debtor to collect a debt must include the language in 15 U.S.C. § 1692g(a)(4) “that the debt, or any portion thereof, is disputed.”

 

Four plaintiffs brought suit against four separate defendants alleging that similar debt collection letters were sent in violation of 15 U.S.C. § 1692g(a)(4) of the FDCPA.

 

Between 2012 and 2013, the plaintiffs received letters from the defendants that read, in pertinent part, as follows:

 

“Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office within 30 days from receiving this notice, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification.”

 

The Seventh Circuit noted that the first sentence of this letter is an attempt to comply with 15 U.S.C. § 1692g(a)(3), which requires the debt collector to include “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”

 

The Court also noted that the second sentence is an attempt to comply with 15 U.S.C. § 1692g(a)(4), which requires the debt collector to include a “statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector.” 

 

The plaintiffs asserted that the letter does not adequately provide the notice required by 15 U.S.C. § 1692g(a)(4).

 

Because the second sentence in the notice omits the phrase “that the debt, or any portion thereof, is disputed,” the plaintiffs contend that it directs the consumer to request verification instead of directing the consumer to dispute the debt. In other words, under the plaintiffs’ theory, the second sentence should have read, “[i]f you notify this office within 30 days from receiving this notice that you dispute the debt or any portion of the debt, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification.”

 

Additionally, one of the consolidated plaintiffs’ letters contained the statement: “[w]e believe you want to pay your just debt” immediately preceding the notice language above. The plaintiff alleged that using the phrase “just debt” is misleading and improperly suggests that the debt’s validity has been confirmed.

 

The district courts dismissed all four actions for failure to state a claim. The plaintiffs appealed, and this consolidated appeal followed.

 

At issue in the appeal was whether defendants’ letters to the plaintiffs violated 15 U.S.C. § 1692(g)(a)(4).

 

As you may recall, FDCPA claims are  evaluated  under  the  objective  “unsophisticated  consumer” standard.  However, under Seventh Circuit law, an unsophisticated consumer is not the least sophisticated  consumer.  Zemeckis  v.  Global  Credit  &  Collection  Corp.,  679  F .3d  632,  634 (7th  Cir.  2012).

 

The plaintiffs argued that because  the  second  sentence  of  the  defendants’  letters  omits  the  phrase  “that  the  debt, or any portion thereof, is disputed,” it creates the risk that an unsophisticated  consumer who may wish to exercise their rights would fail to properly do so because they might be misled to request verification instead of disputing the debt.

 

The Seventh Circuit had little trouble rejecting this argument because “the consumer can, without giving a reason, require that  the  debt collector  verify  the  existence  of  the  debt  before  making  further efforts to collect it.” DeKoven v. Plaza Assocs., 599 F. 3d 578, 582 (7th Cir . 2010). 

 

According to the Court, any consumer that wrote and sought verification of a debt would be disputing the debt for the purposes of the FDCPA and would be entitled to all of the same protections under the FDCPA as if they had written to dispute the debt. Thus, the Court held, a request to verify the existence of a debt constitutes a “dispute” under the FDCPA.

 

One of the plaintiffs also argued that because the statement  “[w]e  believe  you  want  to  pay  your  just  debt” appears immediately before the obligatory 15 U.S.C. § 1692g language, it overshadows and is inconsistent with the notice, rendering the letter misleading in violation of the FDCPA.  Alternatively, the plaintiff argued that the phrase “just debt” implies that judgment has already been rendered against the  recipient of the letter.

 

The Seventh Circuit also found this argument unavailing. The Seventh Circuit determined that the cases the plaintiff cited in support of this argument are distinguishable because they involved notices containing  incoherent and contradictory language.

 

For  example, in Avila v.  Rubin,  84 F .3d  222  (7th  Cir .  1996),  the  disputed  notice  informed  the consumer of their right to dispute or verify the debt.  However,  the  notice  was  followed  by  the  language  “[i]f  the above  does  not  apply  to  you,  we  shall  expect  payment  … within ten (10) days from the date of this letter .” Id. at 226.   Thus, “telling a debtor  he has 30 days to  dispute the debt and following that with a statement that  ‘[i]f  the  above  does not  apply’  you  have  ten  days  to  pay  up  or  real  trouble  will  start is  entirely  inconsistent”  with  the  FDCPA.  Id.

 

Similarly,  in Chuway v. Nat. Action Fin. Servs,  Inc.,  362  F .3d  944 (7th  Cir .  2004),  the  issue  was whether  the  letter  clearly  stated  the  amount  of  the  debt that  the debt  collector  was  attempting  to  collect.  The  letter stated  the  balance  was  $367.42.  However,  the  letter  also directed  the  consumer to  call  a  1-800  number to  obtain  current balance  information.  The letter  was confusing to  the  unsophisticated  consumer because  its  reference  to  the “current balance” could be interpreted to  mean that  the  debt collector was trying to  collect a debt higher than $367.42 that could only be discovered  by  calling  the  1-800  number.  Here,  plaintiffs do not allege that the amount of the debt is unclearly stated.

 

Thus, the Seventh Circuit held that a letter containing the statement “[w]e  believe you want to pay your just debt” does not direct the consumer to take any action at all.  Instead, the Court held, it merely characterizes the debt as “just.”  Considered in the context of the letters in this record,  the  phrase  “just  debt” is simply a congenial  introduction to the verification notice and is best characterized as “puffing, in the sense  of  rhetoric  designed  to  create  a  mood    .”  Taylor  v. Cavalry Inv., LLC, 365  F. 3d  572,  575  (7th  Cir.  2004).  Mere puffery  does not  violate  §  1692g(a)(4).  Id.  Consequently ,  the  statement  “[w]e believe  you want  to  pay your  just  debt” does not  violate  the FDCPA.

 

Thus, the Seventh Circuit held that the defendants’  notices  to  the  plaintiffs  did  not  violate 15 U.S.C. § 1692g(a)(4) of the FDCPA because any written request for verification of the debt constitutes a dispute for the purposes of the  FDCPA.  Furthermore, the Court held that the statement “[w]e  believe  you want to  pay  your  just  debt”  does  not  violate  the  FDCPA because  it  is mere puffery.

 

Accordingly, the Seventh Circuit affirmed the judgments entered for the defendants.

 

 

 

 

Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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RWutscher@mwbllp.com

 

Admitted to practice law in Illinois

 

 

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