Thursday, January 23, 2020

FYI: 6th Cir Holds Consumer Lacks Standing to Assert 'Meaningful Involvement' Claim, Not Every Technical Violation is Redressable

The U.S. Court of Appeals for the Sixth Circuit recently affirmed a trial court's ruling that a consumer lacked standing to pursue a lawsuit alleging that collection notices sent by a law firm violated the FDCPA because no attorney with the firm conducted a meaningful review of his debts.

 

The court's opinion is available at:  Link to Opinion

 

The consumer received two collection letters that were printed on the law firm's letterhead and signed by one of the firm's attorneys. The consumer alleged that those letters were sent to him without any meaningful attorney review. In an effort to support this conclusion, the consumer asserted that the law firm sends so many letters that no attorney could possibly review all of them. He also alleged that the signatures on the two letters were identical and appeared to be "stock signatures."

 

'Meaningful Involvement' Claim Requires Standing

 

As you may recall, the FDCPA (15 U.S.C. § 1692e(3)) prohibits debt collectors from falsely representing or implying "that any individual is an attorney or that any communication is from an attorney." The statute itself makes no mention of "meaningful involvement" or "meaningful review." Instead, courts created the meaningful-involvement doctrine to evaluate claims asserted under § 1692e(3) with respect to communications that bear an attorney's name or signature, but that are (in the words of one court) "not 'from' the attorney in any meaningful sense of the word." Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996).

 

The trial court dismissed the consumer's case, finding that the consumer lacked standing and that he failed to state a claim under the FDCPA. On appeal, the Sixth Circuit limited its review to the issue of standing, and affirmed the trial court's dismissal.

 

A Bare Allegation of Anxiety is Insufficient to Allege an Injury in Fact

 

To pursue a case in federal court, a plaintiff must demonstrate that he has standing, and an essential element of standing is a showing that the plaintiff suffered an "injury in fact" as the result of the defendant's alleged conduct. In this case, the consumer alleged that he suffered an injury in fact because the firm's letters made him feel anxious and caused him to fear that the firm would sue him if he did not pay.

 

The Sixth Circuit held that although a plaintiff might sometimes recover damages for emotional distress in an FDCPA action, a bare allegation of anxiety is insufficient to allege an injury in fact.

The Court also found that the consumer's alleged anxiety was insufficient to confer standing because it was self-inflicted and thus not traceable to the law firm's alleged conduct. That is, the Court determined that any anxiety suffered by the consumer was the result of his decision not to pay his undisputed debts, rather than the content of the law firm's letters.

 

Consumer's Procedural Violation Claim Also Insufficient

 

The consumer also argued that the alleged violation of § 1692e(3) was sufficient, on its own, to confer standing. The Sixth Circuit agreed that a plaintiff need not allege any additional harm when alleging that the defendant has violated a procedural right that was created by Congress to protect a "concrete interest." However, while it is clear that Congress enacted the FDCPA to protect consumers from abusive debt-collection practices, the consumer could not show that the law firm's letters caused him any harm that the FDCPA was intended to prevent.

 

The Court distinguished the procedural violation alleged by the consumer from procedural violations found to be sufficient to confer standing in other cases, such as violations that subjected the consumer to attempts to collect debts that the consumer did not owe and violations that placed consumers at risk of waiving rights protected by the FDCPA.

 

Standing is Subjective, Not Every Technical Violation is Redressable

 

Not every technical violation of the FDCPA is redressable in federal court, and some cases are subject to dismissal due to the plaintiff's lack of standing. But the Supreme Court has noted that it is often difficult to determine when a plaintiff has sufficiently alleged an injury in fact resulting from the violation of a procedural right created by Congress.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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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Tuesday, January 21, 2020

FYI: CFPB Increases Maximum Amount of Civil Monetary Penalties

Effective January 15, 2020, the federal Consumer Financial Protection Bureau increased the maximum civil monetary penalty it can impose within its jurisdiction. The increases are required by federal law, which requires agencies to adjust for inflation each civil monetary penalty within an agency's jurisdiction by Jan. 15 of each year.

A copy of the announcement is available at:  Link to Announcement

The adjusted penalties are as follows:

Law

Penalty description

Penalty amounts established under 2019 final rule

New penalty amount

Consumer Financial Protection Act, 12 U.S.C. 5565(c)(2)(A)

Tier 1 penalty

$5,781

$5,883

Consumer Financial Protection Act, 12 U.S.C. 5565(c)(2)(B)

Tier 2 penalty

28,906

29,416

Consumer Financial Protection Act, 12 U.S.C. 5565(c)(2)(C)

Tier 3 penalty

1,156,242

1,176,638

Interstate Land Sales Full Disclosure Act, 15 U.S.C. 1717a(a)(2)

Per violation

2,014

2,050

Interstate Land Sales Full Disclosure Act, 15 U.S.C. 1717a(a)(2)

Annual cap

2,013,399

2,048,915

Real Estate Settlement Procedures Act, 12 U.S.C. 2609(d)(1)

Per failure

94

96

Real Estate Settlement Procedures Act, 12 U.S.C. 2609(d)(1)

Annual cap

189,427

192,768

Real Estate Settlement Procedures Act, 12 U.S.C. 2609(d)(2)(A)

Per failure, where intentional

190

193

SAFE Act, 12 U.S.C. 5113(d)(2)

Per violation

29,192

29,707

Truth in Lending Act, 15 U.S.C. 1639e(k)(1)

First violation

11,563

11,767

Truth in Lending Act, 15 U.S.C. 1639e(k)(2)

Subsequent violations

23,125

23,533

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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   |   Texas   |   Washington, DC

 

 

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Friday, January 17, 2020

FYI: 5th Cir Reverses Class Cert in FDCPA "Threat of Legal Action" Case

The U.S. Court of Appeals for the Fifth Circuit recently reversed certification of a consumer class alleging that a debt collection letter violated the federal Fair Debt Collection Practices Act ("FDCPA").

 

In so ruling, the Fifth Circuit held that certification of the class was inappropriate because the collection letter's purported false threats to take legal action was not capable of classwide resolution.  As such, the proposed failed to satisfy Federal Rule of Civil Procedure 23's commonality, typicality, and predominance requirements. 

 

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

 

A medical patient (the "Patient" or "Class Representative") who failed to pay for medical care received a series of collection letters from the medical center's ("Medical Center") voluntary debt collection service provider regarding unpaid medical bills.

 

One such letter (the "Collection Letter") advised that the account was delinquent despite past requests for payment, and that if it was the Patient's desire to clear its account, she "need[ed] to promptly remit the balance in full," and concluded stating "[t]o discuss payment arrangements call our office." 

 

The Patient did not contact the Debt Collector to discuss debt repayment programs, but instead contacted the Medical Center who advised that she could enter a payment plan if she made an upfront payment — which she could not afford.  The Patient claims that during the course of these conversations, she was under impression that the Medical Center would sue her to collect the outstanding debt.

 

The Patient/Class Representative brought claims on behalf of herself and all others similarly situated (the "Class Members") against the Medical Center's debt collector and its surety bondholder (the "Debt Collector") alleging that their collection letter violated the FDCPA by falsely threatening legal action against her and Class Members even though the medical enter never intended to file suit over the unpaid medical debt.

 

The trial court denied the parties' cross motions for summary judgments concluding that questions of fact remained about (1) whether an unsophisticated consumer would construe the Collection Letter to threaten legal action, and (2) whether the Medical Center intended to take legal action against the Patient/Class Representative.

 

Later in the case, the Class Representative's motion for class certification was granted.  The Fifth Circuit subsequently granted the Debt Collector's motion for leave to appeal the class certification under Rule 23(f).

 

As you recall, the FDCPA prohibits the use of "false, deceptive, or misleading representation[s] or means in connection with the collection of any debt" (U.S.C. § 1692e) and expressly forbids debt collectors from making a "threat to take any action . . . that is not intended to be taken."  15 U.S.C. § 1692e(5). 

 

Additionally, to certify a putative class, the class must meet all four threshold conditions of Rule 23(a) — that "(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class"—conditions commonly known as "numerosity, commonality, typicality, and adequacy of representation." Fed. R. Civ. P. 23(a); Gen. Tel. Co. of the Nw., Inc. v. EEOC, 446 U.S. 318, 330 (1980))– along with one of the provisions of Rule 23(b). 

 

Here, the Class Representative sought certification under Rule 23(b)(3), which additionally requires "that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy"—conditions commonly known as "predominance and superiority."  Fed. R. Civ. P. 23(b)(3); Amchem Products, Inc. v. Windsor, 521 U.S. 591, 615 (1997).

 

On appeal, the Debt Collector argued that the putative class failed the commonality and typicality requirements of Rule 23(a) as well as the predominance requirement of Rule 23(b)(3).

 

Interpreting these provisions, the Fifth Circuit reasoned that to establish liability under the FDCPA, the Class Members must prove not only that the Collection Letter threatened legal action, but that it did so despite the fact that the Medical Center did not intend to pursue legal action.

Turning first to Rule 23(a)(2)'s "commonality" requirement, the Court reviewed the standard set by the Supreme Court in Walmart v. Dukes, 564 U.S. 338, 348 (2011) that commonality requires more than a shared cause of action or common allegation of fact, but a common legal contention capable of class-wide resolution.  Dukes at 349-50.

 

Here, although every member of the putative class received the same allegedly threatening Collection Letter, the FDCPA penalizes empty threats, not all threats.  Like the failed putative Title VII sex discrimination class in Dukes, the Fifth Circuit opined that because the record was devoid of the Medical Center's debt collection lawsuit filing  practices, and no evidence was submitted evidencing its actual intent to sue the Class Representative or Class Members, there was no "glue" here "holding the alleged reasons for all those [letters] together"—i.e. a uniform intention for the Medical Center to file suit.  Dukes at 352. 

 

Thus, the Class Representative failed to demonstrate that the Debt Collector's purported false threats to take legal action against the Class Members was capable of classwide resolution, and failed to carry her burden to "affirmatively demonstrate" commonality.  Id. at 350.

 

For this reason, the Fifth Circuit held, the Class Representative could not establish typicality under Rule 23(a)(3) because her claim could not be "typical of the claims or defenses of the class" without a common issue, nor predominance under Rule 23(b)(2) without demonstrating common issues that "predominate over any questions affecting only individual class members."  Fed. R. Civ. P. 23(a)(3); Fed. R. Civ. P. 23(b)(2); Falcon, 457 U.S. at 157 n. 13 ("The commonality and typicality requirements of Rule 23(a) tend to merge.").

 

Noting that there was no need to separately analyze whether the class failed under Article III standing, the Fifth Circuit noted that standing issues exist because there are undoubtedly members within the defined class of "all persons in Texas.. who received the [Collection Letter]" who ignored the letter and therefore lack a cognizable injury under Article III. 

 

However, the Court declined to reach the issue, because the Supreme Court repeatedly instructed that it should first decide whether a proposed class satisfies Rule 23, before deciding whether it satisfies Article III, and that there is no need to answer the latter question if the class fails under the former. See Amchem, 521 U.S. at 612 ("The class certification issues are dispositive; because their resolution . . . is logically antecedent to the existence of any Article III issues, it is appropriate to reach them first.") (additional citations omitted).

 

Because the Fifth Circuit determined that the putative class failed under Rule 23 and could not be certified, the order granting class certification was reversed and remanded to the trial court for further proceedings.

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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   |   Texas   |   Washington, DC

 

 

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Wednesday, January 15, 2020

FYI: 5th Cir Reverses Denial of Motion to Compel Arbitration in TILA Case

The U.S. Court of Appeals for the Fifth Circuit recently reversed the denial of a lender's motion to compel arbitration in an adversary bankruptcy proceeding for allegedly violating the federal Truth in Lending Act ("TILA"), holding that -- despite conflicting clauses in two different relevant agreements -- the parties had entered into a valid arbitration agreement that delegated the threshold issue of arbitrability to the arbitrator.

 

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

 

A borrower signed a loan agreement and also purchased insurance policies issued by the lender's subsidiary, both of which contained arbitration clauses.

 

Both agreements also delegated "to the arbitrator the power to decide gateway arbitrability issues, including whether a given claim is covered. The agreements, however, differed "over several procedural aspects of the arbitration, relating mainly to the selection and number of arbitrators, time to respond, location, and fee-shifting."

 

The borrower filed a Chapter 7 bankruptcy and brought adversary proceeding against the lender, alleging that it had violated TILA in its loan disclosures.

 

The lender moved to dismiss or compel arbitration, but the bankruptcy court denied the motion, holding that while the two agreements formed a single contract, the conflicting procedural provisions rendered them insufficient to form a contract to arbitrate under the law of the State of Mississippi.

 

The trial court affirmed and the lender appealed, arguing "that the arbitration agreements should be construed separately and that even if … construe[d] … together, the parties still formed a valid contract."

 

On appeal, the Fifth Circuit engaged in a two-step analysis. First, it looked to "state law to determine whether the parties formed 'any arbitration agreement at al.'" Second, it examined the contracts "to determine whether this claim is covered by the arbitration agreement."

 

However, the Court explained that "'the analysis changes' where the agreement delegates to 'the arbitrator the primary power to rule on the arbitrability of a specific claim.' … In such case, we ask only whether there is a valid delegation clause. If there is, then the arbitrator decides whether the claim is arbitrable."

 

In order to answer the first question, whether under Mississippi law "the parties created a valid contract to arbitrate[,]" the Court explained that it must "resolve two related issues. First, should the arbitration agreements be construed as one contract? Second, assuming we construe them together, did the parties have a meeting of the minds as to arbitration?"

 

First, the Fifth Circuit disagreed with the lender's argument that "the agreements should be construed separately because [it] assented only to the first arbitration agreement and not the second" given that it didn't sign the second one, so "only the first agreement applies." The Court reasoned that because "[u]nder Mississippi law, 'when separate documents are executed at the same time, by the same parties, as part of the same transaction, they may be construed as one instrument[,] … the bankruptcy court properly construed the agreements as one."

 

Next, the Court addressed whether the parties "entered into a valid contract to arbitrate despite inconsistencies in the contractual terms[,]" finding that although "Mississippi courts have not addressed whether conflicting terms in an arbitration agreement prevent a contract from forming[,]" the parties clearly expressed their intention "to arbitrate any dispute that might arise between them … and thus 'evidently intended to enter into a  binding contract.'" The procedural differences did not matter because the two agreements "speak with one voice about whether to arbitrate." Accordingly, the Court concluded that "under Mississippi law, the parties validly contracted to arbitrate."

 

The Fifth Circuit then reasoned that although "[o]rdinarily the next step—after concluding that there is a valid agreement—is to determine whether this claim is arbitrable[,]" since the lender "has pointed to a delegation clause, we ask only whether the parties 'evince[d] an intent to have the arbitrator decide whether a gen claim must be arbitrated." Concluding that "[t]hey did … [because] [e]ach agreement has a delegation clause that mirrors the one we held valid in [Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199 (5th Cir. 2016)] … it is for the arbitrator—not us—to decide whether [the borrower's] TILA claim is arbitrable. … It is similarly the arbitrator's province to resolve the inconsistent procedural terms."

 

The order denying the lender's motion to dismiss or compel arbitration was reversed, and the case was remanded with instructions "to refer the dispute to arbitration."

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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   |   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

 

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and

 

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Saturday, January 11, 2020

FYI: 9th Cir Affirms 25% Reduction in Plaintiff's Attorneys Fee Award

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court's order reducing the amount of attorneys' fees requested by class counsel by cutting the number of hours expended by class counsel by 25%.

 

In so ruling, the Ninth Circuit concluded that the trial court's order explanation of the lodestar calculation it conducted and application of the percentage-of-recovery analysis as a cross-check for reasonableness adequately explained its reasoning and did not abuse its discretion.

 

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

 

A plaintiff consumer ("Plaintiff") filed a putative class action lawsuit against an entertainment studio and distributor ("Defendants") who marketed James Bond DVD and Blu-ray boxsets purportedly containing "all the Bond films," but did not include two such films.  The suit alleged violations of Washington's Consumer Protection Act, breach of express warranties, and breach of the implied warranty of merchantability on behalf of a nationwide class of consumers.

 

The parties settled, and as part of the settlement,  Defendants agreed to pay attorneys' fees and costs to class counsel ("Class Counsel") as determined by the trial court and in an amount not exceeding $350,000 an incentive award to $5,000 to the named class plaintiff. 

 

Plaintiff moved, unopposed, for fees and costs and an incentive award consistent with the agreement.  However, the trial court awarded only $184,655 in attorneys' fees after conducting its own lodestar calculation, and applying a 25% across the board cut to class counsel's requested hours to "reflect a more reasonable representation of the work required."  Class counsel appealed.

 

Reviewing an award of attorney's fees, an appellate court's abuse of discretion standard affirms a trial court's award unless the trial court "applied the wrong legal standard or its findings were illogical, implausible, or without support in the record." Gonzalez v. City of Maywood, 729 F.3d 1196, 1201–02 (9th Cir. 2013) (quoting TrafficSchool.com v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011)). 

 

To determine the reasonableness of the award at issue, the Ninth Circuit cited its ruling In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011), which reversed and remanded the fee award where the trial court provided "(1) no explicit calculation of a reasonable lodestar amount; (2) no comparison between the settlement's attorneys' fees award and the benefit to the class or degree of success in the litigation; and (3) no comparison between the lodestar amount and a reasonable percentage award."  In re Bluetooth, 654 F.3d at 943.

 

On appeal, Plaintiff argued that the entire award was arbitrary because the trial court failed to provide an explanation as to why it chose a 25% cut, primarily relying on the Ninth Circuit's opinion in Gonzalez v. City of Maywood, 729 F.3d 1196 (9th Cir. 2013) which reversed and remanded the trial court's reduced fee award in a civil rights case, where the lodestar method is typically used.

 

Following the procedures it established in In re Bluetooth, the Ninth Circuit observed that in this case, the trial court provided an explicit lodestar calculation in determining the reasonable hourly rate and number of reasonable hours expended by class counsel and six reasons why a 25% reduction was appropriate. 

 

In addition, the Ninth Circuit noted, the trial court performed a percentage-of-recovery analysis as a cross-check, and observed that its lodestar calculation ($184,665) exceeded its 25% benchmark for percentage-of-recovery awards of the benefit achieved for the class ($138,600).  See In re Bluetooth, 654 F.3d at 945 quoting  In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 821 n.40 (3d Cir. 1995) (percentage-of-recovery method can be used to ensure that "counsel's fee does not dwarf class recovery."). 

 

Because the trial provided a clear explanation for its lodestar calculation and reasonableness cross-check allowing the appellate court to determine that the fee award was reasonable based on the record before it, its case law required nothing more. See, e.g., McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009)( ("[The district court] must explain how it arrived at its determination with sufficient specificity to permit an appellate court to determine whether the district court abused its discretion in the way the analysis was undertaken.").

 

The Ninth Circuit further distinguished the case at bar with its opinion in Gonzalez, noting that the trial court in that case provided an explanation that seemed arbitrary and "irreconcilable" with some of its conclusions,  Gonzalez, 729 F.3d 1196 at 1204-1205 (9th Cir. 2013).  By contrast here, the trial court provided a detailed explanation of the lodestar calculation and a percentage cross-check that demonstrated that even with the 25% cut to class counsel's hours, the fee award was higher than the percentage-of-recovery benchmark amount of 25% of the recovery to the class.

 

Accordingly, the trial court's substantially reduced attorneys' fee award was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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   |   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

 

Webinars

 

and

 

California Finance Law Developments

 

 

 

Thursday, January 9, 2020

FYI: 7th Cir Holds Collection Letter Properly Identified "Original" and "Current" Creditors Under FDCPA

The U.S. Court of Appeals for the Seventh Circuit recently affirmed judgment in favor of a debt buyer and debt collector against a consumer debtor alleging that the collector's debt collection letter violated the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 ("FDCPA").

 

In so ruling, the Seventh Circuit rejected the debtor's argument that the letter's identification of both the "original creditor" and "current creditor" was likely to confuse consumers, and held that the letter accurately and clearly identified the creditor to whom the debt was owed, in compliance with subsection 1692g(a)(2) of the FDCPA.

 

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

 

A consumer ("Debtor") defaulted on debt owed to a bank.  The debt was sold to a subsequent creditor (the "Debt Buyer"), who retained a debt collector (the "Debt Collector") to send a form collection letter (the "Collection Letter"). 

 

The Collection Letter advised that the Debtor's account had been "placed with our collection agency on 9-14-17," and that the Debt Collector's "client" had authorized it to offer a payment plan or a settlement of the debt in full.  The Collection Letter further identified the bank as the 'original creditor,' and the Debt Buyer as the 'current creditor,' along with the last four digits of the Debtor's account number and principal and interest balances due on the debt.

 

The Debtor filed a putative class action complaint against the Debt Buyer and Debt Collector alleging that the Collection Letter violated § 1692g(a)(2) of the FDCPA by "fail[ing] to identify clearly and effectively the name of the creditor to whom the debt was owed." 

 

The trial court entered judgment on the pleadings in the Debt Buyer and Debt Collector's favor, holding that the Collection Letter adequately identified the current creditor.  The instant appeal ensued.

 

The Seventh Circuit referenced prior rulings that "[t]o satisfy § 1692g(a), the debt collector's notice must state the required information 'clearly enough that the recipient is likely to understand it.'" Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317, 321 (7th Cir. 2016) (quoting Chuway v. Nat'l Action Fin. Servs., Inc., 362 F.3d 944, 948 (7th Cir. 2004)). 

 

In addition, potential FDCPA violations are viewed "through the objective lens of an unsophisticated consumer who, while 'uninformed, naïve, or trusting,' possesses at least 'reasonable intelligence, and is capable of making basic logical deductions and inferences.'" Smith v. Simm Assocs., Inc., 926 F.3d 377, 380 (7th Cir. 2019) (quoting Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000)).

 

On appeal, the Debtor argued that listing two separate entities as "creditor" without explaining the difference between the two, and stating that the Debt Collector was authorized to make settlement offers on behalf of the Debt Buyer (an entity that was previously unlikely known to the customer) could confuse its recipients as to whom the debt was actually owed. 

 

Citing the Seventh Circuit's ruling in Smith v. Simm Assocs., Inc., the Debtor argued that in that case, dismissal was affirmed because the letters in question did "not identify any creditor other than Comenity Capital Bank, which might have led to consumer confusion," and that here the Debt Collection's identification of an original and current creditor violated Smith.

 

The Seventh Circuit disagreed.  It held that the Collection Letter clearly identified the Debt Buyer as the current creditor, thus meeting the requirement under 1692g(a) that the written notice contain "the name of the creditor to whom the debt is owed."  15 U.S.C. § 1692g(a)(2). 

 

Moreover, the Debtor's argument under Smith was soundly rejected, as the original and current creditors in Smith were the same.  Here, the Collection Letter's identification of the original creditor (who the consumer is likely to recognize based on their past business relationship) and the current creditor (the Debt Buyer, which the consumer may not recognize and is required to be identified under the FDCPA) "provide[d] clarity for consumers" and an unsophisticated consumer would understand that his debt has been purchased by the creditor.  Smith, 926 F.3d at 381. 

 

Acknowledging the trial court's suggestion that the letter could have better clarified the parties' relationship by spelling out that the Debt Buyer purchased the debt from the original creditor, and that the Debt Buyer was the Debt Collector's client, the Seventh Circuit held that section 1692g(a)(2) only requires clear identification of the current creditor -— not a detailed explanation of transactions leading to the Debt Collector's notice.

 

Accordingly, the trial court's judgment in favor of the Debt Buyer and Debt Collector was affirmed.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th 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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