Debtors brought suit against Plaza Associates debt-collection agency ("Plaza"), arguing that two statements in collection letters were deceptive. Debtors first alleged that a reduced balance settlement offer presented as "valid for a period" of set days would lead many consumers to believe that the offer represented a debtor's final opportunity to settle the debt. Debtors also challenged a statement which invited debtors to provide "satisfactory proof" that an account was in error, arguing that such a statement implies a debtor must furnish "proof" in order to "dispute" a claim.
The District Court granted summary judgment in favor of Plaza after rejecting the survey evidence presented by Debtors' expert witness, and the Seventh Circuit affirmed the decision.
As to the "valid for a period" language, the court explained that "a debt collector can, if authorized by the other creditor…make his initial offer a final one, [but] he cannot pretend that is a final one if it is not, in the hope the debtor will think it is final." To address this concern, the court suggested debt-collectors could include the following safe-harbor language: "We are not obligated to renew this offer." However, the absence of such language does not leave a "debt collector per se liable" under the FDCPA. Rather, evidence that "a sufficiently large segment of the unsophisticated are likely to be deceived" must be produced, "the most useful sort being the kind of consumer survey described in Johnson v. Revenue Management Corp., 169 F.3d 1057, 1060-1 (7th Cir. 1999)."
Regarding such surveys, the Court stated that a debtor must "show that the additional language of the letters unacceptably increases the level of confusion," and that "[a] properly designed control group is vital in a survey intended to reveal whether a debt collector is confusing debtors." And, in the case before the Court, it was confusion in the control group which was fatal to the survey's admissibility.
Debtors' survey interviewed 160 people, showing half a collection letter containing the "valid for a period" and "satisfactory proof" language, and half shown a letter without that language, the control group. For the "valid for a period" portion, respondents were asked what would happen if they did not accept the offer, and could answer three ways: offer renewable, last chance for settling, or "don't know / not sure." For the "satisfactory proof" portion, respondents were asked if they could dispute the debt without proof and could respond three ways: yes, no, "don't know / not sure."
The Seventh Circuit found that these surveys likely created too much confusion within the control group. For instance, the control letter did not mention a deadline for the "valid for a period" inquiry, and thus confused respondents as to how an offer could even be extended. The "satisfactory proof" inquiry was deficient because, among other things, there was no explanation as to how a debtor could "dispute a debt."
Ultimately, the Court found the surveys to be insufficient to meet the Debtors' burden and affirmed the summary judgment entered by the District Court. The Court concluded by recognizing that suits under the FDCPA "have repeatedly come to grief because of flaws in the surveys conducted by plaintiff's experts," and suggested that courts begin considering exercising their option of appointing their own expert.
Ralph T. Wutscher
Kahrl Wutscher LLP
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