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Electronic Access to 1692g Validation Notice Not Good Enough

LAVALLEE v. MED-1 SOLUTIONS, LLC, No. 17-3244 (7th Cir. 2019).

The 7th Circuit affirmed a decision out of the Indianapolis Division of the Southern District of Indiana awarding summary judgment in favor of the plaintiff-consumer on their FDCPA claims.

The debt collector in this case sent messages to the plaintiff/debtor via email regarding alleged medical debt. The emails had links to a website where the plaintiff would have had to click a few links to download a .pdf file containing the validation notice required by 15 U.S.C. § 1692g(a) of the Fair Debt Collection Practices Act. The plaintiff never accessed the file (thus never receiving the notice) and the debt collector’s system knew the plaintiff never accessed the files.

The debt collector subsequently contacted the plaintiff and never sent any other validation notices.

Plaintiff, represented by Robert E. Duff, argued that the debt collector simply making the notice available electronically via a process the plaintiff would need to go through did not satisfy § 1692g(a) of the Act. The district court found in favor of plaintiff on summary judgment, and this 7th Circuit appeal followed.

The panel agreed with the district court that the plaintiff had standing under Article III of the U.S. Constitution and Spokeo.

As for the merits, the panel sided with plaintiffs that the emails were not communications for purposes of the FDCPA:

Everyone agrees that the November 12 phone conversation between Lavallee and a Med-1 employee was a “communication.” And if it was the initial communication, Med-1 was required to send Lavallee a validation notice within five days. Med-1 concedes that it did not. So to prevail on appeal, Med-1 must persuade us that its March and April emails were “communications” under the FDCPA.
As we’ve just explained, to qualify as a “communication” under the Act, a message must “convey[] … information regarding a debt.” Id. Med-1’s emails conveyed three pieces of information: the sender’s name (Med-1 Solutions), its email address, and the fact that it “has sent … a secure message.” The emails say nothing at all about a debt.
Med-1 insists that the emails should count as communications because they contain the name and email address of the debt collector. We disagree. Though we haven’t yet addressed the FDCPA’s definition of “communication,” the Sixth and Tenth Circuits have held that to constitute a communication under the Act, a message must at least imply the existence of a debt. In Brown v. Van Ru Credit Corp., the Sixth Circuit held that a message that didn’t “imply the existence of a debt” wasn’t a communication because “whatever information [was] conveyed [could not] be understood as `regarding a debt.'” 804 F.3d 740, 742 (6th Cir. 2015). In Marx v. General Revenue Corp., the Tenth Circuit considered a fax that didn’t “indicate to the recipient that [it] relate[d] to the collection of a debt” or “expressly reference debt,” and that could not “reasonably be construed to imply a debt.” 668 F.3d 1174, 1177 (10th Cir. 2011). The fax was therefore not a “communication” under the Act. Id.

Moreover, the process by which plaintiff would have had to go through was

There is a second and independent reason why the emails don’t measure up under § 1692g(a): They did not themselves contain the enumerated disclosures. To access the validation notice, Lavallee would have had to (1) click on the “View SecurePackage” hyperlink in the email; (2) check a box to sign for the “SecurePackage”; (3) click a link to open the “SecurePackage”; (4) click on the “Attachments” tab; (5) click on the attached .pdf file; and (6) view the .pdf with Adobe Acrobat or save it to her hard drive and then open it.
At best, the emails provided a digital pathway to access the required information. And we’ve already rejected the argument that a communication “contains” the mandated disclosures when it merely provides a means to access them. See Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 875 (7th Cir. 2000) (holding that a debt collector did not satisfy § 1692g(a) by providing a phone number that the debtor could call to obtain the required information).
Med-1 analogizes the information available through a hyperlink in an email to the information printed on a letter inside an envelope. The analogy is inapt.

Interesting note: the CFPB filed an amicus brief arguing that the debt collector failed to abide by the E-Sign Act, 15 U.S.C. §§ 7001 et seq. The CFPB argued that where a statute or regulation “requires that information … be provided or made available to a consumer in writing,” the E-Sign Act imposes conditions on the use of an electronic record to satisfy that disclosure requirement.

Here’s an excerpt from their brief explaining the basic requirement:

Under § 101(c), “if a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing, the use of an electronic record to provide or make available (whichever is required) such information satisfies the requirement that such information be in writing if” various conditions are met. Id. Those conditions include the consumer’s “affirmative[] consent[] to such use”; the provision to the consumer of a “clear and conspicuous statement” informing her of her right to withdraw consent and to receive the disclosure “on paper or in nonelectronic form”; and a disclosure of the “hardware and software requirements for access to and retention of the electronic records,” along with the consumer’s electronic consent (or confirmation of consent) “in a manner that reasonably demonstrates that the consumer can access information in the electronic form.”

7th. Cir.: Online Estimates From Zillow and Redfin Not Actionable

Link: Patel v. Zillow, Inc., No. 18-2130 (7th Cir. 2019).

The 7th Circuit affirmed two decisions from the Northern District of Illinois, confirming that a disgruntled property owner can’t sue Zillow (and likley similar sites like Redfin or Trulia) for the low “Zestimate” on its website. Plaintiff, on behalf of the class, alleged it was not licensed to issue appraisals and that its activity violated the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS §§ 510/1 to 510/7.

The court confirmed that the licensing statute at issue (  Illinois Real Estate Appraiser Licensing Act, 225 ILCS 458/1 to 458/999-99) does not confer a private right of action, and that as for the IUDTPA claim, that

the district judge was right to observe that the statute deals with statements of fact, while Zestimates are opinions, which canonically are not actionable. See, e.g., Sampen v. Dabrowski, 222 Ill. App. 3d 918, 924-25 (1st Dist. 1991) (where a valuation is explicitly labeled an estimate, there is no deception)…

FDCPA Overshadowing Claim Denied Where No Demand or Requirement to Pay

Link: Nieto v. MRS ASSOCIATES (N.D. Ill. Nov. 9 2018).

Plaintiff moved for summary judgment on their FDCPA 1692g claim, arguing that the Plaintiff received a second collection letter within the 30 day period they may dispute the debt (the “validation period”).

Plaintiff relied on prior decisions that an “unexplained demand for payment within the thirty-day validation period creates confusion by contradicting, and thus rendering ineffective, the validation notice.” Olson v. Risk Mgmt. Alternatives, Inc.,366 F.3d 509, 512 (7th Cir. 2004).

Plaintiff also relied on Bartlett v. Heibl, 128 F. 3d 497 (7th Cir. 1997),
 in which the Seventh Circuit held that demanding payment within a specific amount of time that is contrary to the 30-day validation period constitutes an FDCPA violation.

Judge Robert Blakey distinguished Bartlett and entered summary judgment for the Defendant:

This Court finds that the second letter is distinguishable from the letter in Bartlett in two crucial ways. First, unlike in Bartlett, there is no “demand” for payment anywhere in the second letter; the second letter neither states that Plaintiff “must” take action, nor threatens legal action if Plaintiff does not take action. [49-3]. Second, the letter in Bartlettcontained both the 30-day validation notice and a threat that the debtor would be sued if he did not take action within 1 week. Bartlett, 128 F.3d at 499. The second letter here, in contrast, merely conveys three settlement options, without mentioning or referencing the 30-day validation notice contained in the first letter. [49-3]. Thus, there is simply no “juxtaposition of the one-week and thirty-day crucial periods” that the Seventh Circuit cautioned against in Bartlett. 128 F.3d at 501.

FDCPA Overshadowing Claim Rejected

Link: NADBORSKI v. RECEIVABLE MANAGEMENT SERVICE CORPORATION (N.D. Ill. Nov. 8, 2018).

Plaintiff, represented by the Consumer Law Center, P.C., filed a class action alleging that the following language overshadowed the debtor’s rights under 1692g:


This is a request for payment of this account which has been placed by VONAGE for collection. Please remit your payment to the address above.
If you have not been contacted by an RMS representative, you will be receiving a call to bring this matter to a resolution. Should you receive this letter after a discussion with our representative, we thank you for your cooperation.

The Court, Ronald A. Guzman, disagreed:


Plaintiff’s assertion that the letter’s statement that he would be receiving a call contradicts the 30-day verification notice is just the type of idiosyncratic and unreasonable interpretation that the Seventh Circuit has stated is not violative of the FDCPA. Even an unsophisticated consumer, as defined above, would not believe that the promised phone call to attempt to resolve the matter somehow cancels out his right to seek verification of the debt.

. . .


According to Plaintiff, the letter is further confusing and overshadows his rights because RMS’s request that the consumer include the claim number in all communications[1]“contradicts the fact that a consumer does not need to provide specific information or wording in order to dispute a debt.” (Pl.’s Resp., Dkt. # 24, at 5.) This contention verges on the ridiculous.

Collector’s Reference to Faith in Debtor No FDCPA Claim

Link: Larkin v. FINANCE SYSTEM OF GREEN BAY INC. (E.D. Wisc. Nov. 8 2018).

Plaintiff filed an FDCPA 1692e claim based on a collection letter that contained the following:


You do not want to lose our confidence. You want to be worthy of the faith put in you by your creditor; yet the above past due account remains unpaid, possibly through an oversight on your part.
Please contact your creditor or our office to make arrangements for payment on the above account. We are interested in you preserving a good credit rating with the above creditor.

The Court Disagreed:

Larkin alleges that the unsophisticated consumer would be misled by the letter to believe that FSGB “has confidence” in her and that the creditor, Green Bay Radiology, “has faith” in her that she would lose if she did not pay her debt. But these statements are obviously true. Unless a radiologist is providing services for free, he or she no doubt trusts, i.e., has faith, that the person served will pay. Likewise, debt collectors likely have some confidence that many people, when provided notice of an outstanding debt, will pay if they are able. Otherwise, why make the effort? Larkin’s assertion that these innocuous statements imply that nonpayment will harm the physician-patient relationship is bizarre and idiosyncratic.

Mortgage Still “Valid Debt” Despite Being Unenforceable

Link: Bauer v. RoundPOINT MORTGAGE SERVICING CORPORATION (N.D.Ill Oct. 29 2018).

In seeking to foreclose on Plaintiff’s home, the mortgagee violated the single refiling rule in Illinois that says you can’t re-file the same lawsuit twice. As a result, the mortgage loan became unenforceable as a matter of law. (A recent Illinois Supreme Court Decision, First Midwest v. Cobo, also found this would apply to an action on the promissory note).

The mortgage companies continued to send statements, some demanding payments. Plaintiff, represented by Rusty Payton and Marc Dann of DannLaw, filed suit to quiet title and actions under the Fair Debt Collection Practices Act, the Truth in Lending Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, and the Illinois Consumer Fraud Act against the mortgage servicer (Roundpoint), the investor, and the foreclosure mill law firm Wirbicki Law Group, LLC.

Judge Virginia M. Kendall found that the debt was still “valid” even though it was legally unenforceable—meaning that many of the claims do not survive.

Although the single refiling rule prevents the defendants from pursuing another foreclosure action, extinguishing their legal remedy, the rule does not extinguish the right to the underlying debt—that remains. See Midland Funding, LLC v. Johnson, 137 S. Ct. 1407, 1411-12 (2017)Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679, 684 (7th Cir. 2017), cert. denied, 138 S. Ct. 736 (2018)(explaining that Illinois treats a “debt as a debt” because “[t]he creditor retains the legal right to appeal to the debtor to honor the debt out of a sense of moral obligation even if the legal obligation can no longer be enforced in court”); Owens v. LVNV Funding, LLC, 832 F.3d 726, 731 (7th Cir. 2016) (citing Fleming v. Yeazel,40 N.E.2d 507, 508 (1942) (“[T]he statute of limitations controls the remedy for recovery of the debt, but the debt remains the same as before, excepting that the remedy for enforcement is gone.”)).
Indeed, a creditor retains some right to payment, even if its remedy is no longer a legal one but a moral one. See Buchanan v. Northland Grp., Inc., 776 F.3d 393, 396-97 (6th Cir. 2015) (recognizing that a time-barred “debt remains a debt even after the statute of limitations has run on enforcing” and “[t]here thus is nothing wrong with informing debtors that a debt remains unpaid” and “to let the debtor know what the debt is and to ask her to pay it”); HBLC, Inc. v. Egan, 2016 IL App (1st) 143922 (2016) (citing Huertas v. Galaxy Asset Management, 641 F.3d 28, 32-33 (3d Cir.2011) (noting that “the FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts”).
Moreover, a debt once-unenforceable can become enforceable again under certain circumstances. 

However, the Court allowed one claim under the Fair Debt Collection Practices Act and two claims under the Illinois Consumer Fraud Act concerning Roundpoint’s threats to foreclose or legally enforce the mortgage debt.

Class Cert Denied Based on Defense to Rep’s Claim

Link: Heisler v. CONVERGENT HEALTHCARE RECOVERIES, INC. (E.D. Wisc., Sept. 27, 2018).

In an FDCPA lawsuit brought by Edelman Combs Latturner & Goodwin LLC, a district court found that because a class representative was arguably subject to a defense of judicial estoppel—and some unnamed class members were not—that he’s not an adequate class representative under Rule 23.


Again, CHRI argues that Heisler’s cause of action should be barred by judicial estoppel based on actions taken during the course of Heisler’s bankruptcy proceedings. Heisler disputes that judicial estoppel applies in his case and raises both factual and legal arguments in support of his position. This judicial estoppel argument is both legally and factually specific to Heisler and his bankruptcy proceedings. Thus, I find that CHRI has presented at least an “arguable” defense to Heisler’s claim and therefore conclude that Heisler is an inadequate representative of the class. See Randall v. Rolls-Royce Corp., 637 F.3d 818, 824 (7th Cir. 2011) (“[N]amed plaintiffs who are subject to a defense that would not defeat unnamed class members are not adequate class representatives.”); see also Boyd v. Meriter Health Servs. Employee Ret. Plan, No. 10-CV-426-WMC, 2012 WL 12995302, at *11 (W.D. Wis. Feb. 17, 2012), aff’d sub nom. Johnson v. Meriter Health Servs. Employee Ret. Plan, 702 F.3d 364 (7th Cir. 2012) (finding the court was “compelled to conclude” the named plaintiff was an inadequate class representative when defendants alleged judicial estoppel due to plaintiff’s failure to disclose cause of action during banrkutpcy proceedings).

Seventh Circuit Holds Debt Alleged by Collector Sufficient for “Consumer” under 1692a(3)

Link: LOJA v. MAIN STREET ACQUISITION CORPORATION, No. 17-2477 (7th Cir. 2018).

Basic Facts: Main Street filed a lawsuit against Mr. Loja for credit card debt in small claims court—and lost, on the basis that the debt did not belong to him. He then filed an FDCPA case against the debt collectors on the basis they sought to collect a debt that he didn’t owe. It isn’t clear if it was the wrong “Martin Loja,” and for the panel, it didn’t matter.

The district court (Judge Milton Shadur) dismissed the lawsuit sua sponte based on the requirement that an FDCPA claim be brought by a “consumer” under § 1692a(3) which defines such as “any natural person obligated or allegedly obligated to pay any debt.” The district court reasoned that since the Plaintiff didn’t allege the debt was his, he can’t be a consumer for purposes of the Act.

In an opinion authored by Judge Brennan, the panel disagreed, finding that if either the consumer or the debt collector alleges that the Plaintiff owed a debt, they satisfy the definition:


Significantly, the text of 15 U.S.C. § 1692a(3) does not limit “alleged” to obligations alleged by the consumer. The word applies generally and consequently includes obligations alleged by a debt collector as well. We therefore hold that the definition of “consumer” under the FDCPA includes consumers who have been alleged by debt collectors to owe debts that the consumers themselves contend they do not owe. This interpretation conforms to the structure and text of the rest of the FDCPA, which focuses primarily on the conduct of debt collectors, not consumers. Keele v. Wexler, 149 F.3d 589, 595 (7th Cir. 1998) (noting that the language of the FDCPA “focuses primarily, if not exclusively on the conduct of debt collectors, not debtors”).

No Fees Awarded for Second or Third Fee Petition

Link: Nevins v. MED-1 SOLUTIONS, LLC, Dist. Court, (S.D. Ind. Oct. 22, 2018).

Plaintiff, represented by John Thomas Steinkamp, accepted an offer of judgment on an FDCPA claim under Rule 68 and filed a fee petition. Defendant failed to file a response and the court didn’t enter an order on the motion, so Plaintiff filed a second and then third petition for fees, increasing the amount requested each time (to include the fees for each additional motion filed).

The district court, judge Jane Magnus-Stinson, found the second and third motions were unnecessary and denied those additional fees.

The Court first turns to Ms. Nevins’ argument that Med-1 was obligated to respond to her first fee Motion in accordance with Local Rule 7-1. [Filing No. 17-2].[4] Local Rule 7-1(a)(3)(A) states: “Any response is due within 14 days after service of the motion.” S.D. Ind. LR 7-1(a)(3)(A). The Seventh Circuit empowers District Courts to interpret and enforce their local rules. Elustra v. Mineo, 595 F.3d 699, 710 (7th Cir. 2010). The meaning of Rule 7-1(a)(3)(A) is plain: it does not create an independent obligation to respond; it merely provides a timetable for response. Therefore, Ms. Nevins’ argument that the “failure to file a response in a timely fashion constitutes a violation of local rules and this court may issue a finding against Defendant as a result of its conduct” [Filing No. 17-2], mischaracterizes Local Rule 7-1.

7th Circuit Denies Debt Collector’s Bid For Arbitration

Link: Smith v. GC Services Limited Partnership, No. 18-1361 (7th Cir. 2018).

In an FDCPA case filed by Philipps & Philipps, Ltd., in July 2016, the defendants waited to demand arbitration until March of 2017—but filed nothing with the court. It wasn’t until August of 2017, once the class had been certified and another motion to dismiss denied, that the defendants brought their motion to compel arbitration.

The District Court for Southern District of Indiana held that the arbitration clause could not be invoked by GC Services based on an agency theory or equitable estoppel, and that in any event GC Services had waived its right to invoke the clause by waiting so long to bring it to the court’s attention.

The Seventh Circuit affirmed:

Smith does not contend that GC Services expressly waived any right to arbitrate. The question is whether we should infer that forfeiture occurred, which requires us to “determine that, considering the totality of the circumstances, a party acted inconsistently with the right to arbitrate.”

The panel went on to find that GC Services did not act diligently because the company did not mention the arbitration agreement in its answer, provided an inadequate explanation for the five-month delay in seeking arbitration after learning of the agreement, and prejudiced Smith by (unsuccessfully) engaging in motions practice.

The panel also found that this would prejudice the Plaintiff since he had already obtained victory on legal points and that allowing arbitration would undo those victories:

“GC Services’ motion to dismiss framed an integral—perhaps dispositive—issue: whether 15 U.S.C. § 1692g(a)(3) requires that debts be disputed in writing. The Third Circuit has held that a written dispute is required; the Second, Fourth, and Ninth Circuits have held that no writing requirement exists. Compare Graziano v. Harrison, 950 F.2d 107, 112 (3d Cir. 1991), with Clark, 741 F.3d at 490-91Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282, 285-87 (2d Cir. 2013)Camacho v. Bridgeport Fin., Inc., 430 F.3d 1078, 1080-82 (9th Cir. 2005). District courts within the Seventh Circuit have decided the issue both ways. See, e.g., Jolly v. Shapiro, 237 F. Supp. 2d 888, 895 (N.D. Ill. 2002) (finding a writing requirement); Campbell v. Hall, 624 F. Supp. 2d 991, 1000 (N.D. Ind. 2009) (finding no writing requirement) . . .

“[T]he district court’s determination that Smith was prejudiced when GC Services sought arbitration after Smith had defeated a motion to dismiss, obtained class certification, and litigated several discovery issues was not erroneous. In essence, GC Services sought to erase Smith’s successes—including her victory on the pivotal legal issue of whether § 1692g(a)(3) contains a writing requirement . . . “

The Court concluded with an apt warning to defense counsel in other cases:

This attempt to “play heads I win, tails you lose” is “the worst possible reason for delay.” Cabinetree, 50 F.3d at 391