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Tag: 1692e

Third Circuit Allows FDCPA Claim Based on Misleading IRS Language

Steven Uhrich

Link: Schultz v. Midland Credit Management, Inc., Case No. 17-2244 (3d. Cir. 2018).

In Schultz, a debt collector sent letters to collect debts less than $600 to consumers that contained the following letter:

“We are not obligated to renew this offer. We will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.”

The district court found that as a matter of law this could not be misleading or deceptive to a consumer under See 15 U.S.C. § 1692e, and dismissed the putative class action.

The Third Circuit reversed, finding that:

Midland argues that, in order to conclude that a consumer would be misled by this statement, one would have to read the first sentence in isolation while paying no attention to the second qualifying statement—i.e., that “[r]eporting is not required every time a debt is canceled or settled, and might not be required in your case.” (App. 17). However, even with this qualifying statement, the least sophisticated debtor could be left with the impression that reporting could occur. Indeed, this is precisely what happened in the Schultzes’ case—there was no possibility of IRS reporting in light of the fact that the debt was less than $600, but use of the conditional “might” suggested that reporting was a possibility.

The Third Circuit gave a hat-tip to the Seventh in discussing what might qualify as deceptive or misleading to state a claim under 1692e:

The Seventh Circuit has held that “a dunning letter is false and misleading if it `impl[ies] that certain outcomes might befall a delinquent debtor, when legally, those outcomes cannot come to pass.'” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 367 (7th Cir. 2018) (quoting Lox v. CDA Ltd., 689 F.3d 818, 825 (7th Cir. 2012)). Thus, it is not merely the inclusion of a lie but also incomplete or inapplicable language in a collection letter that may form the basis for a potential FDCPA violation.

Debt Collector Wins Summary Judgment on False Threat to Sue

Steven Uhrich

Link: Bandas v. United Recovery Service, LLC, Case No. 17-cv-01323 (N.D. Ill., Sept. 7, 2018).

Plaintiff, represented by Michael Jacob Wood of Community Lawyers Group, Ltd., filed an action under Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and the Illinois Collection Agency Act (“ICAA”), 225 ILCS 425/1 et seq. Both parties moved for summary judgment and the court ruled in favor of the defendant debt collector.

After incurring a medical debt, URS sent the Plaintiff a letter as follows:

Dear FRANK,
Please receive and accept this letter in the spirit in which it is intended. We do not seek to create a climate of argument and threat but merely to state our position in as factual a manner as possible. Our client claims a debt is due and owing from you; they have attempted to resolve this between them and you with no success. Our office has been brought into the picture and we have done everything we can think of to convince you to pay this claim; our file indicates that you have the means to pay but that you will not pay.
We wish to make this appeal to you as one reasonable party to another. Send us your full payment today or contact this office at once to make suitable payment arrangements so that no further procedures need to be taken in this matter.
This is our third attempt to have you voluntarily resolve this claim. We seek your cooperation now! . . .

Plaintiff  alleged that URS’s letter deceptively threatened him with litigation when it had no intention of actually suing him for the debt, in violation of § 1692e of the FDCPA.  Judge Virginia M. Kendall pointed out that in order to defeat summary judgment a plaintiff must show not only that statement is false but also that it would mislead an “unsophisticated consumer.” See Lox v. CDA, Ltd.,689 F.3d 818, 822 (7th Cir. 2012) (citing Wahl v. Midland Credit Mgmt., 556 F.3d 643, 645-46 (7th Cir.2009)), and that that the representation would be confusing to a “significant fraction of the population.” Gruber v. Creditors’ Prot. Serv., Inc., 742 F.3d 271, 274 (7th Cir. 2014).

Section 1692e cases fall into three categories: (1) “cases involving statements that plainly, on their face, are not misleading or deceptive,” in which courts grant summary judgment in favor of defendants, (2) “cases involve[ing] statements that are not plainly misleading or deceptive but might possibly mislead or deceive the unsophisticated consumer,” in which “plaintiffs may prevail only by producing extrinsic evidence, such as consumer surveys, to prove that unsophisticated consumers do in fact find the challenged statements misleading or deceptive,” and (3) “[c]ases involving plainly deceptive communications” that are “clearly misleading on their face,” in which plaintiff need not present any extrinsic evidence to prevail.

Given that Plaintiff alleges that the statement is deceptive (i.e. in the third category above), he needed to put extrinsic evidence into the record because judges “are not experts in the knowledge and understanding of unsophisticated consumers facing demands by debt collectors” and “are no more entitled to rely on [their] intuitions in this context than [they] are in deciding issues of consumer confusion in trademark cases.” Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 776 (7th Cir. 2007). He did not. As such the court looked to whether the thread of litigation was plain on the face of the letter.

Interestingly, the court discussed how some judges looked to Google and Wikipedia for insight bceause it is reasonable to interpret the plain meaning of language in the same way an unsophisticated consumer would. (Citing McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1021 (7th Cir. 2014) and Holt v. LVNV Funding, LLC, 147 F. Supp. 3d 756, 761 (S.D. Ind. 2015).

Because Plaintiff offered no support for his conclusion that an unsophisticated consumer would automatically assume litigation is the only “further procedure” available to URS, the court granted summary judgment in favor of debt collector URS.

 

“Time Sensitive” Warning Not Violative of FDCPA

Steven Uhrich

Link: Preston v. Midland Credit Management, Inc., No. 18 C 1532 (N.D. Ill., Sept. 4, 2018)

Plaintiff, through the firm Sulaiman Law Group, Ltd., filed a putative class action claiming that the “TIME SENSITIVE” stamped on the outside of a debt collector’s letter violated § 1692e(2)(A), e(10), and § 1692f of the Fair Debt Collection Practices Act because it implied a false sense of urgency. MCM was represented by Hinshaw & Culbertson LLP.

§ 1692f(8) specifically prohibits:

using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by the use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.

§ 1692(e)(2)(a) prohibits the “false representation of [ ] the character, amount or legal status of any debt;” and § 1692(e)(1), prohibits the “use of any false representation or deceptive means to collect or attempt to collect any debt.”

Preston claimed that the phrase “TIME SENSITIVE DOCUMENT,” on its own and when considered in combination with MCM’s discount offer urging him to “act now” plus the phrase “we are not obligated to renew any offers provided” violated these sections by creating a false sense of urgency.

The court, judge Sara L. Ellis, disagreed:

MCM’s use of language on the outside of the envelope falls within the benign language exception to § 1692f(8) and so Preston’s § 1692f(8) claim fails. The Court also finds that this language, alone or in combination with the discount offer, does not violate § 1692e(2)(A) or e(10) because MCM properly employed safe harbor language approved by the Seventh Circuit in connection with its discount offer.

Judge Ellis dismissed the FDCPA claims with prejudice but allowed Plaintiff to try to plead the Illinois Consumer Fraud and Deceptive Business Practices Act claim in state court.