Using Consolidated Individual and Class Action Lawsuits Alleging Various Violations of the Federal Fair Debt Collection Practices Act (FDCPA), Seventh Circuit Resolves Nine Issues of Recurring Concern Including Debt Collection Communications with Lawyers for Consumers
The Seventh Circuit consolidated for decision four class action and individual lawsuits brought under the federal Fair Debt Collection Practices Act (FDCPA) “that present nine questions…, several of which have engendered considerable controversy at the circuit level and even some circuit splits.” Evory v. RJM Acquisitions Funding LLC, ___ F.3d ___ [Slip Opn., at 3] (7th Cir. October 23, 2007). Two of the consolidated cases were filed as putative class action lawsuits, but the issues addressed by the Seventh Circuit frequently arise in FDCPA class action litigation. The nine questions are: (1) the FDCPA notice requirements apply if the consumer is represented by legal counsel; (2) whether the FDCPA prohibition against “harassing, deceptive, and unfair practices in debt collection” applies to communications with a debtor’s lawyer and, if so, (3) whether the applicable standard for determining if such a violation occurred is the same if made to a lawyer as if made to the debtor; (4) whether the FDCPA prohibits debt collectors from including settlement offers in a debt collection letter and, if not per se unlawful, (5) whether it matters if the offer is made to a lawyer rather than directly to a debtor; (6) whether a safe harbor exists for debt collectors accused of violating § 1692e based on settlement offers and, if so, (7) the evidence required to establish that a settlement offer violates that statute; and finally, (8) “[w]hether the determination that a representation is or is not false, deceptive, or misleading under section 1692 is always to be treated as a matter of law,” and, if not, (9) whether the court may nonetheless dismiss a claim under § 1692e “on the ground that the challenged representation was, as a matter of law, not false or misleading.” Id., at 3-4.
The Seventh Circuit held as follows. First, that the notice requirements apply regardless of whether the debtor is represented by counsel because it would be “odd if the fact that a consumer was represented excused the debt collector from having to convey to the consumer the information to which the statute entitles him.” Evory, at 6. Second, that while lawyers are “less likely to be deceived,” the FDCPA prohibits debt collectors from using “any unfair or unconscionable means to collect or attempt to collect any debt” and there is no reason to “immuniz[e] practices forbidden by the statute when they are directed against a consumer’s lawyer.” Id., at 7. However, the Circuit Court held that the standard generally applicable for determining violations of the FDCPA – viz., whether the representation would mislead an “unsophisticated consumer” – does not apply to communications with lawyers, id., at 7-8; rather, the Seventh Circuit held “that a representation by a debt collector that would be unlikely to deceive a competent lawyer, even if he is not a specialist in consumer debt law, should not be actionable,” id., at 9. But this is not true for statements that are false or misleading, because “[a] false claim of fact…may be as difficult for a lawyer to see through as a consumer.” Id., at 9. Representations that are false or misleading – that is, where the lawyer “might be unable to discover the falsity of the representation without an investigation that he might be unable, depending on his client’s resources, to undertake” – are actionable irrespective of whether they are made to the debtor or to the debtor’s counsel. Id., at 9-10.
Turning to the category of settlement offers made to unrepresented debtors, the Seventh Circuit observed that settlement offers themselves are not improper but they raise the possibility that “unsophisticated consumers may think that if they don’t pay by the deadline, they will have no further chance to settle their debt for less than the full amount.” Evory, at 10. In reality, however, these offers are frequently renewed, id., at 10-11. Ultimately, the Circuit Court held that debt collectors may avoid any risk of liability by adding the following language to any letters containing settlement offers: “We are not obligated to renew this offer.” Id., at 11. This language need not be included in letters to attorneys, because it is “exceedingly doubtful that any lawyer involved in representing debtors would be deceived by the settlement offers made by debt collectors,” id., at 12. Moreover, the failure to include this safe-harbor language in a letter sent directly to a consumer does not automatically constitute a violation of the FDCPA; rather, the district court should rely on competent consumer survey evidence to determine this issue. Id., at 11-12.
Finally, the Seventh Circuit held that a district court may dismiss as a matter of law a claim of deception under the FDCPA. Evory, at 13. In fact, the Circuit Court explained at page 13 that where the plaintiff relies solely on the text of the debt collection letter, “if there was nothing deceptive-seeming about the communication the court would have to dismiss the case.” We do not here summarize the Circuit Court’s case-by-case application of these rules to the four consolidated cases before it; that discussion may be found at pages 14 -17 of the slip opinion.
NOTE: The Seventh Circuit noted a split among the circuit courts as to the second issue, in that the Fourth Circuit holds that communications to lawyers are subject to the FDCPA while the Second and Ninth Circuits hold that such communications are not, compare Sayyed v. Wolpoff & Abramson, 485 F.3d 226 (4th Cir. 2007), with Kropelnicki v. Siegel, 290 F.3d 118 (2d Cir. 2002), and Guerrero v. RJM Acquisitions LLC, 2007 WL 2389825 (9th Cir. Aug. 23, 2007), the fourth issue, in that the Sixth Circuit holds that settlement offers in debt collection letters are per se lawful under § 1692f, see Lewis v. ACB Business Services, Inc., 135 F.3d 389 (6th Cir. 1998), while the Fifth Circuit holds that they are not, see Goswami v. American Collections Enterprise, Inc., 377 F.3d 488 (5th Cir. 2004), and the eighth issue, in that the Seventh Circuit holds that whether representations are “false, deceptive, or misleading” under the FDCPA are not questions of law, see McMillan v. Collection Professionals, Inc., 455 F.3d 754 (7th Cir. 2006), while the Third and Ninth Circuits hold that they are, see Wilson v. Quadramed Corp., 225 F.3d 350 (3d Cir. 2000), and Terran v. Kaplan, 109 F.3d 1428 (9th Cir. 1997).