The Court of Appeals for the Seventh Circuit has upheld a lower court’s ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act because it attempted to collect on interest that had been charged to the plaintiff’s account after the original creditor had given up on collecting the debt but before that debt was sold to the defendant.
A copy of the ruling in the case of Gomez v. Cavalry Portfolio Services can be accessed by clicking here.
The plaintiffs stopped making payments on their credit card, and after deeming the debt as uncollectible, the original creditor stopped sending statements. But it did not stop adding interest to the unpaid debt. The debt was then sold to the defendant, at which point it began to try and collect on it. The plaintiffs filed suit, alleging a letter that was sent by the defendant violated Section 1692e(2) of the FDCPA, which prohibits the use of false, misleading, or deceptive representations when attempting to collect on a debt. The letter violated the FDCPA because it mis-stated the amount that was owed, the plaintiffs claimed.
A District Court judge ruled the original creditor waived the right to collect interest on the account when it stopped sending statements to the plaintiffs, but also ruled the plaintiff’s claim was time-barred because the statute of limitations had expired.
The Appeals Court ruled that the statute of limitations had not expired, but also ruled that the letter did not violate the FDCPA. “A statement is false, or not, when made; there is no falsity by hindsight,” it wrote.
Adding to the plaintiff’s problems is that the letter in question was not sent to them; it was sent to their attorney. “If the plaintiffs’ lawyer doubted the propriety of the figure mentioned in the verification letter, he could have followed up with Cavalry or advised his clients not to pay the $1,600, which the first two letters showed had been included,” the Appeals Court wrote in its ruling. “The third letter would not have misled a competent lawyer, who also would not deem ‘false’ a demand by a potential opponent in litigation just because counsel believes that his client may be able to persuade a judge that there is a defense.”