Appeals Court Upholds Dismissal of FDCPA Suit Over Reporting Multiple Debts Separately

The Court of Appeals for the Seventh Circuit has upheld the dismissal of a Fair Debt Collection Practices Act case in which a collection agency was accused of engaging in unfair or unconscionable means of collecting on debts because it reported those debts separately to a consumer reporting agency that the plaintiffs argued should have been aggregated into one debt.

A copy of the ruling in the case of Casimer Zablocki and Regina Johnson v. Merchants Credit Guide Co., can be accessed by clicking here.

Both plaintiffs incurred debts to the same healthcare organization. For Zablocki, it was for several x-rays. After his health insurance covered most of the payments, he was left with balances on each of four x-ray charges. When the healthcare facility and the defendant were unable to collect on those debts, they were reported to the consumer reporting agencies separately. In Johnson’s case, she owed various sums on 10 different medical-service charges, which neither the facility nor the defendant were successful in recovering. The debts were reported to the credit bureaus separately.

Originally, Zablocki filed suit alleging the defendant violated Section 1692e(2)(A) by misrepresenting the character of a debt and Section 1692f by using unfair or unconscionable means to collect. As the case was progressing, the Seventh Circuit ruled in Rhone v. Medical Business Bureau, LLC that reporting debts separately does not misrepresent the character of a debt so Zablocki dropped that charge and he and Johnson filed an amended complaint on the 1692f count alone.

The defendant filed a motion to dismiss, which the District Court granted, but allowed the plaintiffs to file an amended complaint. They chose to appeal the case instead.

The plaintiffs content they owed a single debt to the healthcare provider, but the Seventh Circuit looked at how “debt” is defined in the FDCPA and decided that contention did not hold any water.

While none of the eight examples of unfair or unconscionable means of collecting a debt in the FDCPA match what the plaintiffs allege, they did attempt to connect the harm they suffered to the examples about postcard and extraneous envelope markings because they have to do with an individual’s “credit reputation,” and they look “less creditworthy” when obligations on his or her credit report are listed separately instead of together.

But the potential issues of disclosing the existence of an individual’s debt to a third party is not the same as reporting debts separately, the Seventh Circuit ruled.

“It is reasonable, and not at all deceptive or outrageous, for a collector to report individually debts that correspond to different charges, thereby communicating truthfully how much is owed on each debt,” the Seventh Circuit wrote. “Some consumers may prefer to have their debts reported in a way that conceals debt-specific information, like how much is owed on individual debts, when specific debts were incurred, and which debts are stale. Those consumers may be willing to forego the more detailed information on their credit reports if the aggregated reporting increases their credit scores. But a preference does not necessarily equal an injustice, partiality, or deception.”

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