The Court of Appeals for the Seventh Circuit has upheld a lower court’s dismissal of a Fair Debt Collection Practices Act class-action lawsuit, ruling that including line items for “interest” and “other charges” in a breakdown of the plaintiff’s debt in a collection letter does not violate the FDCPA, even when those items are $0.00.
A copy of the ruling in the case of Degroot v. Client Services, Inc. can be accessed by clicking here.
The plaintiff defaulted on a credit card debt. The debt was placed with a collection agency, which sent the plaintiff a collection letter. That letter stated, “… interest and fees are no longer being added to your account.” The debt was reassigned to another collection agency — the defendant in this case — which sent the plaintiff another collection letter. In that letter, the defendant included an itemized breakdown of the debt, which looked like this:
Balance Due At Charge-Off: $425.86
Other Charges: $0.00
Payments Made: $0.00
Current Balance: $425.86
The plaintiff then filed the class-action suit, alleging that he was confused because the first letter indicated no fees and interest were accruing on his balance, whereas the second letter implied they might be, because the items were included in the breakdown of his debt. Such an implication violated Section 1692e and Section 1692g of the FDCPA, the plaintiff claimed. A District Court judge granted a motion to dismiss from the defendant, which was appealed to the Seventh Circuit by the plaintiff.
In rendering its ruling, the Seventh Circuit looked at two questions — whether an unsophisticated consumer would even infer from the letter that interest and other charges would accrue on his outstanding balance if he did not settle the debt, and if the Court concluded that an unsophisticated consumer would make such an inference, whether such an inference is false or misleading.
The Seventh Circuit agreed with the argument made by the Consumer Financial Protection Bureau, which filed an amicus brief in support of the defendant, that an itemized breakdown of a debt in a collection letter is an explanation of what has happened in the past and “cannot be construed as forward looking and therefore misleading.”
Even the plaintiff’s reliance on the original collection letter, which said that interest and fees “were no longer being added” to the balance, was ill-found because the letter did not say they could never be added in the future, the Appeals Court wrote.
“That is why a statement in a dunning letter that relates only to the present reality and is completely silent as to the future generally does not run afoul of the FDCPA,” the Appeals Court wrote. “While dunning letters certainly cannot explicitly suggest that certain outcomes may occur when they are impossible, … they need not guarantee the future.”
The Court summed up its ruling in one nice sentence that debt collectors will be using in courts across the country: “The use of an itemized breakdown accompanied by zero balances would not confuse or mislead the reasonable unsophisticated consumer.”