BARNETT v. HEALTHCARE REVENUE RECOVERY GROUP, LLC
4:16-cv-00140
S.D. Ind.May 4, 2017Background
- Barnett received a July 16, 2016 collection letter from Healthcare Revenue Recovery Group, LLC (HRRG) about an alleged medical debt.
- The letter stated HRRG was evaluating the account for possible sale, placement with another agency, or transfer to ARS (a division of HRRG), and that HRRG had not reported the account to credit bureaus.
- The letter warned that if the account were sold or transferred, the new owner/agency or ARS "may choose to report" the debt as delinquent to major credit bureaus.
- Barnett sued under the Fair Debt Collection Practices Act (FDCPA), alleging violations of §§ 1692d, 1692e (including subsections 6(A) and 10), and 1692f for misleading and coercive language.
- HRRG moved to dismiss under Rule 12(b)(6); the district court applied the Seventh Circuit’s "unsophisticated consumer" objective standard and Twombly/Iqbal pleading rules.
- The court found the letter truthful and not misleading to the unsophisticated consumer, dismissed the FDCPA claims, and gave Barnett 14 days to amend or face dismissal with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the letter violated 15 U.S.C. § 1692e(6)(A) and § 1692e(10) by implying sale/transfer could change the debt's status or rights | Barnett: The letter deceptively suggested sale/transfer might change status or create negative consequences, misleading and coercive | HRRG: Letter truthfully disclosed consideration of sale/transfer and warned other parties may report; not false or deceptive | Court: Dismissed — truthful disclosure would not mislead the unsophisticated consumer and no allegation that transfer would cause loss of claims/ defenses or FDCPA protections |
| Whether the letter violated § 1692e by implying HRRG was not authorized to report to credit bureaus | Barnett: By noting HRRG had not reported but others may, the letter implied HRRG couldn’t have reported | HRRG: Statement merely said HRRG had not reported; warning about potential future reporting by others is accurate | Court: Dismissed — reasonable unsophisticated consumer would understand the distinction; not misleading |
| Whether the letter constituted harassment or abuse under § 1692d | Barnett: Language preyed on consumer ignorance and coerced payment by fear of consequences | HRRG: Advising of possible sale/transfer and potential reporting is factual and not harassing or abusive | Court: Dismissed — factual notice not conduct that naturally harasses, oppresses, or abuses |
| Whether the letter used unfair or unconscionable means under § 1692f | Barnett: Cherry-picked disclosures to coerce payment; unfair practices | HRRG: Statements were factually correct and not unconscionable or unfair | Court: Dismissed — no unfair or unconscionable collection means shown |
Key Cases Cited
- Durkin v. Equifax Check Servs., Inc., 406 F.3d 410 (7th Cir. 2005) (directs use of the unsophisticated consumer standard in FDCPA cases)
- Williams v. OSI Educ. Servs., 505 F.3d 675 (7th Cir. 2007) (defines attributes of the unsophisticated consumer)
- Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057 (7th Cir. 2000) (source for unsophisticated consumer characterization)
- Taylor v. Calvary Inv., L.L.C., 365 F.3d 572 (7th Cir. 2004) (Ford standard: a communication violates FDCPA if it could confuse a substantial number of recipients)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard: complaint must state a plausible claim)
- United Central Bank v. Davenport Estate LLC, 815 F.3d 315 (7th Cir. 2016) (on accepting well-pleaded allegations and drawing inferences on motion to dismiss)