Kimberly Aker v. Collection Associates, LTD.
2017 U.S. App. LEXIS 6342
7th Cir.2017Background
- Plaintiffs received medical services, did not pay, and their providers referred the debts to debt collectors who sent dunning letters.
- Collectors demanded the principal plus 5% per annum interest on the outstanding balances.
- Plaintiffs sued under the Fair Debt Collection Practices Act (FDCPA), alleging the letters violated 15 U.S.C. §1692g(a)(1) by improperly stating the amount owed and related provisions.
- Defendants argued (1) Wisconsin law (Wis. Stat. §138.04) authorizes automatic interest on such debts, so the letters correctly stated the amount, and (2) Wis. Stat. §426.104(4)(b) provides a safe harbor because defendants submitted the practice to the state Administrator and received no disapproval within 60 days.
- The district court granted summary judgment for defendants; the Seventh Circuit affirmed, holding the safe harbor insulated defendants from liability and that state law determines interest on state-law debts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether demanding 5% pre-judgment interest in collection letters violated FDCPA §1692g(a)(1) | Demanding interest before judgment is forbidden under Wis. Stat. §138.04 and thus misstates amount owed | State law permits interest or the safe harbor protects the practice; the letters specify a definite amount | Held for defendants: letters did not violate §1692g(a)(1) because state law/safe harbor permit the practice |
| Whether defendants’ submission to the state Administrator invoked Wis. Stat. §426.104(4)(b) safe harbor | Safe harbor should not apply because §138.04 prohibits pre-judgment interest and Administrator’s silence shouldn’t validate it | Silence within 60 days equals non-disapproval, creating statutory safe harbor against suit under state law referenced by §426.104(4)(b) | Held for defendants: non-disapproval within 60 days barred treating the practice as a violation of covered statutes |
| Whether §426.104(4)(b) is preempted by FDCPA §1692n | §1692n forbids states from reducing FDCPA protections, so state safe harbor is preempted | §1692n concerns debt-collection practices, not calculation of amounts/interest; FDCPA allows interest when permitted by law | Held for defendants: no preemption; §1692n does not displace state-law determination of interest amounts |
| Whether letters violated FDCPA §1692e(2)(A) (false representation of amount) | Letters falsely represented amount by claiming unlawful interest | Because safe harbor/state law permit adding interest, the stated amount was not false | Held for defendants: no violation of §1692e(2)(A) |
Key Cases Cited
- Williamson v. Handy Button Machine Co., 817 F.2d 1290 (7th Cir. 1987) (federal law can govern prejudgment interest when the underlying claim arises under federal law)
- Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000) (FDCPA permits collectors to add interest when allowed by law)
- In re Oil Spill by the Amoco Cadiz off the Coast of France on March 16, 1978, 954 F.2d 1279 (7th Cir. 1992) (discussion of choice-of-law and prejudgment interest principles in admiralty context)
- Veach v. Sheeks, 316 F.3d 690 (7th Cir. 2003) (holding a letter that demanded future treble damages under state law did not satisfy FDCPA’s requirement to state the immediately payable amount)