TAMMY A. EVORY, et al., individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. RJM ACQUISITIONS FUNDING L.L.C., et al., Defendants-Appellees.
Nos. 06-2130 to 2132, 06-2134, 06-2157, 06-2271, 06-3129, 06-3162, 06-3327, 06-3439, 06-3446
United States Court of Appeals For the Seventh Circuit
October 23, 2007
Before CUDAHY, POSNER, and WILLIAMS, Circuit Judges.
ARGUED SEPTEMBER 20, 2007—DECIDED OCTOBER 23, 2007
No. 06-2271
KELLY LAUER and KARLA LAUER, Plaintiffs-Appellants, v. MASON, SILVER, WENK & MISHKIN, LLC, et al., Defendants-Appellees.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 05 C 3911—George W. Lindberg, Judge.
KEVIN I. CAPTAIN, Plaintiff-Appellant, v. ARS NATIONAL SERVICES, INC., Defendant-Appellee.
Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:05-cv-1515-DFH-TAB—David F. Hamilton, Judge.
Nos. 06-3162, 06-3327, 06-3439, 06-3446
PHILIP JACKSON, et al., individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. NATIONAL ACTION FINANCIAL SERVICES, INC., et al., Defendants-Appellees.
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 04 C 1805, 04 C 5056, 05 C 0724, 05 C 3759—Ruben Castillo, Judge, and James F. Holderman, Chief Judge.
Here are the questions:
- Whether, if the consumer (as the statute refers to the putative debtor) is represented by a lawyer, a debt collector must give the same written notice to the lawyer that section 1692g would require were the consumer unrepresented and the notice sent directly to him.
- Whether communications to lawyers are subject to sections 1692d through 1692f, which forbid harassing, deceptive, and unfair practices in debt collection. Compare Sayyed v. Wolpoff & Abramson, 485 F.3d 226 (4th Cir. 2007), answering yes, with Guerrero v. RJM Acquisitions LLC, No. 05-15121, 2007 WL 2389825 (9th Cir. Aug. 23, 2007) (per curiam), and Kropelnicki v. Siegel, 290 F.3d 118, 128 (2d Cir. 2002), both answering no.
- Whether, if the answer to question 2 is yes, the standard applicable to determining whether a representation is false, deceptive, or misleading under section 1692e is the same whether the representation is made to the lawyer or to his client.
- Whether a settlement offer contained in a letter from the debt collector to a consumer is lawful per se under section 1692f. Compare Lewis v. ACB Business Services, Inc., 135 F.3d 389, 398-400 (6th Cir. 1998) (yes), with Goswami v. American Collections Enterprise, Inc., 377 F.3d 488, 495 (5th Cir. 2004) (no).
- If it is not per se lawful, whether its lawfulness should be affected by whether it is addressed to a lawyer, rather than to the consumer directly.
- Whether there should be a safe harbor for a debt collector accused of violating section 1692e by making such an offer.
- Again, if such a letter is not per se lawful, what type of evidence a plaintiff must present to prove that a settlement offer violates section 1692e.
- Whether the determination that a representation is or is not false, deceptive, or misleading under section 1692e is always to be treated as a matter of law. Compare McMillan v. Collection Professionals, Inc., 455 F.3d 754, 759 (7th Cir. 2006); Taylor v. Cavalry Investment, LLC, 365 F.3d 572, 575 (7th Cir. 2004), and Walker v. National Recovery, Inc., 200 F.3d 500, 502, 504 (7th Cir. 1999) (no), with Wilson v. Quadramed Corp., 225 F.3d 350, 353 n. 2 (3d Cir. 2000), and Terran v. Kaplan, 109 F.3d 1428, 1432-33 (9th Cir. 1997) (yes).
- Whether, if that determination is not always a matter of law, nevertheless a charge under section 1692e can sometimes be dismissed on the pleadings on the ground that the challenged representation was, as a matter of law, not false or misleading.
The questions thus fall into three overlapping groups. The first is the application of the Fair Debt Collection Practices Act to lawyers (questions 1 through 3, and 5); the second is the proper treatment under the Act of settlement offers (questions 4 through 7); and the last (questions
Section 1692g provides:
(a) Notice of debt; contents
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer‘s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
It would be passing odd if the fact that a consumer was represented excused the debt collector from having to convey to the consumer the information to which the statute entitles him. For example, sections
It is true that a lawyer is less likely to be deceived, intimidated, harassed, and so forth (for simplicity, we shall assume that only deception is alleged) than a consumer. But that is an argument not for immunizing practices forbidden by the statute when they are directed against a consumer‘s lawyer, but rather for recognizing that the standard for determining whether particular conduct violates the statute is different when the conduct is aimed at a lawyer than when it is aimed at a consumer.
The courts have ruled that the statute is intended for the protection of unsophisticated consumers (sophisticated consumers presumably do not need its protection), so that in deciding whether for example a representation made in a dunning letter is misleading the court asks whether a person of modest education and limited commercial savvy would be likely to be deceived. Olson v. Risk Management Alternatives, Inc., 366 F.3d 509, 512-13 (7th Cir. 2004).
But if the debt collector has targeted a particularly vulnerable group—say, consumers who he knows have a poor command of English—the benchmark for deciding whether the communication is deceptive would be the competence of the substantial bottom fraction of that group. Cf.
By the same token, the “unsophisticated consumer” standpoint is inappropriate for judging communications with lawyers, Dikeman v. National Educators, Inc., 81 F.3d 949 (10th Cir. 1996), just as it is inappropriate to fix a physician‘s standard of care at the level of that of a medical orderly. W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 32, p. 185 (5th ed. 1984). But what should the standard be? Most lawyers who represent consumers in debt collection cases are familiar with debt collection law and therefore unlikely to be deceived. But sometimes
We have assumed for the sake of simplicity that the communication to the lawyer is alleged to be deceptive; what if instead it is alleged to be false or misleading, terms also found in section 1692e? “Misleading” is similar to “deceptive,” except that it can be innocent; one intends to deceive, but one can mislead through inadvertence. A sophisticated person is less likely to be either deceived or misled than an unsophisticated one. That is less true if a statement is false. A false claim of fact in a dunning letter may be as difficult for a lawyer to see through as a consumer. Suppose the letter misrepresents the unpaid balance of the consumer‘s debt. The lawyer might be
We move now from the lawyer cases to the cases of settlement offers communicated directly to consumers, where there is no lawyer in the picture. But later we shall have to bring the lawyer back into the picture in order to round out our discussion of the difference between consumers and lawyers as recipients of potentially misleading statements from debt collectors.
It is apparently common for debt collectors to send letters to consumers that say such things as (these examples are all taken from the cases before us) “we would like to offer you a unique opportunity to satisfy your outstanding debt“—“a settlement of 25% OFF of your current balance. SO YOU ONLY PAY $[___] In ONE PAYMENT that must be received no later than 40 days from the date on this letter.” Or “TIME‘S A WASTIN‘!. . .Act now and receive 30% off…if you pay by March 31st.” Or we are “currently able to offer you a substantial discount of 50% off your Current Balance if we receive payment by 05-14-2004“(emphases in original). There is nothing improper about making a settlement offer. The concern is that unsophisticated consumers may think that if they don‘t pay by the deadline, they will have no further chance to settle their debt for less than the full amount; for the offers are in the idiom of limited-time or one-time sales offers, clearance sales, going-out-of-business sales, and other temporary discounts. In fact debt collectors, who naturally are averse to instituting actual collection proceedings for the often very modest sums in-
The objection to allowing liability to be based on such offers is that the settlement process would disintegrate if the debt collector had to disclose the consequences of the consumer‘s rejecting his initial offer. If he has to say, “We‘ll give you 50 percent if you pay us by May 14, but if you don‘t, we‘ll probably offer you the same or even better deal later, and if you refuse that, we‘ll probably give up and you‘ll never have to pay a cent of the debt you owe,” there will be no point in making offers. As in previous cases in which we have created safe-harbor language for use in cases under the Fair Debt Collection Practices Act, see Veach v. Sheeks, 316 F.3d 690, 693-94 (7th Cir. 2003); Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 876 (7th Cir. 2000); Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997); cf. Diaz v. Prudential Ins. Co. of America, 424 F.3d 635, 637 (7th Cir. 2005); Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000), we think the present concern can be adequately addressed yet the unsophisticated consumer still be protected against receiving a false impression of his options by the debt collector‘s including with the offer the following language: “We are not obligated to renew this offer.” The word “obligated” is strong and even the unsophisticated consumer will realize that there is a renewal possibility but that it is not assured.
This is not to suggest that in the absence of safe-harbor language a debt collector is per se liable for violating section 1692 if he makes the kind of settlement offer that we quoted. We see a potential for deception of the unsophisticated in those offers but we have no way of deter-
Other circuits, perhaps less kindly disposed to survey evidence than we, treat the deceptive character of a debt collector‘s communication as a question of law, so that if the communication is not deceptive on its face, the plaintiff is forbidden to try to show that it would be likely to deceive a substantial number of its intended recipients. We disagree with that position. The intended recipients of dunning letters are not federal judges, and judges are not experts in the knowledge and understanding of unsophisticated consumers facing demands by debt collectors. We are no more entitled to rely on our intuitions in this context than we are in deciding issues of consumer confusion in trademark cases, where the use of survey evidence is routine.
But we emphasize that survey evidence in debt-collection cases as in trademark cases must comply with the principles of professional survey research; if it does not, it is not even admissible,
The last question presented by these cases is whether a claim of deception can ever be rejected in this circuit on the pleadings, since we treat issues of deception as ones of fact rather than of law. The answer is yes. A plaintiff might rest on the text of the communication, and have no other evidence to offer, and then if there was nothing deceptive-seeming about the communication the court would have to dismiss the case. Taylor v. Cavalry Investment, L.L.C., supra, 365 F.3d at 574-75 (“if it is apparent from a reading of the letter that not even ‘a significant fraction of the population’ would be misled by it . . . , the court should reject it without requiring evidence beyond the letter itself“); McMillan v. Collection Professionals, Inc., supra, 455 F.3d at 760 (“undoubtedly, there will be occasions when a district court will be required to hold that no reasonable person, however unsophisticated, could construe the wording of the communication in a manner that will violate the statutory provision“). Or the defendant might have used clear statutory language, as in Jang v. A.M. Miller & Associates, 122 F.3d 480, 483-84 (7th Cir. 1997), or our safe-harbor language. There might also be a case in which a false or deceptive statement clearly was immaterial, as in Gutierrez v. AT&T Broadband, LLC, 382 F.3d 725, 738-40 (7th Cir. 2004); see also Pettit v. Retrieval Masters Creditor Bureau, Inc., supra, 211 F.3d at 1060-62, or was clarified elsewhere, as in McStay v. I.C. System, Inc., 308 F.3d 188, 191 (2d Cir. 2002), or in which a
Having answered the questions that we listed at the beginning of our opinion, we can be brief in discussing our four cases. In Lauer, the consumer was represented by a lawyer. The defendant debt collector did not send either the lawyer or his client the written notice required by section 1692g, but instead sent the lawyer a letter that the plaintiff characterizes as coercive because it threatened to dispose of property of the plaintiff that had a purely sentimental value, such as scrapbooks, a wedding gown, and a videotape of the arrival of his adopted child from Korea. The plaintiff doesn‘t explain which subsection of section 1692 the threat violates, but it could well violate d, e, f, or indeed all three. The district court dismissed the complaint on the ground that communications with a consumer‘s lawyer are beyond the reach of the Fair Debt Collection Practices Act. That was error.
The defendant in Lauer also argues that if the initial communication from the debt collector is to the consumer‘s lawyer rather than to the consumer himself, the notice requirement is not triggered. If you glance back at section 1692g(a) you will see that it says that the written notice is required to be sent “five days after the initial communication with a consumer.” The argument is that if there is no letter sent first (“initial communication“) directly to the consumer, but instead the initial communication is to the consumer‘s lawyer, the condition for requiring the subsequent written notice containing specified information is not satisfied and therefore such a notice need never be sent either to the lawyer or to the consumer. All that this argument shows is how unsound it would be to suppose that a communication to a per-
In Captain, before realizing that the consumer was represented, the defendant sent him a letter offering a 30 percent discount off the face amount of the debt, provided payment was received by a specified date. The plaintiff claims that the letter violated section 1692e. Shortly afterward, his lawyer called the defendant and was told that if the debt wasn‘t paid within two weeks of the date of the initial collection letter (a deadline that had already passed), a $15 daily charge would be added to the account balance until the debt was paid in full. Such a charge, equivalent to an interest rate of 730 percent a year on the unpaid balance of the debt, would violate Indiana law. See
Evory and Jackson, the last two cases (actually sets of cases, but that is of no moment), are pure settlement-offer cases—there were no communications to lawyers. But they are importantly different. In Evory the district court
There is compelling evidence that the offers in this and the other cases were not final offers. But that means only that if the offers were understood as such by the targeted
So Jackson is affirmed; the other three decisions are reversed and the cases remanded for further proceedings consistent with this opinion.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of Appeals for the Seventh Circuit
USCA-02-C-0072—10-23-07