Ryan BOUCHER, et al., Plaintiffs-Appellants, v. FINANCE SYSTEM OF GREEN BAY, INC., et al., Defendants-Appellees.
No. 17-2308
United States Court of Appeals, Seventh Circuit.
Argued December 1, 2017. Decided January 17, 2018.
880 F.3d 362
Brett B. Larsen, Attorney, HINSHAW & CULBERTSON LLP, Milwaukee, WI, Kimberly A. Jansen, Attorney, HINSHAW & CULBERTSON LLP, Chicago, IL, for Defendant-Appellee.
Before BAUER, FLAUM, and ROVNER, Circuit Judges.
FLAUM, Circuit Judge.
Plaintiffs sued defendant, a debt collection agency, for violations of the Fair Debt Collection Practices Act (“FDCPA“). Specifically, рlaintiffs allege that defendant‘s dunning letters were false and misleading because they threatened to impose “late charges and other charges” that could not lawfully be imposed. The district court dismissed plaintiffs’ claims because the challenged statement mirrors the safe harbor language that this Court instructed debt collectors to use in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, LLC, 214 F.3d 872 (7th Cir. 2000). The
I. Background
Plaintiffs are Wisconsin residents who incurred and defaulted on debts for medical services. Plaintiffs’ creditors assigned these debts to defendant, Finance System of Green Bay, Inc. (“FSGB“), a collection agency. In turn, FSGB sent plaintiffs a letter informing them of their principal balance, their interest balance, and their total account balance. The letter also included the following statement:
As of the date of this letter, you owe $[a stated amount]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check. For further information, write to the above address or call [phonе number].
On January 30, 2017, plaintiffs filed a class action complaint against FSGB in the Eastern District of Wisconsin for violations of the FDCPA,
In its motion to dismiss, FSGB argued that it complied with the FDCPA as a matter of law because the allegedly false statement tracks the safe harbor language provided by this Court in Miller. FSGB further asserted that, although it may not lawfully impose “late chаrges and other charges,” the reference to such charges was not materially misleading because it is entitled to charge interest.
The district court granted defendants’ motion to dismiss. In doing so, it acknowledged that some of the Miller safe harbor language—namely, the phrase “late charges and other charges“—does not “strictly” apply in this case. Boucher v. Fin. Sys. of Green Bay, Inc., No. 17-cv-132, 2017 WL 2345678, at *4 (E.D. Wis. May 30, 2017). However, it reasoned that “the central purpose of Miller‘s safe harbor formula is to provide debt collectors with a way tо notify debtors that the amounts they owe may ultimately vary.” Id. Accordingly, it concluded that debt collectors like FSGB may rely on the Miller safe harbor language as long as the debt is variable in some way—regardless of “whether the increase occurred because of interest, late charges, other charges, some combination thereof, or all of the above.” Id. Because FSGB‘s letter conveyed “the crucial fact” that plaintiffs’ debts were variable, the court concluded that FSGB was entitled to safe harbor protection under Miller. This appeal followed.
II. Discussion
We review de novo a district court‘s decision to grant a motion to dismiss under
A. FSGB‘s Dunning Letter is Materially False, Misleading, and Deceptive in Violation of § 1692e
The FDCPA broadly prohibits the use of any “false, deceрtive, or misleading representation or means in connection with the collection of any debt.”
Even if a statement in a dunning letter is “false in some technical sense,” it does not violate
Moreover, “[a] statement cannot mislеad unless it is material.” Hahn v. Triumph P‘ships, LLC, 557 F.3d 755, 758 (7th Cir. 2009). After all, “[t]he purpose of the Fair Debt Collection Practices Act is to protect consumers, and they don‘t need protection against false statements that are immaterial in the sense that they would not influence a consumer‘s decision.” Muha v. Encore Receivable Mgmt., Inc., 558 F.3d 623, 628 (7th Cir. 2009). In this context, a statement is material if it would “influence a consumer‘s decision ... to pay a debt in response to a dunning letter.” Id.
Thus, to state a claim under
In Lox v. CDA, Ltd., 689 F.3d 818, 825 (7th Cir. 2012), we held that a dunning letter is false and misleading if it “impl[ies] that certain outcomes might befall a delinquent debtоr when, legally, those outcomes cannot come to pass.” The dunning letter in Lox stated the following: “Our client may take legal steps against you and if the courts award judgement, the court could allow court costs and attorney fees.” Id. at 820-21. The plaintiff moved for summary judgment, claiming that this language was false and misleading as a matter of law because “[the creditor] could not, under any circumstances, have recovered attorney fees from [him].” Id. at 820. This was so because, under the so-called “American Rule,” courts do not award attorney fees unless there is an explicit contractual or statutory exception. See id. at 823. Because the debt collector failed to identify any applicable exception, it effectively “admit[ted] (through waiver) that the award of attorney fees was not a possible outcome.” Id. at 824. Thus, we concluded that the statement about attorney fees was false. Id. In addition, the statement was misleading to an unsophisticated consumer, who “is not aware of the American Rule on attorney fees,” and “is therefore likely to believe a debt collector when it says that attorney fees are a potential consequence of nonpayment.” Id. at 824-25.
Here, as in Lox, the challenged statement is misleading to an unsophisticated consumer. The dunning letter states that, “[b]ecause of interest, late charges and other charges that may vary from day to day, the amount due on the day you pay may be greater.” While creditors of medical debts may charge interest, FSGB admits that it cannot impose “late charges and other charges” under Wisconsin law. Therefore, the dunning letter falsely implies a possible outcome—the imposition of “late charges and other charges“—that cannot legally comе to pass. See id. at 825. This statement is misleading to an unsophisticated consumer because “[t]his is not the type of legal knowledge we can presume the general public has at its disposal.” Id. at 826.1
The next question is whether the challenged statement is material—i.e., whether the potential imposition of “late charges and other charges” would influence an unsophisticated consumer‘s decision to pay the debt. The district court reasoned that, as long as the debt collector communicates that the debt is variable, the ultimate basis for an increase is immaterial. Similarly, FSGB argues that “[a]ny consumer who owes a variable debt must decide whether to pay sooner than later to avoid that variance, regardless of whether any increase in the amount of the debt is due to the addition of interest, late charges, other charges, or some combination thеreof.”
We disagree. Of course, debtors always have some incentive to pay variable debts as quickly as possible, regardless of the source of variability. However, this incentive is even greater if the debt collector threatens to impose “late charges and other charges” in addition to interest.2 Here, the letter does not say how much the “late charges” are or what “other charges” might apply, so consumеrs are left to guess about the economic consequences of failing to pay immediately. But regardless of the amount of such charges, an unsophisticated consumer understands that these additional charges could further increase the amount of debt owed, thus potentially making it “more costly” for the consumer to hold off on payment. Id. at 827. Even if these additional charges are
This is especially true for consumers who are subject to debt collection activity. We have acknowledged that “[w]hen default occurs, it is nearly always due to an unforeseen event such as unemployment, overextension, serious illness, or marital difficulties or divorce.” McMillan, 455 F.3d at 762 (quoting S. Rep. No. 95-382, at 2 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1697). Because these consumers must often make difficult decisions about how to use scarce financial resources, it is plausible that the fear of “late charges and other charges” might influence these consumers’ choices. Therefore, the challenged statement is material.
In sum, plaintiffs have plausibly alleged that the dunning letter was materially false and misleading to an unsophisticated consumer in violation of
B. The Miller Safe Harbor Does Not Apply
FSGB argues that it is nevertheless immune from liability because it used the safe harbor language provided by this Court in Miller.
In Miller, we addressed whether defendants had violated a separate provision of the FDCPA:
We further held that the defendants were not excused from complying with
As of the date of this letter, you owe $[the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800-[phone number].
Id. at 876 (alterations in original). Debt collectors are not required to use this language. Id. However, “[a] debt collector who uses this form will not violate the ‘amount of debt’ provision, provided, of course, that the information he furnishes is accurate and he does not obscure it by adding confusing other information (or misinformation).” Id. Assuming this “essential quаlification” is met, a debt collector who uses this language “will as a matter of law have discharged his duty to state clearly the amount due.” Id.
Because the Miller decision only addressed
We agree with the majority of district courts that have addressed the issue for two reasons. First, the two statutory provisions at issue sometimes overlap:
However, even if a debt collector may generally rely on the safe harbor language to avoid liability under
In support of its position to the contrary, FSGB relies heavily on a single statement—indeed, a single word—in Chuway v. Nat‘l Action Fin. Servs., Inc., 362 F.3d 944 (7th Cir. 2004). Unlike the variable debt at issue in Miller, the debt at issue in Chuway was fixed. Id. at 947. Accordingly, we concluded that Miller was “not on point.” Id. Although the debt in Chuway was fixed, the dunning letter encouraged the debtor to call to obtain their “most current balance information.” Id. We concluded that this statement was confusing because it suggested to the consumer that the defendant was trying to collect additional debt. Id. at 947-48. After reaching this conclusion, we advised debt collectors who are collecting fixed debts to simply state the amount due and “stop[] there, without talk of the ‘current balance.‘” Id. at 949. We continued: “If, instead, the debt collector is trying to collect the listed balance plus the interest running on it or other charges, he should use the safe-harbor language of Miller.” Id. FSGB argues that this sentence, and in particular the word “or,” advises debt collectors to use the safе harbor language “any time there is reason for the amount owed to increase in the future, whether due to interest, late charges, other charges, or some combination thereof.”
Admittedly, debt collectors may have followed our guidance in Chuway in a good-faith attempt to comply with the FDCPA. However, this statement was dicta because we concluded that Miller did not apply to the fixed debt in Chuway. Moreover, our statement in Chuway must be read in conjunction with Miller, which explained that a defendant is not entitled to safe harbor рrotection if it provides inaccurate information. In any event, our judicial interpretations cannot override the statute itself, which clearly prohibits debt collectors from making false and misleading misrepresentations. See Oliva v. Blatt, Hasenmiller, Leibsker & Moore LLC, 864 F.3d 492, 500 (7th Cir. 2017) (acknowledging debt collectors’ good faith reliance on our precedent, but explaining that “the controlling law is and always has been the statute itself” and “the statute remains the law even if judges еrr“). Thus, FSGB‘s reliance on Chuway is not persuasive.
At bottom, FSGB argues that debt collectors should be able to copy and paste the Miller safe harbor language to avoid liability under
In sum, debt collectors cannot immunize themselves from FDCPA liability by blindly copying and pasting the Miller safe harbor language without regard for whether that language is accurate under the circumstances. Therefore, the district court erred by dismissing plaintiffs’ claims on this ground.
C. Plaintiffs Did Not Forfeit Their § 1692g(a)(1) Claim
The final issue is whether plaintiffs have forfeited their claim under
FSGB is wrong. As explained above, the claims under
III. Conclusion
For the foregoing reasons, we REVERSE the judgment of the district court.