In a recently issued opinion, a federal district court judge in the Eastern District of Wisconsin found that a debt collector’s use of Seventh Circuit-approved interest and fees safe harbor language in a collection letter could constitute a false and misleading representation under the Fair Debt Collection Practices Act where the plaintiff alleged that the debt collector could not legally apply interest and fees.

The case is Hoffman v. Keith D. Weiner & Associates Co. LPA, 2:19-cv-00019-LA (E.D. Wis.)

The FDCPA and Wisconsin Consumer Act putative class action arose out of interest and fees safe harbor language contained in two collection letters plaintiff Robert Hoffman received from defendant Keith D. Weiner & Associates in late 2018. In addition to naming the creditor and the balance of the debt, the letters contained the disclosure that “[b]ecause of interest and other charges that may vary from day to day, the amount due on the day you pay may be greater.” Although this disclosure closely tracked the Seventh Circuit’s approved safe harbor language announced in Miller v. McCalla, Raymer, Padrick, Coob, Nichols, & Clark, L.L.C., Hoffman alleged the disclosure was false and misleading under the FDCPA because Weiner could not legally apply interest and fees to Hoffman’s debt.

Weiner moved to dismiss the complaint based on two arguments. First, Weiner asserted that the interest and fees language included in its letters was not false and misleading because the Seventh Circuit approved of similar language in Miller. Second, Weiner argued that because a future lawsuit to collect on the debt could result in post-judgment interest and fees, the interest and fees language was true and, further, necessary to properly inform the debtor of this possibility.

Based on the allegations in the complaint that Weiner could not apply interest and fees to the debt as a matter of law, the Court found that the use of the safe harbor language was improper under the FDCPA. The Court noted that the Seventh Circuit had recently addressed this issue just last year in Boucher v. Finance Systems of Green Bay and agreed with the Seventh Circuit that “debt collectors must ‘tailor boiler-plate language to avoid ambiguity.’”

Turning to Weiner’s second argument, the Court recognized that it was not required to consider this alternative theory under the legal standard for a motion to dismiss. However, the Court decided to address the argument since Hoffman conceded that Wisconsin law allowed Weiner to collect post-judgment interest in the event of a successful debt collection action. Despite this concession, the Court rejected Weiner’s post-judgment interest argument because a consumer could understand the letter’s language to convey that Weiner had “an existing right to assess interest” and fees. However, the Court noted, post-judgment interest and fees were a purely speculative possibility until, and if, the debt collector decided to commence a collection action and was ultimately successful. As such, the fact that Weiner could one day assess post-judgment interest to Hoffman’s debt did not make the disclosure accurate. The Court found that Weiner could have stated in the letter that the debt collector may be entitled to interest and fees in the event of a successful debt collection action in order to more accurately convey this possibility to a debtor.

The Court’s opinion appears to fall in line with other courts’ decisions on the issue, especially with respect to the post-judgment interest argument. We will continue to monitor and report on decisions on the use of interest and fees safe harbor language.