The U.S. Court of Appeals for the Seventh Circuit recently affirmed judgment in favor of two debt collectors and against a debtor for claims arising under the Fair Debt Collection Practices Act and the Wisconsin Consumer Act (“WCA”). In its ruling, the Court held that the debtor did not create a triable issue of material fact to overcome summary judgment because he failed to provide sufficient evidence that the underlying transactions comprising the credit card debt were for “personal, family, or household purposes,” and, therefore, were not considered “consumer debt” subject to the FDCPA or WCA.
The Kohn Law Firm, S.C. filed suit against debtor John H. Burton in Wisconsin state court to collect amounts due to its client debt collector, Unifund CCR, LLC. Burton denied any knowledge of the credit card debt and filed suit alleging violations of the FDCPA and WCA for filing the state court action without first providing the debtor notice of his right to cure the default.
The district court granted summary judgment to Kohn and Unifund on the basis that the debtor failed to establish that the debt at issue was a “consumer debt,” incurred for personal, family, or household purposes.
On appeal, the Seventh Circuit examined the sufficiency of the evidence regarding whether the credit card debt was incurred for personal, family, or household purposes, i.e. “consumer debt.” Burton advanced five pieces of evidence to support his argument that these were consumer debts, including:
(1) His statements that, to the extent he was liable for the debt, it was a consumer debt;
(2) The defendants’ treatment of the debt as a consumer debt by including FDCPA disclaimers on the collection letters, suing Burton in his personal capacity, and sending communications to his personal address;
(3) Kohn’s and Unifund’s description of their consumer debt collection services on their websites;
(4) A Citibank employee’s email description of the underlying account as a “consumer account”; and
(5) The billing statements listing purchases made on the credit card for personal, family, or household purposes.
The Court rejected Burton’s evidence, specifically finding that:
(1) Any statements could not be reconciled with his total disavowals of the debt in the original state court action;
(2) FDCPA disclaimers on debt collection letters do not prove that a debt is a consumer debt because debt collectors may be exercising caution and including disclaimers on all communications with debtors simply to avoid any FDCPA liability. Furthermore, the defendants’ suit against Burton in his personal capacity did not matter because a person can be sued in a personal capacity for a business debt, and sending correspondence to his personal address is of little consequence either because individuals can carry on business activities from their residence;
(3) The defendants’ online marketing materials generally describing their debt collection services did not establish that the debt they attempted to collect in this case was a consumer debt;
(4) The district court correctly excluded the email from a Citibank employee (in which Burton wanted to use the email to establish that “Citi itself stated that the account was a consumer account”) as inadmissible hearsay; and
(5) The billing statements on the Citibank account shed no light on why these charges were incurred. Specifically, because Burton could not explain whether these transactions were for a consumer as opposed to a business purpose, the billing statements did not provide enough information for a trier of fact to conclude these purchases were for personal, family, or household purposes.
Accordingly, the Court upheld summary judgment in favor of the two debt collectors and against the debtor.
Troutman Sanders’ Financial Services Litigation practice group advises clients nationwide on debt collection compliance issues and litigation, including the FDCPA and various state law equivalents.