On April 1, the United States District Court for the Central District of Illinois denied a debt collector’s motion to dismiss a Fair Debt Collection Practices Act lawsuit stemming from the consumer visiting the debt collector’s online payment portal. This decision highlights the potential risks that debt collectors face in indirect communication with debtors, including operation of online payment portals, without adequate warnings.
Factual and Procedural Background
After checking her credit report, Julia Alexander learned that a purported obligation had been assigned, transferred, and/or placed for collection with Consumer Adjustment Company, Inc. (“CACi”). After learning that the debt had been placed on her credit report, Alexander visited CACi’s website in search of more information and accessed CACi’s online payment portal. When Alexander accessed the portal, CACi allegedly attempted to collect payment on the debt, despite it falling outside of the statute of limitations. The portal did not advise Alexander that CACi could not sue on the debt due to it being time-barred, or that Alexander making a partial payment or even simply acknowledging the debt could remove, waive, or restart the statute of limitations. Due to this, Alexander filed suit claiming that CACi’s conduct violated sections 1692d, e, and f of the FDCPA.
CACi moved to dismiss for failure to state a claim, arguing that, when a debt collector does not make a settlement offer or directly contact the consumer, there is no duty under the FDCPA to disclose a debt’s time-barred status or the implications of making partial payment. In response, Alexander argued that the combination of CACi reporting the stale debt to credit reporting agencies alongside its payment portal soliciting payment on the debt when Alexander accessed it constituted a communication under the FDCPA, and that the communication was misleading because it did not inform her that the debt was stale or that making partial payment could restart the debt’s statute of limitations.
In analyzing the parties’ arguments, the Court first made clear that CACi’s payment portal was a communication in connection with the collection of a debt. Whereby a communication under the FDCPA involves conveying information indirectly through any medium, and CACi stated in its portal that the portal was a communication from a debt collector in an attempt to collect a debt, the Court was quick to find the portal was a communication under the FDCPA. Crucially, the Court also brushed aside CACi’s argument that the portal could not be a communication because it was unsolicited. In an interesting bit of comparison, the Court stated that CACi’s insistence that Alexander’s viewing of the payment portal was unsolicited was similar to a panhandler feigning bewilderment and surprise when a passersby leaves money in his donation jar.
After determining that the portal was a communication in connection with the collection of a debt, the Court turned to deciding whether the communication was misleading or deceptive to the unsophisticated consumer. In doing so, the Court looked to earlier decisions by the Seventh Circuit that addressed a debt collector’s obligations to disclose when a debt is time-barred and the risk of resetting a debt’s statute of limitation. In one such case, a debt collector sent a dunning letter to a consumer regarding a debt that was outside of the statute of limitations, offering to “settle” the debt without any mention of the fact that the debt collector could not legally enforce the debt. In holding that offering to settle implies the ability to legally enforce the debt, the Seventh Circuit affirmed the lower court’s decision that noted that a letter with no warning as to a debt’s enforceability or the consequences of making payment on the debt may mislead and deceive unsophisticated consumers. In a later case, a debt collector mailed a dunning letter on a time-barred debt offering to settle and stating that, because of the age of the debt, the debt collector would not sue the consumer or report the debt to any credit reporting agencies. The Seventh Circuit held that the letter was misleading and deceptive as a matter of law because it offered no warning as to the risk of resetting the statute of limitations on the debt. Alternatively, the Seventh Circuit also held that the letter was misleading and deceptive because it implied that the debt collector was choosing not to sue instead of being legally barred from doing so.
Applying these cases to the parties’ arguments, the Court held that, at minimum, whether an unsophisticated consumer would be misled or deceived by CACi’s silence as to the legal enforceability of debt or the consequences of making a payment or promise to pay was a question of fact sufficient to survive a motion to dismiss. The Court further held that Alexander plausibly alleged that CACi attempted to skirt such disclosure requirements by reporting stale debts to credit reporting agencies, knowing that debtors eventually would find their way to CACi’s website and, ultimately, payment portal. In sum, the Court had no issue determining that, even when not contacting a debtor directly, a debt collector must have adequate disclosures in place regarding the legal enforceability and the risk of paying on or acknowledging stale debts, and that plausibly alleging that a debt collector has skirted making those disclosures is enough to state a claim under the FDCPA.