Search results for: boucher

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.

In a recent ruling, the Seventh Circuit Court of Appeals held that plaintiffs stated a viable claim under the Fair Debt Collection Practices Act by alleging that a collection letter which included the safe harbor language set forth in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, LLC, 214 F.3d 872 (7th Cir. 2000), was false and misleading.  In reversing the lower’s court decision on which we previously reported, the Court of Appeals concluded that the letter’s reference to late and other charges was inaccurate, even though it came directly from the Miller safe harbor language, since the defendant could not lawfully impose such charges.  A link to the Seventh Circuit’s decision can be found here.

The letter at issue was an attempt to collect medical debts.  It recited verbatim the safe harbor language, including the statement of the amount of debt and a disclosure that “interest, late charges, and other charges … may vary from day to day … .”  The plaintiffs filed a class action asserting that the letter was misleading because the collector could not lawfully or contractually impose “late charges or other charges.”  In response, the collector argued that it was permitted to charge interest and that reference to late and other charges was not materially misleading.  The trial court agreed because “the central purpose of Miller’s safe harbor formula is to provide debt collectors with a way to notify debtors that the amounts they owe may ultimately vary.”  On appeal, the Seventh Circuit reversed dismissal of the plaintiffs’ claims.

In performing materiality analysis, the Court explained that, while debtors always have some incentive to pay variable debts quickly, the source of variability matters.  The letter did not specify how much the “late charges” are or what “other charge” may apply, “so consumers are left to guess about the economic consequences of failing to pay immediately.”  Because these additional fees and charges may be “a factor in [plaintiffs’] decision-making process,” the plaintiffs plausibly alleged that the letter was materially false or misleading.

The Court also found that the collector was not entitled to safe harbor protection because the Miller language was inaccurate under the circumstances in that the collector could not lawfully impose “late charges and other charges.”  The Court rejected the collector’s reliance on the Court’s earlier decision in Chuway v. Nat’l Action Fin. Servs., 362 F.3d 944 (7th Cir. 2004), wherein the Court instructed collectors to use the safe harbor language if “the debt collector is trying to collect the listed balance plus the interest running on it or other charges.”  Despite the apparent applicability of Chuway, the Court found that it was not persuasive because Chuway dealt with a fixed debt; therefore, the statement was arguably made in dicta.  The Court further stated that “in any event, our judicial interpretations cannot override the statute itself, which clearly prohibits debt collectors from [making] false or misleading misrepresentations.”  In support, the Court cited its recent controversial decision in Oliva v. Blatt, Hasenmiller, Leibsker & Moore LLC, 864 F.3d 492 (7th Cir. 2017), that effectively rejected the collector’s reliance on controlling law and found that the bona fide error defense did not apply.

Boucher highlights the need for customized compliance review of collection letters within the context of specific debts.  Such review must take into account not only whether the amount of debt is static or variable but also the sources of variability to help avoid claims of confusion and deception.

In dismissing a claim against a debt collector, brought under the Fair Debt Collection Practices Act, the U.S. District Court for the Eastern District of Wisconsin found that language used by the debt collector clearly informing the consumer that interest and fees would continue to accrue on the balance did not violate the FDCPA.

In Boucher et al. v. Finance System of Green Bay, Inc. et al., the plaintiffs defaulted on medical debts which were placed with Finance System to collect.  Finance System sent the plaintiffs letters containing the following disclaimer:

“As of the date of this letter, you owe $ [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 address above or call [listed number].”

The plaintiffs claimed that Finance System could never have lawfully imposed late fees or charges on medical debt.  They asserted a class action, alleging that the letters were materially false, deceptive, and misleading under the FDCPA.

Finance System filed a Rule 12(b)(6) motion to dismiss for failure to state a claim, arguing that the disclaimer used in its collection letters mirrored the safe harbor language found in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark LLC. 214 F. 3d 872, 876 (7th Cir. 2000).  Finance System also argued it was entitled to accrue interest on the plaintiffs’ accounts because interest was authorized by the creditor.

In granting the motion to dismiss, the Court held that Finance System accurately notified the plaintiffs of the amount due on the date of the letters and properly informed them that the amounts due may vary due to additional charges.

The Court referenced Miller and stated that the Seventh Circuit recognized that a debt collector who uses such language would not violate the “amount of the debt” provisions as long as “the information he furnishes is accurate and he does not obscure it by adding confusing other information (or misinformation).”

The plaintiffs tried to argue that Miller required debt collectors to narrowly tailor the Miller statement to each unique situation and eliminate the variable charges that no longer apply.  Failure to do so, the plaintiffs argued, would therefore result in inaccurate and misleading information in violation of the FDCPA.

The Court held that the plaintiffs’ interpretation of Finance System’s collection letter was unreasonable.  The central purpose of the Miller safe harbor formula was to provide debt collectors with a way to notify consumers that the amounts they owe may ultimately vary.  Therefore, the Court noted that, as in the Miller case, no reasonable person could conclude that the letters used by Finance Systems failed to clearly inform the plaintiffs of the amount due or that the balance may increase by the time of payment.

This case has now been appealed to the Seventh Circuit.  We will continue to monitor the outcome of this case and other current account balance cases, and will report on future developments.