On February 7, the Seventh Circuit Court of Appeals ruled in favor of the accounts receivable management industry, finding that a debt collector did not misrepresent the “character” of debt by reporting unpaid medical bills owed to a single provider separately rather than in the aggregate.

In Rhone v. Medical Business Bureau, LLC, the Seventh Circuit Court of Appeals reversed a decision by the United States District Court for the Northern District of Illinois, which held that defendant Medical Business Bureau, LLC (“MBB”), a debt collector, violated §1692e(2)(A) of the Fair Debt Collection Practices Act by reporting that plaintiff Diane Rhone owed nine debts of $60 each for nine physical therapy sessions rather than one aggregate debt of $540.  The Court, resolving an issue of first impression, held that simple arithmetic does not affect the “character” of debt under the FDCPA; instead, the “amount” of the debt governs the debt’s size.

In Rhone, it was undisputed that the plaintiff’s credit report was factually correct.  The question in the case was whether accurately representing the “character” of debt requires the debt collector to aggregate multiple transactions between a debtor and a single entity.  The Seventh Circuit answered “no,” finding that there is no regulation requiring aggregation and emphasizing that the terms “character” and “amount” are used independently in the statute and, thus, must be given different meanings.

The Court also found that representing the debts on a per transaction basis would allow a debtor to identify exactly which transactions are at issue and which debts may be stale.  Accordingly, the Court held that MBB did not misstate the “character” of Rhone’s debt, reversing the District Court’s finding of liability.

In rendering its decision, the Seventh Circuit had the benefit of an amicus brief filed by ACA International, advocating for reversal of the district court’s decision on several grounds that were ultimately adopted by the Court.

The District Court for the Eastern District of Arkansas granted summary judgment in favor of defendant debt collector ProCollect, Inc. in Jennifer Fox v. ProCollect, Inc. by ruling that ProCollect did not violate the Fair Debt Collection Practices Act by making two phone calls to a wrong number after first learning the number was not the debtor’s phone number.  The Court’s ruling illustrates the difference between a debt collector that mistakenly contacts the wrong individual and, on the other hand, a collector that intentionally harasses and abuses a consumer in violation of the FDCPA.   

Plaintiff Jennifer Fox alleged ProCollect violated FDCPA Section 1692d, which prohibits harassment or abuse, and Section 1692f, which prohibits unfair or unconscionable practices. The main issue was whether ProCollect intended to annoy, abuse, or harass Fox when it placed two calls to her phone number after being told twice that it had a wrong number.

ProCollect intended to call the correct debtor’s phone number, which ended in “9183;” instead, ProCollect called Fox’s phone number, which is one digit off, ending in “9182.” Over the span of ten months, between July 1, 2016 and May 10, 2017, ProCollect called Fox’s phone number five times, but Fox never answered any of these calls.  Then, on May 11, Fox answered ProCollect’s call and informed the company that it had the wrong number. On May 18, ProCollect called Fox’s phone number again and left a voicemail message for the intended debtor. That same day, Fox called ProCollect and told them for the second time that it had the wrong number. On June 8, 2017, ProCollect called Fox yet again. Fox responded by informing ProCollect for the third time that it had the wrong number.

The Court ruled that ProCollect’s conduct does not give rise to an intent to annoy, harass, or oppress because ProCollect clearly intended to reach the debtor, and not to annoy, harass, or oppress Fox. Judge Holmes wrote in his ruling that “[r]epeatedly calling a number despite being told that number is incorrect would at some point, perhaps, cross a line from merely intending to carry out legitimate collection efforts to intending to harass. But the Court does not draw that line in this case. In any event, the facts here do not give rise to such an intent. Even the courts that have denied summary judgment partly based on continued phone calls to a wrong number did so under more egregious facts than those present here.”

The attorneys in Troutman Sanders’ Financial Services Litigation team regularly defend clients in FDCPA claims and other debt collection consumer claims.  Please do not hesitate to contact us with any questions about this or any other ruling. 

On January 29, the District Court in Georgia, in Jones v. Jason A. Craig and Associates, P.C., denied a motion for judgment on the pleadings by a defendant-collections law firm seeking dismissal of a Fair Debt Collection Practices Act claim.  Plaintiff John Jones alleges that the law firm’s use of “& Associates,” as part of its name in a debt collection letter, was a violation of the FDCPA. 

The collection letter at issue reads “JASON A. CRAIG & ASSOCIATES, ATTORNEYS AT LAW” in the letterhead.  The letter is also signed by “JASON A. CRAIG & ASSOCIATES, ATTORNEYS AT LAW.”   Jones claimed a violation of Section 1692e of the FDCPA because the only lawyer allegedly associated with the defendant is Jason A. Craig.  His theory is that there is a violation of the FDCPA because the defendant allegedly seeks to intentionally mislead consumers into believing that it is a law firm comprised of many attorneys, not just Jason A. Craig.  Yet, at the time the letter at issue was provided, the defendant had “Jason A. Craig & Associates” registered with the Georgia Secretary of State.  In responding to Jones’s claim and allegations, the defendant argued that even if the collection letter was deemed to be misleading, the conduct at issue did not rise to the level of being material enough to be actionable under the FDCPA.  The District Court held:

The Defendant contends that even if its name on the letter was deceptive and/or misleading, that does not rise to the level of material misrepresentation to be actionable under § 1692e. Doc. 11-1 at 8. This argument is contingent on the Court applying materiality requirement to actions under § 1692e. Both parties correctly note that the Eleventh Circuit has not yet adopted the materiality requirement for claims brought under the FDCPA, specifically, § 1692e. […]  The Court agrees ‘the materiality requirement is a corollary of the least sophisticated debtor standard’ and that only material misrepresentations are actionable under § 1692e.

[…]

Contrary to the Defendant’s assertion, the Court finds the Plaintiff has alleged sufficient facts suggesting that the Defendant’s misrepresentation of its name as a firm with multiple attorneys is material in the eyes of the least sophisticated consumer. Given that at this stage all well-pleaded facts are accepted as true, the question becomes, why would a debt collector, in its collection letter to a debtor, represent itself as a law firm with multiple attorneys knowing it is actually a single-attorney law firm? The question is largely rhetorical, but it serves to highlight the materiality of the Defendant’s misrepresentation.

(internal citations omitted).

Based on the District Court’s decision, certain factual disputes between the parties in Jones will need to be resolved in discovery.  Relatedly, the District Court’s decision signals that a determination as to “materiality,” at least in the Eleventh Circuit, is more properly decided on summary judgment than as part of a motion for judgment on the pleadings, in the context of the type of factual allegations present in Jones.

The United States District Court for the Western District of Texas recently granted summary judgment in favor of a debt collector, holding that letters sent with the same client account number for two different debts incurred with the same underlying creditor was not false, deceptive, or misleading or otherwise in violation of the Fair Debt Collection Practices Act.

Consumer plaintiff Mary Reynolds incurred debts with the original creditor, Methodist Specialty & Transport Hospital, for two separate hospital visits five months apart in 2017.  Medicredit, Inc. sent Reynolds two collection letters relating to the hospital visits.  These letters included the same account number generated by Medicredit but pertained to debts from two separate hospital visits, with two separate balances, and different account numbers for the original creditor.

The first letter stated the balance owed as $600 for a hospital visit in March 2017, and the second letter stated a balance of $75, pertaining to a hospital visit in the following August.  Reynolds alleged this caused her to believe that the amount of debt had decreased due to her insurance paying off a portion of the debt.

Reynolds filed suit, alleging Medicredit violated the FDCPA by unlawfully confusing her by including the same internal account number on both letters even though the letters pertain to separate debts.  Specifically, Reynolds alleged a violation of § 1692e for using any false, deceptive, or misleading representation or means in connection with the collection of any debt, and a violation of § 1692(f) for using unfair or unconscionable means to collect or attempt to collect any debt.  Medicredit filed a motion for summary judgment on the basis that no reasonable factfinder could find the correspondences at issue misleading because an unsophisticated consumer would understand that the letters were for separate financial obligations.

In its opinion, which can be found here, the Court held that the ultimate question in the case is whether the unsophisticated or least sophisticated consumer would have been led by the debt collection letter into believing something untrue that would have influenced their decision making.

In granting Medicredit’s motion for summary judgment, the Court noted that the collection letters would deceive or mislead only under a “bizarre or idiosyncratic” reading.  The Court reasoned that an unsophisticated consumer, when reading the letters as a whole with some care, would note the differing client account numbers in the letters, the fact that the dates of service differed by more than four months, and the large gap between the two balances of $600 and $75.  Finally, the Court held that Medicredit’s inclusion of a self-generated account number, even viewed from an unsophisticated consumer’s perspective, is not unfair or unconscionable, just as it is not false, deceptive, or misleading.

On January 23, the Middle District of Florida issued an order dismissing a Fair Debt Collection Practices Act and Florida Consumer Collection Practices Act (“FCCPA”) putative class action because the defendant, Wells Fargo Bank, N.A., did not qualify as a debt collector under the FDCPA.  

The case is Rose Mary Rawls, et al. v. Wells Fargo Bank, N.A., 8:18-cv-2571 (M.D. Fla.).  

Plaintiffs Rose and John Rawls and Carmela Fornier filed the putative class action on October 19, 2018, asserting violations of the FDCPA and FCCPA. At issue were a pair of letters the Rawlses and Fornier received from Wells Fargo in October 2017 that stated the lender would not report any negative information regarding the plaintiffs’ loans or charge any late fees for a period of 90 days due to the plaintiffs’ residence in a FEMA-declared disaster area. The genesis of the letter for the Rawlses was a 2005 home mortgage loan and subsequent home-equity line the Rawlses originally obtained from Wachovia Bank. Wells Fargo later acquired the loan following its merger with Wachovia. Fornier also had two home mortgage loans with Wells Fargo, unrelated to the Rawlses’ loans. Both the Rawlses and Fornier defaulted on their obligations to Wells Fargo but all loans were satisfied from the proceeds of related short sales of the plaintiffs’ homes. The plaintiffs alleged Wells Fargo’s letters illegally attempted to collect on the loans via misrepresentations regarding the status and enforceability of the loans.  

On December 17, 2018, Wells Fargo filed a motion to dismiss and motion for judicial notice in response to the plaintiffs’ complaint. The motion for judicial notice requested the Court to consider the Rawlses’ mortgage agreements with Wachovia as well as documentation evidencing Wachovia’s merger with Wells Fargo. The motion to dismiss argued that the FDCPA claims against Wells Fargo should be dismissed because Wells Fargo, as originator and owner of the Rawlses’ loan by virtue of the merger with Wachovia and as outright owner of Fornier’s loan, is not a debt collector under the FDCPA. Further, the complaint did not contain any allegations that would support Wells Fargo’s alleged status as a debt collector under the FDCPA. Wells Fargo also argued for dismissal based on the fact that the letters at issue were sent for purely informational purposes and did not, therefore, constitute an attempt to collect a debt under the FDCPA or FCCPA.  

The district court agreed with both of Wells Fargo’s arguments and dismissed the FDCPA claims with prejudice. Relying on the Eleventh Circuit’s recent decision in Helman v. Bank of America, 685 F. App’x 723, 726 (2017), the district court found that Wells Fargo was “exempt from the definition of a debt collector” due to its status as the originator of the Rawls and Fornier loans. With respect to the FCCPA claims, the district court found it lacked jurisdiction to adjudicate these claims because of the plaintiffs’ failure to comply with the local rules of the Middle District of Florida, which requires the filing of a motion for class certification within 90 days of the filing of the complaint. Since the FCCPA claims were based on diversity jurisdiction under the Class Action Fairness Act, the district court found it lacked original jurisdiction due to the plaintiffs’ failure to comply with the local rules pertaining to class actions and dismissed the FCCPA claims without prejudice.

This decision aligns with the Supreme Court’s recent proclamation in Henson v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017), that a person who collects or attempts to collect a debt that it owns is not a debt collector under the FDCPA. Troutman Sanders will continue to monitor and report on developments in this area of the law.

On January 22, a district court in Wisconsin dismissed a debt collection action, with prejudice, on the basis that the inclusion of the current monthly payment in the “amount due now” was “not false, misleading, or confusing.”  A copy of the Court’s decision can be found here.   

Plaintiff Barbara Mollberg filed a complaint alleging that defendant Advanced Call Center Technologies, Inc. (“ACCT”) mailed her a letter in an attempt to collect a debt.  The letter stated that the “total account balance” was $1,113 and that the “amount due now” was $234.  ACCT used the term “amount due now” to mean the sum of the amount past due and the current monthly payment.  The letter did not itemize those amounts.  Mollberg alleged that the letter violated the law in two ways: (1) it included the current installment in the amount of the debt, and (2) the use of “amount now due” could confuse or mislead an unsophisticated consumer as to the character or legal status of the debt.   

ACCT moved to dismiss the case on the pleadings, arguing that Mollberg failed to state a claim under the Fair Debt Collection Practices Act or the corresponding Wisconsin state debt collection law.  The Court granted the motion and dismissed the case with prejudice. 

In dismissing Mollberg’s claim that the amount of the debt could only consist of an amount that is past due, the Court explained the “amount of the debt” is the amount the debt collector is authorized to collect and is attempting to collect in its letter, which may include the current balance due.  The Court explained that the plain language of the FDCPA does not require that debt collectors collect only past-due amounts or that they clearly state past-due amounts in debt collection letters.  Instead, under the FDCPA, “debt” refers to the amount owed without regard to whether it is currently due or past due. 

Next, the Court dismissed Mollberg’s claim that ACCT’s use of the phrase “amount now due” would materially mislead or confuse the least sophisticated consumer.  Mollberg alleged that such language falsely implied that the current installment was overdue.  However, the Court failed to see how “ACCT’s letter implied that the current installment was overdue.”  Instead, the “amount due now” consisted of the amount past due in addition to the amount currently due.  The Court held that “[a]ny consumer who interprets ‘now due’ as ‘past due’ is interpreting it in a bizarre, idiosyncratic fashion inconsistent with the unsophisticated consumer standard.”  The Court similarly dismissed Mollberg’s theory that the letter “unfairly misleads the consumer about how much she needs to pay to avoid a late fee by implying that she needs to pay this amount in its entirety,” because neither the FDCPA nor Wisconsin law “requires a debt collector to notify the consumer of the minimum amount they must pay to avoid late fees.”   

Lastly, the Court held that the language was not confusing based on inconsistencies with prior correspondence sent to the consumer.  The Court explained that “evaluating a debt collector’s liability in light of the creditor’s prior actions concerning the debt would be absurd, as it would require debt collectors to scrutinize all correspondence the creditor had previously sent to each debtor and then tailor each letter to avoid any perceived contradiction.”  It noted that there was “no support in the statute or case law for imposing such a burden on debt collectors.” 

Troutman Sanders maintains a robust practice defending debt collection claims asserted against its clients and will continue to monitor developments in the law governing the FDCPA and related state laws.