UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

ERIN JOHNSON,

on behalf of plaintiff and a class,

Plaintiff,

v. 2:16-cv-00330-PPS-APR

ENHANCED RECOVERY COMPANY, LLC,

Defendant.

OPINION AND ORDER

Erin Johnson claims that the dunning letter she received from Enhanced

Recovery Company, LLC (“ERC”), a debt collector, was false or misleading in violation

of the Fair Debt Collection Practices Act. ERC seeks dismissal of the case, arguing that

the letter is plainly neither false nor misleading. The Seventh Circuit has instructed that

whether a debt collection letter is misleading under the FDCPA turns on questions of

fact. Dismissal is permitted in only the most extreme cases, when no reasonable

consumer could be misled. Johnson’s complaint plausibly shows that ERC’s letter could

mislead reasonable consumers. So ERC’s motion to dismiss will be denied.

Background

ERC sent Johnson a collection letter dated April 21, 2016. The letter alleges that

Johnson didn’t pay her Sprint bill, so Sprint contracted with ERC to collect the debt. The

letter offers Johnson three options to pay less than the full amount allegedly due. The

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 1 of 15
second page of the letter appears to contain notices required by federal and various

states’ laws. (DE 1-1 at 1-2.) Johnson attached the letter to her complaint. (DE 1-1,

referred to in the complaint as “Exhibit A.”) It is therefore “part of the [complaint] for

all purposes.” Fed. R. Civ. P. 10(c). Rather than just looking to the plaintiff’s description

of the letter, I will go straight to the horse’s mouth and refer directly to the letter. See,

e.g., Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013).

Johnson filed her complaint on July 12, 2016, alleging that the April 21 letter

violated the FDCPA by making false or misleading statements. (DE 1, hereinafter cited

as “Compl.”) Johnson seeks class certification of her suit. (DE 4.) The Magistrate Judge

temporarily stayed class certification briefing. (DE 8, 14, 20.) I subsequently denied the

motion without prejudice to refiling because it was getting stale without briefing.

(DE 26.) So for the present, the party plaintiff in this case is Johnson as an individual.

ERC’s letter to Johnson says, in relevant part:

Our records indicate that your balance with Sprint remains

unpaid; therefore your account has been placed with ERC for

collection efforts. We are willing to reduce your outstanding

balance by offering discounted options.

Option 1: Pay the settlement of $875.78, please remit by May

26, 2016.

Option 2: Pay the settlement of $930.51, payable in 2 monthly

payments of $465.26.

Option 3: Pay the settlement of $985.25, payable in 3 monthly

payments of $328.42.

We are not obligated to renew this offer.

This letter serves asnotification that your delinquent account

may be reported to the national credit bureaus.

2

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 2 of 15
Payment of the offered settlement amount will stop collection

activity on this matter. We will inform Sprint once the

payment(s) is/are posted. Payment of the settlement amount

will not restore your service with Sprint. If you wish to

establish service with Sprint at a future date, the remaining

balance must be paid in full prior to the consideration of any

future services being granted.

(DE 1-1 at 1, emphasis added.) Johnson’s claim arises out of the bolded text, both

standing on its own and based on its relation to the surrounding text offering a chance

to settle.

Although the letter from ERC states that Johnson’s delinquent account “may” be

reported to credit bureaus, in fact ERC already had reported the delinquent debt to

national credit bureaus in April 2016, around the time it mailed the letter to Johnson.

(Compl. ¶ 23.)

Discussion

ERC seeks dismissal of the case with prejudice under Federal Rule of Civil

Procedure 12(b)(6). A motion to dismiss for failure to state a claim doesn’t address the

underlying merits of a case, but rather the sufficiency of the pleadings. I will accept as

true all of the allegations in the complaint, which must contain “a short and plain

statement of the claim showing that the pleader is entitled to relief.” Fed. R.

Civ. P. 8(a)(2); see also Bravo v. Midland Credit Mgmt., Inc., 812 F.3d 599, 601

(7th Cir. 2016) (citing Erickson v. Pardus, 551 U.S. 89, 94 (2007)). The appearance of a

right to relief must be more than speculative; it must be plausible. The complaint also

serves as notice of the claims and their grounds, so it must provide enough detail to

3

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 3 of 15
give the defendant fair notice. Bravo, 812 F.3d at 601-02 (citing Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); EEOC v. Concentra

Health Servs., 496 F.3d 773, 776 (7th Cir. 2007)).

The primary purpose of the FDCPA, 15 U.S.C. §§ 1692–1692p, is “to eliminate

abusive debt collection practices by debt collectors.” 15 U.S.C. § 1692(e). Johnson’s claim

arises under 15 U.S.C. § 1692e, which prohibits false or misleading representations in

connection with debt collection. Johnson specifically cites 15 U.S.C. §§ 1692e,

1692e(2)(A), and 1692e(10), which state:

§ 1692e. False or misleading representations

A debt collector may not use any false, deceptive, or

misleading representation or means in connection with the

collectionof any debt. Without limiting the general application

of the foregoing, the following conduct is a violation of this

section:

. . .

(2) The false representation of—

(A) the character, amount, or legal status of any

debt; . . .

(10) The use of any false representation or deceptive

means to collect or attempt to collect any debt or to

obtain information concerning a consumer.

Section 1692e’s sixteen subsections are representative examples of impermissible

conduct, but § 1692e is expressly not limited to these. See, e.g., Lox v. CDA, Ltd., 689 F.3d

818, 822, 827 (7th Cir. 2012); O’Rourke v. Palisades Acquisition XVI, LLC, 635 F.3d 938, 941

(7th Cir. 2011).

Under 15 U.S.C. § 1692k(a), any debt collector who fails to comply with any

provision of 15 U.S.C. §§ 1692 et seq. with respect to a person may be civilly liable to that

4

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 4 of 15
person. A § 1692e plaintiff need not prove that she was misled to her detriment and that

she suffered actual damages. See Muha v. Encore Receivable Mgmt., Inc., 558 F.3d 623, 629

(7th Cir. 2009). Statutory damages are available under 15 U.S.C. § 1692k(a)(2).

FDCPA allegations, including claims brought under § 1692e, are assessed from

the perspective of the Seventh Circuit’s objective “unsophisticated consumer,” created

in Gammon v. GC Services Limited Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994), as a

mutation of the widely adopted “least sophisticated consumer.” See, e.g., Clomon v.

Jackson, 988 F.2d 1314, 1318-19 (2d Cir. 1993). This consumer is taken to be “uninformed,

naive, or trusting,” but nonetheless has a rudimentary understanding of personal

finances and is essentially reasonable. Durkin v. Equifax Check Servs., Inc., 406 F.3d 410,

414 (7th Cir. 2005) (quoting Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 564-66 (7th Cir.

2004)). The reasonableness requirement “shields complying debt collectors from

liability for unrealistic or peculiar interpretations of collection letters.” Gammon, 27 F.3d

at 1257. A plaintiff’s idiosyncratic reading won’t carry the day even if that reading is

sincere: “a collection letter cannot be confusing as a matter of law or fact ‘unless a

significant fraction of the population would be similarly misled.’” Durkin, 406 F.3d at

415 (quoting Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir.

2000)). 

The Seventh Circuit has warned district court judges against assuming that the

interpretation a plaintiff propounds is an outlier just because it differs from a judge’s

own interpretation. A judge may not impute his own well-developed reading

5

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 5 of 15
comprehension skills to the recipients of debt collection notices. What may seem

obvious and beyond contestation to a federal judge may be clear as mud to many

consumers. In order to understand how other people interpret a letter, a judge may

need to review evidence derived from other people. It is for this reason that whether a

collection letter is misleading is a question of fact. See, e.g., McMillan v. Collection Profl’s

Inc., 455 F.3d 754, 759-60 (7th Cir. 2006) (reversing 12(b)(6) dismissal of a § 1692e claim

because “the inquiry under §[ ] 1692e . . . requires a fact-bound determination of how an

unsophisticated consumer would perceive the letter”); Walker v. Nat’l Recovery, Inc., 200

F.3d 500, 503 (7th Cir. 1999) (“The conclusion that [a plaintiff’s] complaint states a claim

on which relief may be granted and therefore may not be dismissed under Rule 12(b)(6)

follows directly from the proposition that ‘confusion’ is a matter of fact rather than

law.”); Johnson v. Revenue Mgmt. Corp., 169 F.3d 1057, 1060 (7th Cir. 1999).

It is also true that sometimes there are outlier cases. It is for this reason that,

when it comes to allegations of misleading statements in collection notices, the Seventh

Circuit differentiates extreme cases from closer ones that require additional evidence by

grouping cases into three categories: (1) cases in which the statements would not

mislead any reasonable consumer, even an unsophisticated one, and the court grants

dismissal or summary judgment for the defendant as a matter of law, see, e.g., Barnes v.

Advanced Call Ctr. Techs., LLC, 493 F.3d 838, 841 (7th Cir. 2007); (2) cases in which the

statements are not plainly misleading but might mislead the unsophisticated consumer,

in which situation plaintiffs may prevail only by producing evidence to prove that a

6

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 6 of 15
substantial portion of consumers would find the statements misleading, see, e.g., Muha,

558 F.3d at 629-30; or (3) cases in which the statements are plainly deceptive, and the

court will grant summary judgment for the plaintiff, see, e.g., Lox, 689 F.3d at 826-27. See

also Ruth v. Triumph P’ships, 577 F.3d 790, 800-01 (7th Cir. 2009) (discussing the three

categories of cases alleging misleading statements under the FDCPA).

The categories don’t explicitly account for materiality—the additional

requirement that a successful plaintiff must demonstrate that a false statement actually

matters. Technical falsity is not enough to constitute a violation; the false statement

must have the capability to affect the unsophisticated consumer’s decisionmaking. The

FDCPA exists to protect consumers, and an immaterial statement by definition can’t do

them any harm because it has no effect at all. See, e.g., Lox, 689 F.3d at 824, 827; Muha,

558 F.3d at 627-28; Hahn v. Triumph P’ships LLC, 557 F.3d 755, 757-58 (7th Cir. 2009).

But by the same token, literal truth may not protect a debt collector from liability

if the statements at issue convey a misleading impression. McMillan, 455 F.3d at 761.

Rather than looking at each sentence in isolation as strictly true or false, the Seventh

Circuit has taken a more holistic and nuanced approach to § 1692e claims. The bottom

line question is whether a collection letter would mislead a substantial number of

recipients. See Ruth, 577 F.3d at 800-01, 801 n.4 (collecting cases). Courts have looked at

factors including the statement’s placement within the letter, its relation to other

information in the letter, and word choice. See, e.g., Muha, 558 F.3d at 629-30 (reversing

grant of summary judgment for defendant on § 1692e claim because district court

7

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 7 of 15
focused on survey evidence and literal falsity without addressing “the critical issue,

which is that of confusion” caused by letter’s statement that consumer’s “original

agreement with the above mentioned creditor has been revoked”); McMillan, 455 F.3d at

761-62 (reversing grant of 12(b)(6) motion with respect to letter’s statement that called

“into question a debtor’s honesty and good intentions simply because a check was

dishonored”).

I’ll now turn to the collection letter at issue in this case. Let me begin by pointing

out that, in many respects, the parties frustratingly seem to be ships passing in the night

as they miss one another’s point and argue issues that are irrelevant or uncontested. Of

course they don’t see eye to eye—hence the lawsuit—but they don’t do themselves any

favors by tilting at strawmen rather than focusing on the real issues. I’ll point out some

of these missed connections where they’re relevant in an effort to focus the case moving

forward.

At this stage, all I must decide is whether this is a category 1 case described

above. In other words, is this a case in which the statements are patently not misleading

and would not mislead any reasonable consumer, even an unsophisticated one? If it is

such a case, as ERC argues, then it needs to be brought to an abrupt halt. The first step

in determining a statement’s truth or falsity is determining what the statement means.

Johnson’s first theory of recovery is that the credit reporting warning is false and

violates the FDCPA standing on its own. Johnson claims that telling her the delinquent

account “may be reported” to a credit bureau was demonstrably false since the account

8

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 8 of 15
had in fact already been so reported. (Compl. ¶¶ 20-23; DE 22 at 2.) This argument

interprets “may” as an indication of an unrealized possibility. ERC counters that the

word “may” means that it is permitted to report the delinquency. 

The word “may” is certainly used in both of those ways. Merriam-Webster puts

it like this: “(1) (a) archaic: have the ability to[;] (b): have permission to . . .—used nearly

interchangeably with can[;] (c) —used to indicate possibility or probability . . .” May,

MERRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/may (last

visited Jan. 15, 2017). ERC attempts to merge the definitions. It argues that there is

actually no difference between the two because ERC is permitted to report the

delinquency at any time, that might happen, and the letter simply forewarns Johnson

that the delinquency could show up in her credit history. (DE 18 at 6-7.)

ERC points out that the Fair Credit Reporting Act (“FCRA”) requires some

creditors to provide notice that negative information may be reported to credit bureaus,

and argues that it cannot be penalized for providing the warning because it used safeharbor model language to do so. (DE 18 at 6.) This part of ERC’s argument leads the

parties into a dispute (Johnson even filed a surreply to address it) about whether ERC

was required to provide the credit reporting warning, as it is not a “creditor” under the

FDCPA. See 15 U.S.C. § 1692a(4). (DE 22 at 7-8; DE 23 at 13-14; DE 24 at 1-2.) It looks like

ERC is peddling a red herring here—it never actually affirmatively asserts that it was

required to provide the credit reporting warning, and in fact indicates that it probably

wasn’t. But even if the FCRA did require ERC to provide a credit reporting warning,

9

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 9 of 15
ERC would not be immunized against FDCPA claims about the manner in which it did

so. Judicial opinions analyzing claims brought under 15 U.S.C. § 1692g, an FDCPA

provision requiring certain notices to consumers, demonstrate that a party can violate

the FDCPA even in providing mandatory disclosures. This can happen when a debt

collector provides the mandatory disclosures in a confusing way or includes language

that undermines or muddles their meaning. See, e.g., Janetos v. Fulton Friedman & Gullace,

LLP, 825 F.3d 317, 321 (7th Cir. 2016) (collecting cases). ERC’s intent in including the

credit reporting warning is irrelevant at this point. The FDCPA imposes strict liability

upon debt collectors who fail to meet its requirements. See Ruth v. Triumph P’ships, 577

F.3d 790, 805-06 (7th Cir. 2009); Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995 (7th

Cir. 2003). Of course, ERC can seek to prove that it intended to provide fair notice to

consumers about credit reporting, and that its intent was effectuated such that the

statement somehow actually aids consumers’ understanding rather than hindering it.

See, e.g., Muha v. Encore Receivable Mgmt., Inc., 558 F.3d 623, 630 (7th Cir. 2009); Turner,

330 F.3d at 995.

For now, it is enough to say that Johnson’s proposed interpretation of the credit

reporting warning standing alone is plausible, and therefore passes muster under Rule

12(b)(6). As the case proceeds, the parties may (both might, and are permitted to)

present evidence about how unsophisticated consumers would interpret it. 

Johnson’s second theory of recovery is based on the credit reporting warning’s

placement in the middle of the settlement offer. According to ERC, the credit reporting

10

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 10 of 15
warning is separate from the settlement offer statements, and each statement in the

letter is independently true. (DE 18 at 5-6, 14-16.) ERC conclusorily states that the letter

does not offer any way to avoid having the delinquency reported. (DE 18 at 7.) ERC

never actually addresses the letter’s organization, specifically the curious placement of

the credit reporting notice. Johnson claims that unsophisticated consumers would

interpret the credit reporting warning, combined with the next sentence (in a new

paragraph, among a series of very short paragraphs), as offering not to report the

delinquent account. The next sentence is this: “Payment of the offered settlement

amount will stop collection activity on this matter.” (DE 1-1 at 1.)

The parties debate whether “collection activity” includes credit reporting—the

problem with this dispute is that they appear to agree that it does. (DE 22 at 10-11; DE

23 at 2). ERC argues that telling Johnson that payment will stop collection activity can’t

be a promise that collection activity as a whole will be prevented from ever happening

because the letter itself is collection activity. (DE 18 at 10-13.) But the fact that collection

activity has started (evidenced by ERC mailing the collection letter) doesn’t mean that it

can’t be stopped before the delinquency is reported to the credit agencies. A course of

action can be stopped from ever starting (ERC’s interpretation of Johnson’s claim (DE

18 at 10-13; DE 23 at 2-4)), but it can also be stopped once it starts and before some

particular event included in the course of action occurs (Johnson’s claim (DE 22 at 11-

12)). This discussion also begs the question why credit reporting was singled out among

11

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 11 of 15
all of the possible collection activities for specific mention in the middle of the

settlement offer. ERC never answers that question.

Apparently in response to ERC’s arguments, Johnson goes off on a tangent about

‘pay-for-delete’ agreements, attaching 158 pages of 26 exhibits of Internet search engine

results for the phrase “pay for delete.” (DE 22 at 8-9; DE 22-1.) Discussion of pay-for- 1

delete may be relevant, but I don’t see how. First, why would a recipient of ERC’s letter

search for the phrase “pay for delete”? It’s not mentioned in the letter and I don’t think

it’s a universally known term. Second, Johnson’s claim is that ERC offered not to report

the delinquency in the first place, which is different from offering to delete the

delinquency once it has already been reported. The quid pro quo Johnson alleges is

different from the very specific phenomenon of pay-for-delete described ad nauseam in

DE 22-1. Third, anyone who actually reads the Web pages in DE 22-1 knows that a payfor-delete agreement is unusual, difficult for a consumer to obtain, and disfavored

because it violates debt collectors’ contracts with credit bureaus, so it’s a risky move for

a debt collector. (See, e.g., DE 22-1 at 71-72.) Given those facts, even if a debt collector

might occasionally agree to a pay-for-delete deal, it wouldn’t offer pay-for-delete en

masse, providing voluminous evidence of its willingness to breach its contracts with the

credit bureaus. Johnson’s evidence would support an argument that ERC’s letter didn’t

It is proper to consider these attachments as attempted illustrations of the facts Johnson 1

expects to be able to prove. See Def. Sec. Co. v. First Mercury Ins. Co., 803 F.3d 327, 335 (7th

Cir. 2015) (citing Runnion v. Girl Scouts of Greater Chi. and Nw. Ind., 786 F.3d 510, 528 n.8 (7th

Cir. 2015) (“[N]othing prevents a plaintiff opposing dismissal from elaborating on the

complaint or even attaching materials to an opposition brief illustrating the facts the

plaintiff expects to be able to prove.”)).

12

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 12 of 15
offer pay-for-delete. But that has no bearing on whether ERC’s letter would be

interpreted by a significant number of consumers as offering not to report the

delinquency in the first place in exchange for the consumer paying to settle.

The legitimacy of the quid pro quo that Johnson alleges the letter offers is at the

heart of her claim. She asserts that ERC’s letter makes an offer to induce her to settle,

but that ERC was never going to keep up its end of the deal by not reporting the

delinquency. It appears uncontested that ERC never intended to adhere to such an

agreement. ERC argues it never even intended to make the offer, although its intent in

that respect is irrelevant because what matters is the letter’s effect on the

unsophisticated consumer recipient. The ultimate question, then, is whether a

significant number of consumers would interpret the letter as making the non-reporting

offer. Johnson’s theory is plausible, and I can’t say at this point whether a substantial

number of consumers would view the letter as she suggests. Dismissal is therefore

inappropriate.

The allegedly misleading statements were material

ERC also argues that even if a statement in its letter was technically false, that

statement was not material. ERC argues that any falsity is only based on a

“hypertechnical” reading. ERC further argues that its letter just provides Johnson with

fair warning that she may have a negative mark on her credit report, so it doesn’t

frustrate the purpose of the FDCPA. Finally, ERC argues that the warning about

possible reporting of the already-delinquent account has nothing to do with the

13

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 13 of 15
settlement offers, so it cannot be material to Johnson’s decision with respect to the

settlement offers. (DE 18 at 16-19.)

Credit reports matter, and damage to one’s report can occur in a moment but

take a decade or more to repair. Johnson’s claim is that a consumer would think ERC’s

letter was an offer to let her avoid a black mark on her credit by paying a reduced debt

amount, which may be in reach while the original debt wasn’t. If Johnson is correct

about how the unsophisticated consumer would interpret ERC’s letter, the statements

are certainly material. Consumers with debts in collection are generally people doing

their best in the face of a tough situation that requires them to make difficult choices.

“[T]here is universal agreement among scholars, law enforcement officials, and even

debt collectors that the number of persons who willfully refuse to pay just debts is

minuscule. The vast majority of consumers who obtain credit fully intend to repay their

debts.” McMillan v. Collection Profl’s Inc., 455 F.3d 754, 762 (7th Cir. 2006) (ellipsis,

brackets omitted) (quoting S. Rep. No. 95-382, at 2 (1977), reprinted in 1977 U.S.C.C.A.N.

1695, 1697). By offering (or appearing to offer) a consumer a way to keep one

delinquency off her credit report, a debt collector might get itself bumped to the top of

her list of payments to make. That makes the offer material, assuming Johnson proves

there was an offer. If she proves something different or less than that, then the issue of

materiality may need to be revisited.

14

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 14 of 15
Conclusion

For the foregoing reasons, Defendant ERC’s motion to dismiss pursuant to

Federal Rule of Civil Procedure 12(b)(6) is DENIED. (DE 17.)

SO ORDERED.

ENTERED: January 17, 2017

/s/ Philip P. Simon 

PHILIP P. SIMON, CHIEF JUDGE

UNITED STATES DISTRICT COURT

15

USDC IN/ND case 2:16-cv-00330-PPS-APR document 27 filed 01/17/17 page 15 of 15