## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 07

- 4083 M ARVI N S EEGER, B RAD LEY G AMROTH, R OBERT M C C LAIN , an d J OAN NE B LARE K, on be hal fo fthem sel ves and al l o ther s s i mi l a r l y s i t ua t e d, P la intif fs-A pp ellees,

v.

A FN I, I NC ., D ef endant-Appellant.

____________

Appeal from the United States District Court fo r the E astern Di stricto f Wisc onsin
. No . 05- C- 0714

—Wi ll iam E . C all ahan,J r. , Magistrate Judg e.

____________ A RG UE D S EP TE MBE R 9, 2008

— D ECI DE D D ECE MBE R 8, 2008

____________

Befo re B AUER, C UDAH Y, an d W OO D , C ircu it Judges. W OO D , C ircu it Judge. Thi s ca se i nvol ve s th e l ega l i ty of the me tho ds tha tAF NI, I nc . , u s e s wh e n i tu nd e rt ake s col l ecti on efforts

— i n thi s i nstance , o n behal fo fCi ngul ar W i rel ess . ( A fterthe eve nts i n thi s ca se, Ci ngul arwas2 N o. 07

- 4083

ac qui r ed byAT& T; f o r the sa ke o fc o ns i st en cywi ththe dist ri ct c ourt ’ s o p in ion, w e r eferto i t her e byi ts f or m er n am e.) T h e d ist ric t c ou rtce r t i fied a c las s o f cu st om er s in the s tat e o fW i sco nsi n w ho had recei ved a col l ecti on l ett er du ri ng a speci fi ed ti m e. The cl ass to ok the pos itio n that A FN I’s p ra c tic es vio lat ed bo th W isc on sin law an d t h e F air Debt Col l ecti on Pr acti ces A ct ( “FDCP A ”) , 15 U
. S. C. §§ 1692 et seq
. On cro ss- m oti ons fo r sum m ar y j ud gm ent, the dist ri ct cour t rul ed that A FN Ihad not vi ol ate d W i s. S tat
. § 422. 202 when i ti mpo s e d i t s c o l l e c t i o n fe e , b e c a u s e th e c e l l p h o ne co nt r ac t was no t a “c o ns um erc r edi t tr an sa ct i o n. ” The cour t a l so rul ed, how eve r, thatthe pla i nti ffcl ass was en ti tl ed to sum m ar y j udg m en t o n i ts c l ai m s unde r the FD C PA and W is. Stat. § 427. 104(j ), becau se ne ither A FN I ’s contr acts w i th i ts custo m er s no r W i sco nsi n l aw autho ri zed it to ch arge th e t yp e o f collection fee it w as u sing. Plai nt iffs w er e w illing to letw ell en ou gh alon e w ith res p ec t t o t h eir defea t o n the § 4 22
. 20 2 th eo r y , b utAFNI ha s appe al ed th e j udg m en t i n f av o r o fthe c l as s. Al th o ug h we ca n i m ag i ne hypotheti calf acts under w hi ch A FN Iw oul d be enti tl ed to preva i l, A FN Idi d not pre sent such a re cor d to the di str i ct c o u r t
. We th e r e f o r e a ffi r m.

I M ar vi n S eege r, Br adl eyGa m r o th, Ro be r t M cCl ai n, a nd J o an ne Bl ar eke ac h e nt er ed i nt o a n a g r ee m en t wi ththe f or m erCi ngul arW i re l ess , A m er i tech M obi l e Com m unica

tions, or W orldcom , for cellular tel ep hon e service. Seeger’s contr act w as w i th Ci ngul ar ; i t was a m onthl y pl an that includ ed 800 “an ytim e” m inu tes an d i m p osed extraN o. 07

- 4083 3 charg es f oraddit i onalti m e use d. The other thre e nam ed pl a i nt i ff s h a d s i mi l a r p l a n s w i th th e i r c a r r i e r s . A ts o me poi nt, ea ch one f el l behi nd i n hi s o r her paym ents. A FN Ii s a debt col l ecti on co m pany thatpurchase s acco unts f ro m so m e o fi ts custo m er s. The o ri gi nal co ntra cts between ea ch pla i nti ff and the ce l l ula r tel ephone pro vi der con tained l an gu age ad d ressing th e p ossible use of a col l ecti on a gency . S om e Ci ngul ar contr acts had thi s t o say : Yo u a g r e e t o p a y t o C I NG UL AR th e f e e s o fa ny col l ecti on agency, w hi ch m ay be based on a per centag e ata maxi m um o f3 3% o fthe de bt, a nd all co st s an d ex pen se s, i nc l ud in gr ea so nabl e at to r ne y s’ fee s an d co ur t co st s, i nc ur r ed byCI N GU LA R i n e xe r ci singa ny of i ts rig h ts an d re m ed ies w h en en for c in g an y p r o visi ons ofthi s Agree m ent. Other Cingul arco ntra cts sa id onl y that “ [ y] ou ag re e t o re i m burse us the fees o fany col l ecti on age ncy, w hi ch m ay be b ase d on a perce ntage at a m axi m um of 33% o fthe debt, and a l l cos ts and e xpenses, i ncl ud i ng r eas onabl e a tto rney s’ f ees , we i ncur i n such col l ecti on ef f or ts. ” The co ntra cts al so conta i ned var i ous pr ovi si ons m aki ng i t cl ear that f ai l ure to pa y wa s c a us e f o r t e r mi na t i o n o f the c o nt r a c t a nd that a n e a r l y t e r mi na t i o n f e e o r ca nc e l l a t i o n fe e wou l d b e i mpo s e d. Betw een S eptem ber 2004 and J une 200 5, A FN Ise nt debt c o l l e c t i o n l e t t e r s t o S e e g e r, G a mr o th, a n d Mc C l a i n, i n f o r mi nge ac h o ne tha t he o wed a deb t a nd tha t Ci ng ul arw as the or i gi nal cr edi tor. ( The parti es dispute w hetherBl ar ek r ec ei ve d tha t fi r stl et ter. ) AFNI ’ s l et te r s ta te d tha t th e re ci pie nt was re sponsibl e f orpayi ng AFN Ia col l ecti on fee of 1 5% o f t h e “o rig in al b ala n c e.” Som e t im e la te r, M c C lain4 N o. 07

- 4083

an d Bl ar ekr ec ei ve d a nothe r f o r m l et te r fr o m AFNI ; the seco nd l ett erincl ud ed the c ol l ecti on fee i n the bal ance due. Inke ep i n g w ith its n or m al p ra c tic e, C in gu lar h ad so ld these acc ounts to A FN I
. A s p ar t o fthe tr ansfer, Ci ngul ar fur ni sh ed ac co unti nf o r m at i o n to AFN Io n a CD- ROM , a nd th e inform ation on the C D w a s t he n u p loade d to A FN I ’s sy st em . T h e in for m at ion tra n sm itt ed by C in gu lar sa id no th i ngabo uta ny c o l l ec ti o n fee s th atAFNI mighto r might n ot ch ar ge . On J ul y 7 , 2 00 5, S ee g era nd Ga m r o thfi l ed a co m pl ai nt aga i nst AF NI, a l l e g i ngtha ti t s a t t e mptt o i nc l ud e a s e par a t e c o l l e c t i o n fe e i n th e a mo u n td u e v i o l a t e d th e F DC P A. On Nov embe r 2 9, 2 00 5, they fi l ed ana m en ded co m pl ai nt th atb o tha dded M cCl ai n a nd B l ar eka s pl ai nt i ff s an d i ncl ud ed char ges u nd erthe W i sco nsi n Consum erA ct, W i s. St at. §§ 42 1- 425. S i x m onths l ate r, the pla i nti ff s m ove d fo r cl as s ce r ti fi ca ti o n. The di st r i ctc o ur t ( ac ti ng thr o ugh a m ag ist ra te j u d ge , by c on se n t o f t h e p ar tie s) g ra n te d th eir m oti on a nd defi ned the cl ass as f ol l ows: ( a) A l l natur alper sons i n the St ate o fW i sco nsi n ( b) w ho w er e s ent a co l l ecti on l ett erby A FN Icl ai m i ng a col l ecti on fee ( c) f orCi ngu lar te l ephone se rv i ce o r ser vi ce o fa n othe r cel l ula r provi der t ra nsf er re d to Cingul ar, ( d) o btain ed f orper sonal, f am i l y o r househol d pu rpos es, ( e) wh i ch ori gi nal l y i ncl ud ed a co ntra ct f ora m i ni m um te rm o fse rv i ce o fo ne o r m ore y ear s, and “ear l y c ancel l ati on fee” o fany am ount, ( f ) o n or afte r J ul y 7, 2 00 4, ( g) thatwas no t r etur ne d b y the postalse rv i ce. A s n o ted above, the d istri ct cou rt l ater gran ted sum m ary j udg m en t i n the c l as s’ s f av o r, r ul i ngtha t AFN I ’ s ac ti o nsN o. 07

- 4083 5 vi ol ate d the F DC PA bec au se nei therthe contr acts nor W i sco nsi n l aw per m i tte d the o w ner ofa debt t o i m pose a separ ate f ee f or col l ecti on, i f the f ee w as f or the pu rpos e o f re i m bursi ng the o w ner i tse l fas o pp ose d to a thi rd- party deb t co l l ec to r . Thi s al so mean t, the di st r i ctcou r t co ncl ud ed, thatA FN Ihad vi ol ate d the W i sco nsi n Consum er A ct’ s provi si on prohibi ti ng a debt col l ecto r f ro m tr yi ng to enf or ce a r i ght i t know s o r has r eas on t o know does no t exi st. S ee W i s. Stat. § 427. 104(j )

. A FN Inow chal l enges tho se r ul i ng s o n a pp e a l

. W e r e v i e w the di s t r i c t c o ur t ’ s g r a nt o f sum m ar y j ud gm ent deno vo , e xa m i ni ngthe r ecor d i n the ligh t m os t fa vo ra b le t o t h e n on -m ov in g p ar ty
. Sou nd of M us i c Co. v. 3M , 377 F.3d 910 , 914 (7th C ir. 2007).

II I n o r de r t o b e e nt i t l e d t o c o l l e c ta fe e , AF NI mus ts how that the fee i s ei therauthori zed by the gov er ni ng co ntra ct o r tha ti ti s p e r mi t t e d b y Wi s c o ns i n l a w. S e e 1 5 U. S

. C. § 1 69 2f(1 ). In A FN I’s v iew , th e d ist ric t cou rt er re d w h en it rej ecte d each o ne o fthes e a l ter nati ves.

A W e co nsi der fi rs t whether W i sco nsi n l aw all ows a debt coll ecto r i n A FN I ’ s pos i ti on t o i m pose the 1 5% fee that A FN I w an te d to ch ar ge . A FN I arg u e s t h at th e fe e fa lls wi th i n th e d e fi n i t i o n o fi n c i d e n t a l o r c o n s e q u e n t i a l d a mage s f or the custo m er ’ s bre ach of the underl yi ng co ntra ct. Theref or e, i t rea sons, the f ee m ay be col l ecte d by a n enti ty th at p u rc h as es th e c on tr ac t fo r c olle c tio n p u rp os es .6 N o. 07

- 4083 A FN Ii s correct to p oint out th at W iscons in (l ike every st at e) per m i ts r ec o ve r y o fl o ss es tha t ar e th e na tu r ala nd p robab le r esu lt of the breac h of a contra ct an d that w ere w i thi n the re aso nabl e co ntem pla ti on o fthe parti es. M agestro v. N . Star E nv tl. Co nst., 64 9 N
. W

. 2d 722 , 7 25- 26 (W is. C t. A p p . 200 2); Pe t e rs on v. Cor n e rs t on ePr op . De v. , L L C, 720 N
. W

. 2d 716, 73 0 ( W i s. Ct. A pp . 20 06)

. Thi s rule appli es to ser vi ce c ontr acts li ke the plai nti ff s’ cel l phone co ntra cts, j ust a s i t a pp l i es to em plo ym ent a nd c o ns tr ucti on co ntra cts. Se e H andicapp ed Childre n’s E d uc. Bd

. v. Lukaszewski, 33 2 N .W .2d 77 4, 77 8 (W is. 19 83 ). T h e fa c t t h at W isc on sin follow s th is w ell es ta b lish ed ru le i s no t e nough, by it se l f, to al l ow A FN Ito r eco ver . I t m ust show that th is rule perm i ts a thi rd- partypurchase r ofan ac c ou n t t o re c ov er it s int er n al c os ts to rec ov er th e d eb t in th i s m an ne r, a nd, i fs o , tha t th e 15 % fee i t ch ar ged t o the pl aint i ff s r efl ec te d AFNI ’ s a ctua l c o st s. To e st ab l i shthe fi rst p rop os it io n , A FN Irel ies heav il y on th e Secon d Circui t’ s dec i si o n i n Tutt l e v. Equ i f ax Che ck, 1 90 F.3d 9 (2d Cir. 19 99 )

. I n Tuttle, the pla i nti ff, wh i l e h e w as sta nd i ng j ust und era prom i nent si gn w ar ni ng that a col l ecti on fe e o f$2 0 w oul d be i m posed fordi shonor ed checks , wrote a check f or approxi m ate l y $ 57 at a hardw ar e s tor e. H i s che ck, tho ugh author i zed by Equif ax, l ate r bounced. U n d er the contr act b et w ee n E q u ifax an d th e s to re , E q u ifax gu ar an te ed all c he c k s tha ti t autho r i z e d. Whe n a c he c kwa s di s ho no r e d, Eq uif ax w as obl i gat ed to purchase i t a t f ace val ue and then p u rs u e c olle c tio n effo rt s o n its ow n . Tuttl e a sse rt ed that Equ i f ax w as not enti tl ed to co l l ect a $20 f ee i n conj uncti on with i ts e ffort t o col l ect on the $5 7N o. 07

- 4083 7 ch ec k, b utthe j ur y r ej ec te d hi s ar g um en ts and the S ec o nd Cir cui t a ffi rm ed. The co urt f ound that Connectic ut l aw author i zed the col l ecti on o fthe f ee: A rt i cl e 2 o fthe U CC , as adopted i n Connecti cut, prov id es that“[ w ] hen the buyerf ai l s t o pay the pri ce as i t be com es du e the sel l erm ay re cove r, to gether w i th an y i n c i d e n t a l d a ma g e s u n d e r s e c t i o n 4 2 a - 2

- 7 1 0 , t he pri ce . . . o f g oo d s a ccepted. ” Conn. Gen. S tat
. § 4 2 a - 2

- 7 0 9
. T he “ inc i dental dam age s” perm i tte d und er § 4 2a -2-7 09 “in c lu d e a n y c om m e rc ially rea so n ab le charg es, expenses orco m m i ssi ons . . . o ther w i se re sul ti ng fro m the bre ach, ” id

. § 4 2 a - 2

- 7 1 0 , a nd m ay be re covere d by a s el le r or b y a “pers on in the posi ti on of a seller, ” id

. § 42a-2-707
. The l at te r i nc l ude s ( as the com m enta ry advi ses ) “a fi nanci ng ag ency w hi ch has ac qui r ed do cument s . . . b y di sc o unt i nga dr aft f o r the se l l er . . . . ” Con n. Ge n. S ta t. Ann. § 42 a- 2- 70 7, c o m m en t ( W es t 19 90 & S upp. 1 99 9)

. M o r e g en er al l y , a “ fi na nc i ng ag en cy ” i s defi ne d i n th e UC C as o ne “who i n the o r di na r y c o ur s e o f b us i ne s s . . . b y a r r a ng e men t wit h either th e sell er or th e bu yer i nt erven es in ordin ary c ou rs e t o m ake o r col l ect paym ent due o r cl ai m ed unde r the c o nt r a c tf o r s a l e . ” Co nn . Ge n. S t a t. § 4 2a- 2- 104. 19 0 F
. 3d at1 4- 15 ( emphas i s adde d)

. I n the a l te r na ti ve , the co ur t f o und tha t Tut tl e ha d ag r ee d to the i m po si ti o n ofthe col l ecti on fee w hen, i n full vi ew of the s i gn al er ti ng hi m to th e $ 20 fee , he te n d er ed h is c h ec k. N ei thera l aw e xpressl y per m i tti ng a col l ecti on fee on behal f o f a p erson i n the posi ti on o fa sel l ero fcel l ula r8 N o. 07

- 4083 tel ephone se rv i ces nor a n a gr eem ent b etween the cl ass m em ber s a nd thei r cel l ula r provi ders exi sts her e. That m i ght no t m att er i fthe re cor d contai ned any i nfo rm ati on that w oul d i nd i cate wh ethero r n ot the 1 5% co l l ecti on fee A FN Ii m posed can proper l y be char acte ri zed as i nci dental orco nsequenti aldam age s r esul ti ng fro m the pla i nti ff s’ br ea ch o f th ei r ce l l ul ar pho ne co nt r ac ts wi th Ci ng ul ar . But i td o e s n o t
. T h e r e c o r d d o e s n o te v e n r e v e a l wh e th e r AF NI pai d 1 00 c en ts o n the do l l arf or Ci ng ul ar ’ s del i nque nt acco unts, o r i f( as i s co m m on) , i t purchas ed the portf ol i o of ac co unt s ata di sc ou nt, the r eb y c o m pen sa tingi ts el fup f ro ntf o r the e xp e ns e o fi t s c o l l e c t i o n e ff o r t s a nd the r i sk that som e a ccoun ts m i ght pr ove to be uncol l ectibl e. Fr om Cingul ar ’ s p oin t o fvi ew , the i nci dental o r conse quenti al damag e f r o m i ts c us to m er ’s f ai l ur e to pa y i s th e di sc o unt i t had to abs orb , if a n y exi ste d, w hen i t s ol d the debt to A FN I. B u t t h e re c or d co n ta in s n o e vid en c e t h at w ou ld supp or t the pro posi ti on that ther e w as any di sco unt, m uch l es s whethe r i t equa l ed 15 % o fthe f ac e amoun t o fthe debts, or any otheram ount fo r that m att er . T he reco rd al so does not re vea l wh etherA FN I ’ s busi ness m odel i nvol ved so m e com bi nati on o fthe 15% fee and a di sco unt on ac co unt s i t pur ch as ed. I n s ho r t, AFNI f ai l ed to pr es en t th e necess ar y e vi dence thatwould perm i t a f act- fi nd erto concl ud e that A FNI’ s co st ofdebt col l ecti on s h ou l d be chara cter i zed as an i nci dental or consequenti alexp ense of the c ustom er ’ s underl yi ng br eac h o f hi s o r her contr act w ith C ingu lar. Fo r th e s ak e o f c om p let en es s, w e ad d t h at th e W isc on sin sta tutes ati ssue here do notco ntai n th e s am e k i nd o f l an g ua ge th at UC C § 2

- 70 7 ha s, a nd o n whi chthe S ec o ndN o. 07

- 4083 9 C i r cui t r el i ed i n Tuttle. Thi s was i m port ant t o the Tut tl e cour t’ s co ncl usi on; i t di d not ho l d that a l l dam age s that can be char acte ri zed as i nci dental o r conse quenti alm ay au to m at ica lly b e a d d ed on as a d e b t c olle c tio n fee . Th is alone m i ght not be enough to defe at A FN I ’ s posi ti on, if w e were to c on cl ud e that W i sco nsi n cour ts w oul d not draw a dist i ncti on b etw een a fee that the ini ti alcr edi tor charg ed i ts c u st om ers a nd a f ee i m posed by the debt col l ecto r. But, on thi s reco rd, such a concl usi on would not h elp A FN I. That i s b e c a us e the r e c o r d i s i ns uffi c i e nt t o s up po rta fi nd i ng tha t the 1 5% co l l ecti on fee re fl ects A FN I ’ s a ctual co st s. AFN I r el i es ex cl us i ve l y o n th e f o l l o wi ng statement byJ o hn H es s, i ts di r ec to r of bus i ne ss de ve l o pm en t: “ The 15% co l l ecti on fee is su bsta nti al l y l ess than the a ver age col l ecti on cos ts on the co l l ecti on a ccounts tr ansfer re d to A FN Iby Ci ngul ar . ” Hess di d no t expla i n how he r eached thi s co ncl usi on, nordoes the re cor d contai n any othe r data th at m ight su p p ort him

. I nd eed , the im p li cation of H ess’s sta tem ent i s a bi t odd. I f A FN I i s tr uly charg i ng a col l ecti on fee that i s “su bsta nt ial ly less” tha n its costs, then A FN I( a c om p an y in th e d eb t c olle c tio n bu sin es s, aft er all), is pri ci ng it s ser vi ces “subst anti al l y” bel ow cost
. A s we have al r ea dy no te d, we m i g htg ue ss tha t AFN Ii s al so c o ve r i ng i ts cos ts thro ugh the disc ount r ate atwh i ch i t purchas es i ts ac c ou n ts , bu t w e h av e n o id ea w h at th at rat e is
. I t i s a l so w or th not i ng tha t Equif ax char ged a set$2 0 fee f orea ch check, wh i l e AFN Ichar ged a p er c en tag e fee that n e ce ss ar i l y v a r i e d wi th e a c h a c c o u n t
. F o r e x a mpl e , AF NI c h ar ge d See ge r $1 5.8 7, G am ro th $5 0.4 4, an d M c C lain10 N o. 07

- 4083 $190

. 39. But the cos ts t h at A FN Idescr ibes i n i ts bri ef, f or it ems su ch as co m put er equi pm en t, per so na l i zi ngf orm l ett er s, and s or ti ng acco unts, appear t o be c onst ant a cro ss ac co unt s. AFNI ha s no t pr o vi ded an y e vi den ce s ug g es ting that the 1 5% fi gure nonethel ess w or ks out to be a n ave ra ge that com pensates i t f or i ts eff or ts. H ess , i n f act, di scl ai m ed an y s uchpo si ti o n.

B A FN Ial so ar gues that the c ontr acts b et w een Ci ngul ar and the pl ai nti ff s a uthor i zed Ci ngul arto ch ar ge a co l l ecti on fee, and thus, as Ci ngul ar ’ s a ssi gnee, i t was al so au tho r i ze d t o c ha r g e su cha fee . Al th o ug h the pl ai nt if fs si g ne d di ff er en t ve r si o ns o fCi ng ul ar ’ s co nt r ac t, th e relevan t clause s allrefer to a ri gh t to coll ect fees of third par ti es , s ucha s col l ec ti o n a g en cyfee s, c o ur t co st s, a nd at to rneys ’ fee s. The c l au se s spe ako fCi ng ul ar ’ s i nc ur r i ng th o se fee s i ts el fa nd the n the c o ns um er ’ s r ei m bur sing C in gu lar

. The dis tr i ct c ourthel d that the co ntra cts do not author i ze Ci ng ul arto cha r g e i ts cus to m er s a f ee w he n i t ha ndl es the col l ecti on pro cess o n i ts own ; i nstea d, they author i ze a fee onl y when C i ngul arf ar m s o ut the proce ss to a thi rd party. The dis tr i ct c ourtco ncl ud ed that Cingul ari tse l fco uld not ch arge a coll ection fee th a t w a s n either th e resu lt ofa re f er ra l o fan acco unt, norr ei m burse m ent o ffees char ged to i t by a col l ecti on agency, n oras p ar t o fan i ncurr ed cos t. T he use of the w ord “ r e fe r r a l” i m p li es th e existen ce of a th ird p arty; C ingu lar w as not “ referri ng ” acc ou nt s to i tself. N o r do es i t m ak e se ns e to thi nktha t Ci ng ul arwas c ha r g i ngN o. 07

- 4083 11 i tse l fa col l ecti on fee , w hi ch pl ai nti ff s then w oul d have t o re i m burse

. Fi nal l y, the dist ri ct c ourtr eas oned thatthe 15% c olle c tio n fee w as n ot a c os t t h at C in gu lar w ou ld “in c u r.” A s the co urt poi nted out, [ t] he l anguage o fthe contr act does not si m plyst ate th a t a c u st om er ag re es to “p ay all co st s in c lu d in g . . . co l l ec ti o n fee s. ” Ra th er, the c o nt r ac t st at es tha t th e custo m erag re es to “pay a ll c osts i ncl ud i ng . . . co l l ect i o n f e e s . . . we i n c u r i n e n f o r c i n gth i s Ag r e e me n t
. ” As w ith th e p ro vis ion ref e r en c in g re im b u rs em en t, a col l ecti on f ee w hi ch i s never pai d i s not a cost t h at Cingul arwould i ncur. S uch being the case , A FN I, as w ith C ingu lar, cou ld n ot ch arge a coll ection fee as p art ofa co s ti ti nc ur r e d, a s AF NI di d n o tp a y a c o l l e c t i on f ee to anyo ne. A FN I ’ s o nl y r esponse to thi s a n aly sis i s t o ass er t that Cingul ar coul d hav e charg ed custo m er s the 15% f ee if it had refer re d the debt to A FN Iforco l l ecti on a nd A FN Ihad charg ed Cingul ar15% forcol l ecti on ser vi ces. B ut this i s no t ho w Ci ngul a r a nd AF NI h a nd l e d the i r r el a t i o ns hi p. In st ea d , C i n gu lar ch os e t o s ell its d elin q u en t a c c ou n ts in bu lk for a p rice that w as acc ep table to A FN I
. W ithou t m ore ev i de nc e i n the r e c o r d, we ha v e no b a s i s o n whi c h to co nc l ude th at AFN I ’ s f ee sh o ul d be r eg ar ded as th e equi val ent o fthe re f er ra l fee that Cingul arwarned i ts custo m er s they m i ght ha ve to bear

. The si m ple addit i on o f th e w or d s “in c lu d in g colle c tio n fee s” to th e c on tr ac t w ou ld h av e c u re d th e p ro b lem

.12 N o. 07

- 4083 C Fi nal l y, A FN I ar gues that i t i s e nti tl ed to i nvoke the b ona f i deer ro r de fen se that the FDC PA r eco gni zes . The st atute provi des thata debt co l l ecto r i s no t l i abl e i fits vi ol ati on w as not i ntenti onaland i nstea d res ult ed f ro m a b ona f i de er ro r. S ee 15 U
. S. C. § 1 692k ( c)

. The parti es here agr ee that A FN Idi d n ot inte nd to vi ol ate the FDC PA , but they d i s p u t e w h e th e r th e d e f e n s e a p p l i e s t o m i s t a k e s o fl a w, w hether A FN I ’ s er ro r w as bo na fide, a n d wh e th e r AF NI m ain ta ined re aso nabl e pr oce du re s d es ign ed to p re ve n t t h is kind of error. This cour t has notye t deci ded wh etherthe b onaf i deer ro r defe nse a pp l i es to m i sta kes of l aw . R ecent l y, w e noted that a sp lit exi sts am ong the c i rcui ts on thi s quest i on. S ee N i e l s e n v . D i cke rs on, 3 0 7F
. 3 d 6 2 3 , 6 4 0

- 4 1 ( 7 th C i r . 2 0 0 2 )

. We no t e d the r e tha tthe maj o r i t y o fo urs i s t e r c i r c ui t s , i nc l ud

i ng the S eco nd , E i ghth, and N i nth, have l i m i ted the defense to f actualand cl er i caler ro rs , wh i l e a “g ro w i ng m i nor i ty” h av e a p p lied th e d efe n se to m i s t a k es of law

. Id. ( quo ting Jo hn son v. R idd le, 30 5 F .3d 11 07 (10 t h C i r . 2 00 2)). N ielsen note s that the m aj or ity v iew r el i es on a n anal ogyto a sim il ar b ona f

i dee rrorpr o vi si o n i n the Tr uth i n Le ndi ng A ct. Yet, as N ielsen al so obs er ves, the Truth i n Lend i ng Act speci fi cal l y e xcl ud es m i sta kes of l aw , w hi l e the FDCPA has n o s u c h ex c lu sio n . N i e l s e n, 30 7 F
. 3d at 640- 41. W e h av e n o n ee d to ta ke sid es on th e c irc u it s p lit in th is case , bec ause, ev en as sum i ng tha t AFN I ’ s m ista ke w as a m i sta ke ofl aw , i t ca nnot pre vai l f or othe r re aso ns. U nl ess a par ty m ain tai ns r eas onabl e pr oce du re s t o aver t a vi ol a-N o. 07

- 4083 13 tio n, th e d efe n se d oe s n ot ap p ly. H er e, A FN I a rg u es th at it maint a ine d s uch pr o cedures to preve nt co l l ecting unauthori zed fees bec au se it h as a co m pli ance c om m i tte e that r e v i e ws l e g a l s ummar i e s p r e pa r e d b y the Amer i can C re d i torA sso ci ati on ( “A CA ”) and the Debt Bar A sso ci ati on. A FN Ial so subm i ts i ts f or m l ett er s t o the AC A

. H ess te st i fi ed th ath e r egul ar l y r ea ds ex ce r pts o fthe r el ev an t W iscons in s tatu tes. Th e plaintiff s resp ond that A FN I ’s pr o c e d u r e s a r e i n a d e q u a t e a s a ma t t e r o f l a w. T he ACA add re sse s o nl y c om pli ance w i th the FDCPA , n ot w i th W i sc o ns i n l aw o r i nd ivi d ua l c o nt r ac ts
. AFNI ne ve r c o nsul t e d a n a t t o r ne y i n W i s c o ns i n o n s t a t e l a w i s s ue s , nor d id it as k a W isc on sin gov er n m en ta l a ge n c y w h et h er it was e nt i tl ed to c ha r g e a co l l ecti on f ee a s th e o wnero fthe d eb t. A FN I ’ s s teps do not am ount to re aso nabl e pr oce du re s, as th e st atut e us es tha t te r m . To the c o nt r ar y , a pp lyi ngthe b ona f i dee r r o r de f en s e h e r e wo ul d e s s e nt i a l l y r e wa r d a busi ness’ s i gnor ance ofthe l aw . H ess ’ s deposi ti on i m pli es that A FN Ineve r knew that char gi ng a f ee as the o w ner of a debt w as diff er ent fro m char gi ng a f ee as a s er vi ce provi der f orano therenti ty: Q: So yo u

— i t’ s y o ur

— w as yourundersta nd i ng o f w hetherco l l ecti on fees ar e p er m i tte d on thi s type o f ac co unt s i n the S ta te of W i sc o ns i n l i m i te d t o the abse nce of i nfo rm ati on on i t i n that A CA m anual pri or to the l aw sui t? A : That docum ent a s wel l as any othe r pu bl i shed bul l et i ns tha t woul d ha ve c o m e to my a tt en ti o n.14 N o. 07

- 4083 Q: Do yo u re m em berspeci fi cal l y a ny o ftho se? A : Th er e’s p er iod ic n ot ifica tio n of e-m ails on a d aily b as is fro m th e D eb t B u ye rs A ss oc iat ion , fro m th e c re d it and c ol l ecti on i nd ustr y a sso ci ati ons, yo u know, l ate b r e a k i n g n e ws . S o th e r e wa s n e v e r a n y th i n g th a tc a me to m y a tte nti on o ther w i se. But the pri m ar y b asi s f or our u nd e r s t a nd i ngo fWi s c o ns i n a nd i t s a s s o c i a ted st atut es woul d ha ve b ee n b as ed o n the ACA do cumenta ti o n. I n the end , A F N Ii s no t ar g ui ngtha t i t r el i ed o n a n i nf or m ed, but m istaken, l ega l o pini on. I t i s s ayi ng tha t its ig n or an c e o f th e la w sh ou ld be ex c u se d be c au se it att em pted to kee p i tse l fi n form ed abo ut the l aw thr ough the var i ous tr ade ass oci ati on com m unica ti ons. This is not enough, in o ur v i ew , to support the b ona f i deer ro r defe nse. AF NIa l s o a p p e a l s th e d i s t r i c tc o u r t ’ s fi n d i n gth a tAF NI vio lat ed W is. St at . § 42 7.1 04 (j ), bu t A FN I’s ar gu m en t is l i m i ted to as ser ti ng tha t i t di d n ot k n ow charging i ts 15% f e e v i o l a t e d th e F DC P A. Th e di s t r i c tc o u r tf o u n d t h a tAF NI shoul d have know n i t did n ot h ave the ri ght t o col l ect a 15 % fee f o r the sa m e r ea so ns A F N Idoe s no t qua l i fy f o r the bo na fide er ro r d efe n se . W e a gr ee w ith th e d ist ric t c ou rt
.
* * * Ou r re vi ew of thi s case persuades us that th e d istri ct c o u r t w a s c o r r e c t, o n th e r e c o r d b e f o r e i t, t o g r a n ts u mma r y j u d g me n ti n f a v o r o fth e p l a i n t i ffc l a s s o n i t s c l a i msN o. 07

- 4083 15 b a s e d o n th e F D C P A a n d Wi s . S t a t
. § 4 2 7
. 1 0 4 (j )

. We ther ef or e A FFIRM th e jud gm en t o f th e d ist ric t c ou rt
.

12- 8- 08