Opinion ID: 2996070
Heading Depth: 2
Heading Rank: 1

Heading: Fair Debt Collection Practices Act Claim

Text: Veach sued Sheeks under the remedial portion of the FDCPA, 15 U.S.C. § 1692k, which allows him to recover actual damages, a penalty of up to $1,000, and attorney’s fees for a violation of the FDCPA. Veach argues that Sheeks failed to comply with 15 U.S.C. § 1692g(a)(1), which requires a debt collector’s notice of claim to specify the “amount of the debt.” The notice of claim Sheeks sent Veach described the “amount of the claimed debt” as “Remaining principal balance $1,050.00; plus reasonable attorney fees 1 The district court did deny Sheeks’ motion for judgment as a matter of law regarding Veach’s 15 U.S.C. § 1692i claim, based on Sheeks’ filing his state court action in the incorrect county. This claim went to the jury, who found that Sheeks violated 15 U.S.C. § 1692i, but absolved him of liability pursuant to the bona fide error defense of 15 U.S.C. § 1692k(c). Veach does not appeal the jury’s verdict. 4 No. 02-1149 as permitted by law, and costs if allowed by the court.” Because the amount of attorney’s fees and court costs due is not specified, Veach argues, there was not an “amount” stated for FDCPA purposes. Sheeks claims that a “debt” is defined in the FDCPA as an “obligation or alleged obligation,” and that his general reference to fees and costs is permissible according to Indiana law and the FDCPA, since those were monies which he would be allowed to collect had his court action been successful. Also, Sheeks points out that to specify an amount for fees and costs before they are finalized by a court could cause Veach to pay more than the amount actually imposed as a result of court proceedings. In addition, Veach says the $1,050 figure is appropriate because that amount is an “alleged obligation,” incorporating the treble damages which Sheeks was allowed to pursue under Indiana Code 34-24-3-1. We agree with Veach that Sheeks incorrectly stated the amount of the debt, but not because he specified indeterminate attorney’s fees and court costs. Rather, by stating the amount of the debt as $1,050, Sheeks took it upon himself to hold Veach liable for legal penalties that had not yet been awarded, penalties that for FDCPA purposes should have been separated out from the amount of the debt. When reviewing documents for compliance with the FDCPA, such as the letters sent to Veach by Sheeks, we use the “unsophisticated debtor” standard. See MarshallMosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000); Bartlett v. Heibl, 128 F.3d 497, 500 (7th Cir. 1997). This assumes that the debtor is “uninformed, naive, or trusting,” and that statements are not confusing or misleading unless a significant fraction of the population would be similarly misled. Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000). No. 02-1149 5 In our earlier attempt to clarify the “amount of debt” provision of 15 U.S.C. § 1692g(a)(1), we described the following language as a safe harbor for debt collectors when the amount of the debt varies from day to day: As of the date of this letter, you owe $___ [the exact amount due]. 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, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800- [phone number]. Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 876 (7th Cir. 2000). We suggested this language to prevent confusion by debtors for whom the “exact amount due” is a constantly shifting target due to accruing interest and accumulating unpaid charges. The reason for that variation, i.e., “interest, late charges, and other charges,” is explained in the sentence following the amount of the debt as of the letter’s date. What is missing from that language is any mention of court costs, attorney’s fees, or other penalties which may be imposed by statute. That is because the “amount of the debt” provision is designed to inform the debtor (who, remember, has a low level of sophistication) of what the obligation is, not what the final, worst-case scenario could be. The definition of a “debt” according to the FDCPA is of an “obligation or alleged obligation . . . whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5). Since Veach cannot be held liable for treble damages, court costs, or attorney’s fees until there has been a judgment by a court, they cannot be part of the “remaining principal balance” of a claimed debt. Therefore, Sheeks’ notice misrepresented the actual debt 6 No. 02-1149 CreditNet claimed that it was owed by Veach, a misrepresentation that violated 15 U.S.C. § 1692e. Sheeks claims that the language he used was not misleading because the notice of claim and small claims court summons specified that “the Defendant is indebted to the Plaintiff in the sum of $1,050 as treble damages for a bad check in the sum of $350.00, plus reasonably [sic] attorney fees as permitted by law.” This argument is belied by the “unsophisticated debtor” standard which we use to review FDCPA documents. While the state court summons and notice of claim may have complied with the language of the FDCPA, the other notice of claim, which accompanied the state court summons and explicitly labeled “F.D.C.P.A.” across the top, provides the misleading information as described above. When there are two different accounts of what a debtor actually owes the creditor, that one version is the correct description does not save the other, since under the unsophisticated debtor standard, “a letter may confuse even though it is not internally contradictory.” Johnson v. Revenue Mgmt. Corp., 169 F.3d 1057, 1060 (7th Cir. 1999). We took the step once of providing “safe harbor” language in Miller so that creditors could craft a notice for claims that could pass muster under the FDCPA involving fluctuating balances that varied from day to day. We do not think that we need to revisit our earlier language, since we have no dispute as to the outstanding balance. Sheeks knew that Veach allegedly owed CreditNet $350; by assuming the outcome of future events in drafting his notice, Sheeks ran afoul of the FDCPA. We leave for another day the question of whether it was enough to implicate the remedial provisions of the FDCPA.