Court Opinion

ID: 4574914
Source: CourtListenerOpinion
Date Created: 2020-10-09 07:01:24.236238+00
Date Added: 2024-06-11T13:30:32.493447
License: Public Domain

In the

     United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 20-1089
JOSEPH DEGROOT, individually on behalf of all others similarly sit-
uated,

                                                  Plaintiff-Appellant,

                                 v.

CLIENT SERVICES, INCORPORATED,

                                                 Defendant-Appellee.
                     ____________________

         Appeal from the United States District Court for the
                   Eastern District of Wisconsin.
         No. 1:19-cv-00951 — William C. Griesbach, Judge.
                     ____________________

  ARGUED SEPTEMBER 15, 2020 — DECIDED OCTOBER 8, 2020
                ____________________

   Before FLAUM, ROVNER, and WOOD, Circuit Judges.
    FLAUM, Circuit Judge. Plaintiﬀ-appellant Joseph Degroot
brought this putative class action suit in the Eastern District
of Wisconsin against defendant-appellee Client Services, Inc.
(“CSI”), alleging violations of the Fair Debt Collection Prac-
tices Act (“FDCPA”), 15 U.S.C. § 1692. The district court granted
2                                                 No. 20-1089

the collection agency’s motion to dismiss, holding that CSI’s
communications were not false, misleading, or deceptive to
the unsophisticated consumer. We agree and aﬃrm.
                       I. Background
   Degroot, a Wisconsin resident, defaulted on a debt owed
to Capital One Bank (USA), N.A. Subsequently, Capital One
placed that debt for collections with AllianceOne Receivables
Management, Inc. As part of its collection efforts, AllianceOne
sent Degroot a letter on August 6, 2018, stating:
      The amount of your debt is $425.86. Please keep
      in mind, interest and fees are no longer being
      added to your account. This means every dollar
      you pay goes towards paying oﬀ your balance.
    Based on AllianceOne’s representations in the letter,
Degroot understood that Capital One had “charged-off” his
account, meaning that his debt would no longer accrue inter-
est, late charges, or other fees for any reason.
    Capital One subsequently reassigned, placed, or trans-
ferred the account to CSI for collections. CSI then mailed
Degroot a letter dated March 11, 2019. The top left-hand cor-
ner of the letter contained CSI’s logo and address, and a sum-
mary of information that read:
      CURRENT CREDITOR: CAPITAL ONE BANK
      (USA), N.A.
      ACCOUNT NUMBER: XXXXXXXXXXXX9018
      BALANCE DUE: $425.86
  Below this summary was a heading in bold, capital letters:
“NEW INFORMATION ON YOUR ACCOUNT.” The letter
No. 20-1089                                                      3

went on to note that Capital One had “placed the above ac-
count with our organization for collections” and gave an
itemized summary of Degroot’s current balance:
       Balance Due At Charge-Off:           $425.86
       Interest:                            $0.00
       Other Charges:                       $0.00
       Payments Made:                       $0.00
       Current Balance:                     $425.86
    After providing an offer to resolve the debt and various
disclosures required by certain states, the letter concluded on
a third page with an “ACCOUNT RESOLUTION OFFER.”
The terms of the offer included a notice that “no interest will
be added to your account balance through the course of Client
Services, Inc. collection efforts concerning your account.”
    Following his receipt of this letter, Degroot filed suit, seek-
ing to represent himself and all other persons to whom CSI
mailed a similar letter in Wisconsin. He alleged that CSI’s let-
ter misleadingly implied that Capital One would begin to add
interest and possibly fees to previously charged-off debts if
consumers failed to resolve their debts with CSI. Specifically,
he alleged that he was “confused by the discrepancy between
the AllianceOne letter’s statement that ‘interest and fees are
no longer being added to your account’ and the 3/11/19 Let-
ter’s implication that Capital One would begin to add interest
and possibly fees to the Debt once [CSI] stopped its collection
efforts on an unspecified date.” In light of these allegedly false
or misleading statements, Degroot asserted that CSI violated
15 U.S.C. § 1692e by using false, deceptive, and misleading
representations or means to collect a debt and 15 U.S.C.
§ 1692g by failing to disclose the amount of the debt in a clear
and unambiguous fashion.
4                                                     No. 20-1089

    After its initial motion to dismiss was mooted by
Degroot’s filing of an amended complaint, CSI filed a new
motion to dismiss the amended complaint. The district court
granted that motion, concluding that CSI’s letter was not
false, misleading, or deceptive. Specifically, the court found
that the March 11, 2019 letter had accurately and correctly dis-
closed the amount of the debt, and that CSI’s letter did not
imply fees or interest would be added to the debt in the fu-
ture. Furthermore, the court noted that even if CSI’s letter did
imply that fees and interest would begin to accrue at a later
date if the debt remained outstanding, the statement was not
false or misleading given that Wisconsin law provided for the
assessment of fees and interest on “static” debts in certain cir-
cumstances.
   Noting differing approaches to this issue at the district
level, the court invited “clarification in this important area of
law.” This appeal followed.
                        II. Discussion
    Because the district court dismissed Degroot’s suit under
Rule 12(b)(6), we review the allegations in Degroot’s com-
plaint de novo to determine whether he has stated a claim
upon which relief can be granted. Perry v. Coles County, 906
F.3d 583, 586 (7th Cir. 2018), cert. denied, 139 S. Ct. 1225
(2019).“[W]e accept as true all factual allegations in the com-
plaint and draw all permissible inferences in plaintiff[’s] fa-
vor.” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 365
(7th Cir. 2018). Notwithstanding that deference, “[t]o survive
a motion to dismiss, a plaintiff must allege ‘enough facts to
state a claim to relief that is plausible on its face.’” Id. at 365–
66 (citation omitted). With that standard in mind, we turn to
the specific allegations in this case.
No. 20-1089                                                      5

   A. Itemized Breakdown and Zero Balances
    Among other things, the FDCPA requires debt collectors
to send consumers a written notice disclosing “the amount
of … debt” they owe. 15 U.S.C. § 1692g(a)(1). This disclosure
must be clear. See Janetos v. Fulton Friedman & Gullace, LLP, 825
F.3d 317, 319 (7th Cir. 2016) (“If a letter fails to disclose the
required information clearly, it violates the Act, without fur-
ther proof of confusion.”). Here, there is no dispute that the
letter disclosed the amount that Degroot owed as of March 11,
2019, the date of CSI’s letter. That said, “a collection letter can
be ‘literally true’ and still be misleading … if it ‘leav[es] the
door open’ for a ‘false impression.’” Dunbar v. Kohn Law Firm,
S.C., 896 F.3d 762, 765 (7th Cir. 2018) (alteration in original)
(citations omitted). The pertinent question in this case is thus
whether CSI, by providing a breakdown of Degroot’s debt
that showed a zero balance for “interest” and “other charges,”
violated 15 U.S.C. §§ 1692e and 1692g(a)(1) by implying that
interest and other charges would accrue if the debt remained
unpaid. See, e.g., Boucher, 880 F.3d at 371 (explaining that
where a plaintiff claims that a false or misleading statement
goes to the amount of debt, a determination of whether there
has been a violation of § 1692e “‘goes hand-in-hand with
whether the amount of the debt has been accurately disclosed’
under § 1692g(a)(1)”).
    A debt collector violates § 1692e by making statements or
representations that “would materially mislead or confuse an
unsophisticated consumer.” Koehn v. Delta Outsource Grp.,
Inc., 939 F.3d 863, 864 (7th Cir. 2019) (quoting Boucher, 880
F.3d at 366). While the paradigmatic example of such prohib-
ited behavior is the inclusion of patently false information, we
have also held that “a dunning letter is false and misleading
6                                                    No. 20-1089

if it ‘impl[ies] that certain outcomes might befall a delinquent
debtor when, legally, those outcomes cannot come to pass.’”
Boucher, 880 F.3d at 367 (alteration in original) (quoting Lox v.
CDA, Ltd., 689 F.3d 818, 825 (7th Cir. 2012)).
     With that background, we turn to the itemized breakdown
of debt at issue in this case. To determine whether CSI’s letter
was false or misleading, we must answer two questions. The
first is whether an unsophisticated consumer would even in-
fer from the letter that interest and other charges would ac-
crue on his outstanding balance if he did not settle the debt.
If, and only if, we conclude that an unsophisticated consumer
would make such an inference, then we move to analyze
whether the inference is false or misleading.
    To answer the question of whether a statement can be in-
terpreted as Degroot claims, we ask whether an unsophisti-
cated consumer could reach that interpretation. See Steffek v.
Client Servs., Inc., 948 F.3d 761, 765 (7th Cir. 2020). As we have
stated time and again, while the unsophisticated consumer is
“uninformed, naïve, or trusting,” we assume the consumer
“nonetheless possesses reasonable intelligence, basic
knowledge about the financial world, and is wise enough to
read collection notices with added care.” Koehn, 939 F.3d at
864 (internal quotation marks and citations omitted). For that
reason, our unsophisticated consumer test is objective and
“disregards ‘bizarre’ or ‘idiosyncratic’ interpretations of col-
lection letters.” Dunbar, 896 F.3d at 764–65 (citations omitted).
    CSI, joined by the Consumer Financial Protection Bureau
(“CFPB” or “the Bureau”) and ACA International, the Associ-
ation of Credit and Collection Professionals (“ACA”), as amici
curiae, urge us to conclude that Degroot’s alleged under-
No. 20-1089                                                    7

standing of its dunning letter is just such a “bizarre” or “idio-
syncratic” interpretation. As the CFPB points out, the itemi-
zation of a debt is a record of what has already happened. It
“discloses the interest or other charges that have been as-
sessed between a date in the past (in this case, the date that
the debt was charged-off) and the date of the notice.” For that
reason, the Bureau argues, such a breakdown cannot be con-
strued as forward looking and therefore misleading. We
agree.
    The facts in this case bear a striking resemblance to those
in Koehn, in which we concluded a similar claim could not
proceed. See 939 F.3d at 865. The plaintiff in Koehn alleged that
the dunning letter in question was misleading because it used
the phrase “current balance” to describe her balance. Id. at
864. She argued “current balance” implied that her balance
could grow even though “her account was actually ‘static,’
meaning that additional interest and fees could no longer be
added to the balance.” Id. “By falsely implying that the ‘cur-
rent balance’ might increase, she contend[ed], the debt collec-
tor’s choice of wording [would] mislead debtors to give such
static debts greater priority than they otherwise would.” Id.
Rejecting that argument we explained:
       Dunning letters can comply with the Fair Debt
       Collection Practices Act without answering all
       possible questions about the future. A lawyer’s
       ability to identify a question that a dunning let-
       ter does not expressly answer (“Is it possible the
       balance might increase?”) does not show the let-
       ter is misleading, even if a speculative guess to
       answer the question might be wrong.
Id. at 865.
8                                                     No. 20-1089

    The logic of Koehn applies with equal force here. CSI’s let-
ter merely detailed, correctly, that no interest or other charges
had accrued from the date Capital One charged off the debt
to March 11, 2019. Indeed, except for the statement regarding
the accrual of interest during CSI’s pursuit of the loan, which
we address below, CSI’s letter was totally silent as to the fu-
ture. Thus, any inference Degroot made about the debt accru-
ing interest or other charges in the future was entirely specu-
lative. Degroot’s insistence—apparently accepted by several
district courts, see, e.g., Duarte v. Client Servs., Inc., No. 18 C
01227, 2019 WL 1425734 (N.D. Ill. Mar. 29, 2019)—that the in-
clusion of a zero balance for interest and fees naturally implies
he could incur future interest or other charges if he did not
settle the debt is unpersuasive. In line with Koehn, Degroot’s
mere raising of an open question about future assessment of
other charges with a speculative answer does not make the
breakdown misleading.
    Indeed, our own caselaw appears to compel the inclusion
of an itemized breakdown. In Fields v. Wilber Law Firm, P.C.,
383 F.3d 562 (7th Cir. 2004), we held that a debt collector vio-
lated § 1692e by failing to include an itemized breakdown
showing how the debt in question had doubled in size due to
fees and other charges. See id. at 566 (explaining that when
presented with a non-itemized bill, an unsophisticated con-
sumer may incorrectly assume that she has in fact incurred
the entire amount of debt in charges). As we explained, the
letter “was misleading because it gave a false impression of
the character of the debt … thereby impairing [consumers’]
ability to knowledgeably assess the validity of the debt.” Id.
We then explained that a simple way to avoid such a problem
was to “itemize the various charges that comprise the total
No. 20-1089                                                    9

amount of debt.” Id. The logic of Fields suggests that a collec-
tor will not violate the FDCPA if it accurately reports that the
amount of additional other charges or interest is zero, even if
it is also permissible—maybe even preferable—for the credi-
tor to fill in those fields with a “not applicable” notation when
it is handling a “static” debt.
    Furthermore, while Degroot’s complaint relies heavily on
AllianceOne’s statement that “interest and fees are no longer
being added” to support his allegation that he found CSI’s let-
ter confusing and misleading, even that statement did not say
that interest and fees could never be added to his account.
That interest and fees are no longer being added to one’s ac-
count does not guarantee that they never will be, because
there is no way—unless the addition is a legal or factual im-
possibility—to know what may happen in the future. That is
why a statement in a dunning letter that relates only to the
present reality and is completely silent as to the future gener-
ally does not run afoul of the FDCPA. While dunning letters
certainly cannot explicitly suggest that certain outcomes may
occur when they are impossible, see, e.g., Boucher, 880 F.3d at
367; Lox, 689 F.3d at 825, they need not guarantee the future,
see Koehn, 939 F.3d at 865. For that reason, the itemized break-
down here, which makes no comment whatsoever about the
future and does not make an explicit suggestion about future
outcomes, does not violate the FDCPA.
   B. No Interest Statement
    The above analysis applies with equal force to Degroot’s
argument that CSI’s letter attempted to mislead him when it
stated, “Please note that no interest will be added to your ac-
10                                                   No. 20-1089

count balance through the course of Client Services, Inc. col-
lection efforts concerning your account.” We likewise con-
clude that this statement does not run afoul of § 1692e.
    The principle epitomized by Koehn is that where a dun-
ning letter only makes explicit representations about the pre-
sent that are true, a plaintiff may not establish liability on the
basis that it leaves ambiguity about the future. See 939 F.3d at
865. Where a dunning letter goes beyond describing the cur-
rent reality, however, and even implicitly suggests the possi-
bility or likelihood of an outcome in the future, the letter must
take great care to ensure that the outcome in question is in fact
possible or otherwise risk violating § 1692e. See, e.g., Boucher,
880 F.3d at 367; Lox, 689 F.3d at 825.
    Here, CSI’s letter simply informed Degroot that no interest
would accrue while CSI pursued its debt collection efforts. It
did not address in any way whether interest would accrue in
the future after CSI no longer controlled the debt. Degroot
jumps on this ambiguity as evidence that CSI was trying to
mislead him into thinking that he had to settle with CSI, lest
he later be assessed interest on the debt. Even taking
Degroot’s position to its logical conclusion, however, Allian-
ceOne’s statement that “interest and fees are no longer being
added” would not violate § 1692e. It refers only to present
conditions and does not speculate one way or the other as to
whether interest and fees could ever be added to his account
in the future.
   As Koehn suggests, the presence of ambiguity does not au-
tomatically point to an FDCPA violation. The fact that a
debtor may incorrectly speculate as to a possible outcome
does not render a dunning letter misleading. See 939 F.3d at
865. It is only when a dunning letter at least implicitly points
No. 20-1089                                                    11

to a possible outcome that it can become misleading. Here, the
statement “no interest will be added to your account balance
through the course of Client Services, Inc. collection efforts”
makes no suggestion regarding the possibility that interest
will or will not be assessed in the future if CSI ends its collec-
tion efforts. For that reason, the letter complies with both
§§ 1692e and 1692g.
                      III. Conclusion
   In this case, we agree with the district court’s logic: Con-
gress did not intend the FDCPA to require debt collectors to
cast about for a disclosure formulation that strikes a precise
balance between providing too little information and too
much. The use of an itemized breakdown accompanied by
zero balances would not confuse or mislead the reasonable
unsophisticated consumer.
   For the reasons stated above, we AFFIRM the judgment of
the district court.