7th Circuit rules on debtor issues

The 7th Circuit Court of Appeals handed down a decision today addressing issues that have frequently arisen under the Fair Debt Collection Practices Act, which have caused some splits at the Circuit level. In its opinion, the court combined two cases from Indiana and two from Illinois that dealt with similar issues.

The four cases in the opinion include Tammy A. Evory, et al. v. RJM Acquisitions Funding LLC, et al., 06-2130 to 2132, 06-2134, and 06-2157, and Kevin I. Captain v. ARS National Services, Inc., 06-3129 from the U.S. District Court, Southern District of Indiana, Indianapolis Division. Judge David Hamilton presided over both cases. The Illinois cases are Kelly and Karla Lauer v. Mason, Silver, Wenk & Mishkin, LLC, et al., 06-2271 and Philip Jackson, et al. v. National Action Financial Services Inc., et al., 06-3162, 06-3327-06-3439, and 06-3446.

In the opinion authored by Circuit Judge Richard Posner, the court determined there are three overlapping groups of issues to be addressed: the application of the Fair Debt Collection Practices Act, 15 U.S.C. 1692, to lawyers; the proper treatment under the act of settlement offers; and the role of Federal Rules of Civil Procedure12(c) in deciding claims of violations of section 1692e.

The 7th Circuit concluded that any written notice sent to the attorney of a consumer being contacted by a debt collector must contain the same information required by the act that would be sent to the consumer directly. It would be odd if a consumer with an attorney would be excused from receiving information to which he or she is entitled under the statute, wrote Judge Posner.

In the opinion, the judges decided that a representation by a debt collector that would not deceive a competent attorney, even if he or she is not a specialist in consumer debt law, would not be actionable under the act; however misleading or misrepresentation toward an attorney with information a lawyer may not be able to determine, such as the balance of the consumer's debt, would be actionable.

In terms of proper treatment under the act of settlement offers, the 7th Circuit wrote the settlement offers should include language such as "We are not obligated to renew this offer," so even unsophisticated consumers can understand that the debt collector may or may not present a similar offer again. Consumers often interpret offers such as "act now and receive 30 percent off … if you pay by March 31st" or "we would like to offer you a unique opportunity to satisfy your outstanding debt" as one-time only offers and may not have any further opportunity to settle their debt for less than the full amount if they do not take the offer at that time. By using terms such as "not obligated," the debt collector can let the consumer know the company may or may not extend this offer again.

The 7th Circuit reversed and remanded Evory, Captain, and Lauer for further proceedings consistent with the opinion. In Captain, the 7th Circuit ruled that the District Court erred in dismissing the complaint for failure to state a claim because settlement-offer charges are lawful under the act and the challenge to the lawfulness of the $15 a day representation was made to a lawyer.

In Evory, which is a pure settlement-offer case with no communication with attorneys, the 7th Circuit ruled the dismissal of the complaint was an error.

In Lauer, the 7th Circuit ruled the District Court's dismissal of the plaintiff's complaint on grounds that the communications with a consumer's attorney are beyond the reach of the act was an error.

The court affirmed Jackson.