In an in-depth 17-page-long decision, the Seventh Circuit Court of Appeals reiterated its prior finding: plaintiffs in FDCPA cases must meet their appropriate burdens of proof, or else their claims fail. Specifically at issue in Johnson v. ERC, No. 19-1210 (7th Cir. June 9, 2020) was whether the plaintiff was required to provide extrinsic evidence on a claim that a credit reporting statement in a collection letter was false, deceptive, or misleading. In this case, the answer is yes. 


So, What Happened?

ERC sent a series of collection letters on plaintiff’s delinquent Sprint debt. The letters contained a disclosure that the account “may be reported” to the credit bureaus. The letters that contained settlement offers also included statements that said paying the settlement amount would stop collection activity on the account, but that it would not restore services with Sprint. 

Plaintiff sued, alleging that the “may be reported” language was false, deceptive, or misleading. The crux of the plaintiff's argument is that “may be reported” implies future reporting, whereas ERC had already reported the account. Plaintiff also argues that the letter misleads consumers into thinking that paying the settlement offer by the specific listed date would prevent credit reporting because collection activity would stop, which is allegedly false since the account was already reported.

District Court Decision

The district court issued two decisions in this case, both of which were appealed by the parties to the 7th Circuit. First, the district court denied ERC’s motion to dismiss, finding that it is plausible for some confusion to exist from the reading of the letter and that it is a question of fact. By denying the motion to dismiss, the court essentially allowed the parties to ask for and present evidence in the case. 

Later, the district court granted ERC’s motion for summary judgment, finding that the plaintiff failed to present evidence that the letter “would be confusing or misleading to a significant fraction of the population.” 

Both parties appealed the motions they lost.

7th Circuit Opinion

The most poignant part of the appellate decision is that the court reiterates that opinions and legal tests from other circuits don’t apply to false, deceptive, or misleading analysis for cases within the 7th Circuit. Specifically, in other circuits, simply showing that a letter could be read in two different ways, one of which is misleading, is sufficient to find a violation of the FDCPA. In the 7th Circuit, however, more is required. First, the 7th Circuit adopted the “unsophisticated consumer” test rather than the “least sophisticated consumer” test, since it does not believe that the standard applies should be from the bottom rung of the ladder. Second, the 7th Cir. applies a 3-pronged test to determine whether extrinsic evidence is required to determine whether a communication is false, deceptive or misleading. If it’s clear from the face of the communication that the letter is or is not false, deceptive or misleading, then no intrinsic evidence is required. However, if a letter is not misleading on its face but could be construed as such, then extrinsic evidence is required.

The court found that this latter prong applied to this case. The court states that the term “may” has two dictionary meanings. One indicates a future action—which is the plaintiff's interpretation—the other indicates permission to do something—which is ERC’s interpretation. 

Plaintiff attempts to argue that its reading of the phrase “may be reported,” couples with the statement that collection activity will stop if payment is made, is false because the account was already reported. The court, however, states: 

[T]he fact that a statement explaining ERC’s power to report the delinquent debt is followed by another statement (in a new paragraph) explaining that paying the settlement amount will stop collection activity but not restore Johnson’s Sprint service is certainly not on its face a promise or guarantee that if the offered settlement is paid, then the delinquent debt will not be reported.

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Because the latter prong applied, plaintiff needed to present extrinsic evidence to meet his burden on this claim. He did not, and therefore the district court properly granted summary judgment to ERC.

The court finishes with:

Our case law makes clear that mere speculation by the plaintiff that a collection letter is misleading is insufficient to survive a debt collector’s motion for summary judgment.

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