The courts have issued a couple of court decisions recently regarding variations of legal action language in collection letters. For example, just last month the Southern District of New York dismissed a complaint where the crux was letter language that stated, "[Creditor] will send your account to an attorney for possible legal action" if a payment arrangement is not made. Just yesterday, the Northern District of Illinois (N.D. Ill.) came to a similar conclusion in Ramirez v. Midland, which containeda slightly different version of legal action language.

The Facts

The case invovles five plaintiffs, each of whom defaulted on debts that Midland Funding purchased. Midland Funding placed these accounts for collection with Midland Credit Management (MCM). Each plaintiff received a collection letter from MCM that stated:

LET US HELP YOU! If the Account goes to an attorney, our flexible options may no longer be available to you. There is still an opportunity to make arrangements with us.


None of the plaintiffs took action on the letters. Of the five plaintiffs, the accounts for three were referred by MCM to its law firm, and the law firm commenced collection litigation against two.

Of note, the law firms do not make settlement offers to consumers, but are authorized to discuss settlements if the consumer initiates the discussion.

Plaintiffs sued, alleging that the letter language quoted above was a threat to take an action defendant did not intend to take and was false, deceptive, or misleading—both of these lumped into a single count complaint. The complaint also alleges that using this language was an unconscionable means to collect a debt. The reasoning behind all of these claims is that defendant's law firm could engage in settlement discussions after the accounts were referred to it, whereas the letter allegedly implies otherwise.

The Court's Decision—A Lesson in Plain Language to Plaintiffs' Counsel

After examining the plain language of the letter, N.D. Ill. granted summary judgment in favor of MCM. The court explained the different standards for a false/deceptive/misleading claim:

  1. If the plain letter language on its face is (or is not) false/deceptive/misleading, then no extrinsic evidence is required.
  2. If a letter is not misleading on its face but could be construed as such, then extrinsic evidence is required.

Since plaintiffs did not present any extrinsic evidence—such as a consumer survey analyzing the letter—they were required to show that the letter is plainly deceptive and misleading on its face.

The court called out the factual shortcomings of plaintiff's claim, such as the fact that the attorneys' goal was to collect the full balance, the attorneys might choose at their discretion to not accept a settlement offer initiated by the consumer, and that flexible options might not be available if the court enters a default judgment against the consumer. The most glaring factual shortcoming, however, comes from the letter language itself:

Most importantly, plaintiffs' argument ignores the presence of the word "may" in the letter. As the Seventh Circuit has said, "[a]n unsophisticated consumer would not understand the word 'may' to mean 'will.'" Had the dunning letters at issue in this case used the word "will" instead of "may," then the Court would agree that the letters would have been false on their face. That is so, because, under some circumstances, an attorney could accept a reduced lump-sum payment or payment plan. It could not, therefore, be true that flexible options "will" no longer be available. The letter, though, says "may."

(Internal citation omitted.)

The court likewise granted summary judgment to MCM on the unconscionable means claim, finding that plaintiffs did not put forward enough evidence to support this claim.

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insideARM Perspective

This is the second time in two months were the courts mentioned the lack of extrinsic evidence in a false/deceptive/misleading claim. Both cases were filed by two different "frequent filer" plaintiffs' firms.

Earlier this month, the 7th Circuit ran a similar analysis in the Johnson case. It likewise found that the letter was not false or misleading on its face and that extrinsic evidence was required to continue the claim. And, just like here, extrinsic evidence was not provided.

One wild-eyed theory  is that obtaining extrinsic evidence—such as a consumer survey—is expensive. If the plaintiff does not win the case, then it is no longer a no-loss game for plaintiffs' counsel. They would no longer just be on the hook for lost attorney time, but instead would also be responsible to cover the cost of such a survey. 

Another wild-eyed theory is that they know what would likely happen if they did conduct consumer surveys: the outcome would be a reasonable reading of the letter, not some hyper-technical lawyer's analysis designed to contrive a violation where there is none. 

Either way, this new trend is something to keep in your back pockets for when you inevitably receive false/deceptive/misleading claims.


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