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Collections Case Analysis

The decision in these cases is particularly notable in light of the Seventh Circuit’s recent decision in Chuway v. National Action Financial Services Inc., No. 03-2158, 2004 WL 614760 (7th Cir. Mar. 30, 2004).

In the wake of Chuway, which involved a dunning letter very similar to those in the case at bar, and which was found confusing, attorneys would not have been unreasonable in assuming that the dunning letters in the case at bar were also unlawful.

Nevertheless, the court distinguished Chuway. In Chuway, the dunning letter stated the balance due, and added, “Please remit the balance listed above in the return envelope provided. To obtain your most current balance information, please call 1-800-[phone number]. Our friendly and experienced representatives will be glad to assist you and answer any questions you may have.”

In Chuway, the debt collector was actually no longer adding interest; the balance stated was the actual balance. Thus, the court concluded, “So if the letter had stopped after the ‘Please remit’ sentence, the defendant would be in the clear.”

Discussing the additional language, however, the court observed, “the entire bench was confused about the meaning of the letter until the defendant’s lawyer explained it to us at the oral argument, and our confusion, coupled with the plaintiff’s affidavit in which she plausibly attested that she had been confused by the letter, is enough to satisfy her burden of proof.”

The court rejected the debt collector’s argument that a decision for plaintiffs would “place debt collectors on a razor’s edge, where if they say too little they violate the Act by failing to disclose the amount of the debt they are trying to collect and if they say too much they violate the Act by confusing the consumer.”

Instead, the court instructed debt collectors to stick to the “safe-harbor language” of Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., 214 F.3d 872, 875 (7th Cir.2000): “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].”

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7th Circuit Court of Appeals

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Dunning letters held not confusing

Arguably, the language in Chuway is more confusing than in the cases at bar. It is just as arguable, however, that the language in all the cases merely state what any reasonable person should know, regardless of sophistication or lack of it — balances may be higher by the time of payment, due to accruing interest and the like.

Just as the court found it “perfectly obvious to even the dimmest debtor that the debt collector would very much like him to pay the amount demanded straight off, sparing the debt collector any further expense,” the court could have held it just as “perfectly obvious to even the dimmest debtor” that accruing interest may increase his balance by the time he actually pays.

Instead, the approach of the court is to ignore the obvious, and search the language of the letter for confusion. Given the safe-harbor language of Miller, it is folly for a debt collector to use any other language, and place itself in that situation, notwithstanding the fact that the collectors happened to prevail in the case at bar.

– David Ziemer

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David Ziemer can be reached by email.

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