Nine FDCPA issues resolved in four consolidated cases

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The Seventh Circuit on Oct. 23 issued an opinion which resolves many unanswered questions about the Fair Debt Collection Practices Act (FDCPA), in three areas:

The application of the FDCPA to lawyers;

The proper treatment under the FDCPA of settlement offers from debt collectors; and
The role of dismissal on the pleadings pursuant to Fed. R. Civ. P. 12(c) in deciding claims under the FDCPA.

The opinion resulted from the consolidation of four separate cases, the facts and procedural histories of which are beyond the scope of this summary.

However, the nine issues identified by the court, and their holdings are as follows:

1. If the debtor is represented by a lawyer, must a debt collector give the same written notice to the lawyer that section 1692g would require if the consumer were unrepresented and the notice were sent directly to him?

Yes. Any written notice sent to the lawyer must contain the information that would be required by the FDCPA if the notice were sent to the consumer directly.

2. Whether communications to lawyers are subject to sections 1692d through 1692f, which forbid harassing, deceptive, and unfair practices in debt collection.

Yes. The act does not designate any class of persons, such as lawyers, who can be abused or misled by debt collectors with impunity.

3. If the answer to question 2 is yes, is the standard applicable to determining whether a representation is false, deceptive, or misleading under section 1692e the same whether the representation is made to the lawyer or to his client?

No. The “unsophisticated consumer” standpoint is inappropriate for judging communications with lawyers. Instead, a representation by a debt collector to a lawyer that would be unlikely to deceive a “competent lawyer,” even if he is not a specialist in consumer debt law, is not actionable.

4. Whether a settlement offer contained in a letter from the debt collector to a consumer is lawful per se under section 1692f.

No. Although there is nothing improper about making a settlement offer, offers containing a short time limitation for acceptance raise legitimate concerns.

5. If it is not per se lawful, whether its lawfulness should be affected by whether it is addressed to a lawyer, rather than to the consumer directly.

Yes. It is exceedingly doubtful that any lawyer involved in representing debtors would be deceived by the settlement offers made by debt collectors, and doubtful therefore that any cases based on such offers could survive summary judgment or even a motion to dismiss if the offer were directed to the consumer’s lawyer rather than to the consumer.

6. Whether there should be a safe harbor for a debt collector accused of violating section 1692e by making a settlement offer with a limited time for acceptance.

Yes. The concerns with settlement offers can be adequately addressed, yet the unsophisticated consumer can still be protected, by the debt collector’s including the following language: “We are not obligated to renew this offer.” The word “obligated” is strong and even the unsophisticated consumer will realize that there is a renewal possibility but that it is not assured.

7. What type of evidence must a plaintiff present to prove that a settlement offer violates section 1692e?

As in other cases alleging deception, the most useful evidence is professionally conducted consumer surveys.

8. Whether the determination that a representation is or is not false, deceptive, or misleading under section 1692 is always to be treated as a matter of law.

No. The intended recipients of dunning letters are not federal judges, and judges are not experts in the knowledge and understanding of unsophisticated consumers facing demands by debt collectors.

9. Whether, if that determination is not always a matter of law, nevertheless, a claim under section 1692e can sometimes be dismissed on the pleadings on the ground that the challenged representation was, as a matter of law, not false or misleading.

Yes. The plaintiff’s allegations may be insufficient as a matter of law; the defendant may have used clear statutory language or approved “safe-harbor” language; the deceptive statement may be clearly immaterial; or an allegedly false statement may be obviously true. In such instances, a case may be dismissed on the pleadings.

The case is Emory v. RJM Acquisitions Funding L.L.C., No. 06-2130, et al.