U.S. Court of Appeals for the Seventh Circuit
Consumer Protection — FDCPA
A dunning letter, offering to settle a time-barred debt, violates the FDCPA.
“Our reasoning in Evory supports this understanding. There we considered whether a settlement offer contained in a dunning letter is per se unlawful under § 1692f. The concern was that unsophisticated consumers receiving letters with language like ‘Act now and receive a settlement of 25% off your current balance!’ would believe that if they did not pay by the deadline, they would not have a later chance to settle for less than the full amount. Such a belief would often have been ill-founded, because ‘debt collectors, who naturally are averse to instituting actual collection proceedings for the typically modest sums involved in the consumer debt collection business, frequently renew their offers if the consumer fails to accept the initial offer.’ Evory, 505 F.3d at 775. The recipients of the letters, however, would believe that if they did not immediately accept the offer, they would face legal proceedings where the full amount would be demanded. The risk here is similar: a settlement offer on a time-barred debt implies that the creditor could successfully sue on the debt. If unsophisticated consumers believe either that the settlement offer is their chance to avoid court proceedings where they would be defenseless, or if they believe that the debt is legally enforceable at all, they have been misled, and the debt collector has violated the FDCPA.”
Affirmed in part, and Reversed in part.
12-3504 & 13-2030 McMahon v. LVNV Funding, LLC
Appeal from the United States District Court for the Northern District of Illinois, Kocoras, J., Wood, J.