By Paul A. Ferrer, J.D.
The Seventh Circuit concluded that a debt collector does not misrepresent a debt’s "character" by reporting to a credit bureau the individual amounts of the debtor’s unpaid bills to a single creditor rather than the aggregate amount.
The Fair Debt Collection Practices Act prohibits a debt collector from misrepresenting the "character" of a debt, among other things. Reversing the district court’s decision that the debt collector had violated the FDCPA by reporting nine $60 debts rather than the aggregate debt of $540, the Seventh Circuit concluded that such matters of arithmetic do not affect a debt’s "character." Rather, the "character" of a debt refers to the kind of obligation involved, not the number of transactions between a debtor and a single creditor (Rhone v. Medical Business Bureau, LLC, Feb. 7, 2019, Easterbrook, F.).
Background. The plaintiff received nine sessions of physical therapy, for which her insurer paid all but a $60 co-pay per session. When the plaintiff did not pay her co-pays, the debt collector reported to Equifax that she owed nine debts of $60 each. The plaintiff sued the debt collector, alleging that the debt collector had violated the FDCPA by reporting nine $60 debts rather than the aggregate debt of $540. The district court agreed and imposed a $1,000 penalty for the debt collector’s violation.
What is the "character" of a debt? Under 15 U.S.C. § 1692e(2)(A) of the FDCPA, a debt collector may not make any false representation about "the character, amount, or legal status of any debt." The Seventh Circuit found very little law concerning the meaning of the word "character" in a debt-related context generally, and none at all with regard to the specific question of whether aggregation (or not) of all amounts owed to a single creditor concerns the "character" of a debt. Writing on a blank slate, the court indicated that "character" sounds like a reference to the kind of obligation. For example, secured auto loans, unsecured credit-card debt, a judgment debt, and a subordinated debenture are all different kinds of obligations. By contrast, the number of transactions between a debtor and a single merchant does not impact the genesis, nature, or priority of the debt, and so does not concern its "character." Moreover, the statute refers separately to the "character" and the "amount" of a debt. The court concluded that the word "amount" rather than the word "character" is what governs reporting the debt’s size. In other words, arithmetic affects the "amount" of a debt, but not its "character." It was undisputed that the debt collector correctly reported that the plaintiff incurred nine debts of $60 each. Therefore, the debt collector did not misrepresent the "character" of the plaintiff’s debt by reporting nine unpaid bills of $60 rather than one of $540, which is a matter of arithmetic and aggregation that does not impact the kind of obligation at issue.
The case is No. 17-3408.
Attorneys: Celetha Chatman (Community Lawyers Group, Ltd.) for Diane Rhone. Nicole Marie Strickler (Messer Strickler, Ltd.) for Medical Business Bureau, LLC. Brian Melendez (Barnes & Thornburg LLP) for ACA International.
Companies: Medical Business Bureau, LLC; ACA International
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