Banking and Finance Law Daily Itemized debt breakdown and ‘no interest’ statement not misleading under the FDCPA
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Friday, October 9, 2020

Itemized debt breakdown and ‘no interest’ statement not misleading under the FDCPA

By Nicole D. Prysby, J.D.

A debt collection letter’s itemized breakdown with zero balances for interest and other charges was not misleading, because it merely stated the current balance information and did not make explicit suggestions about future outcomes.

A debt collection letter’s itemized breakdown accompanied by zero balances would not confuse or mislead the reasonable unsophisticated consumer, held the Seventh Circuit Court of Appeals, rejecting a consumer’s claims under the Fair Debt Collection Practices Act (FDCPA). The court held that the letter showing $0 interest and other charges did not imply the consumer could incur future interest or other charges if he did not settle the debt. The itemized breakdown in the letter did not make an explicit suggestion about future outcomes, and therefore did not violate the FDCPA. The same analysis applied to the consumer’s argument that the letter attempted to mislead him when it stated that no interest will be added to his account balance through the course of Client Services, Inc.’s (CSI) collection efforts. The statement that no interest will be added to the account balance through the course of the collection efforts makes no suggestion regarding the possibility that interest will or will not be assessed in the future. For that reason, the letter complies with FDPA sections 1692e and 1692g (Degroot v. Client Services, Inc. , Oct. 8, 2020, Flaum, J.).

Background. The consumer defaulted on a debt to Capital One Bank (USA), N.A., which placed the debt for collections with AllianceOne Receivables Management, Inc. AllianceOne sent the consumer a letter stating: "The amount of your debt is $425.86. Please keep in mind, interest and fees are no longer being added to your account. This means every dollar you pay goes towards paying off your balance." Capital One subsequently transferred the account to CSI for collections and CSI mailed the consumer a letter that contained a balance due on the account of $425.86, and an itemized summary of the balance ($425.86 balance due, $0 interest, $0 other charges, and $0 payments made, for a total current balance of $425.86). The letter contained an "Account Resolution Offer," the terms of which included a statement that "no interest will be added to your account balance through the course of Client Services, Inc. collection efforts concerning your account." The consumer brought a putative class action against Client Services, Inc. (CSI) for alleged violations of the FDCPA, asserting that CSI violated 15 U.S.C. section 1692e by using false, deceptive, and misleading representations or means to collect a debt and 15 U.S.C. section 1692g by failing to disclose the amount of the debt in a clear and unambiguous fashion. The district court dismissed the case, holding that CSI’s communications were not false, misleading, or deceptive to the unsophisticated consumer. The consumer appealed.

The consumer’s claims failed. The breakdown of the debt in the CSI letter could not be interpreted as forward looking and therefore misleading under the FDCPA. The consumer’s argument that the inclusion of a zero balance for interest and fees naturally implies he could incur future interest or other charges if he did not settle the debt is unpersuasive. To the extent the consumer’s complaint relied on AllianceOne’s statement that "interest and fees are no longer being added" to support his allegation that he found CSI’s letter confusing and misleading, even that statement did not say that interest and fees could never be added to his account. That interest and fees are no longer being added to one’s account does not guarantee that they never will be. The itemized breakdown in the CSI letter does not make an explicit suggestion about future outcomes and does not violate the FDCPA.

The same analysis applied to the argument that CSI’s letter attempted to mislead the consumer when it stated that no interest will be added to his account balance through the course of CSI’s collection efforts. Where a dunning letter only makes explicit representations about the present that are true, a plaintiff may not establish liability on the basis that it leaves ambiguity about the future. CSI’s letter did not address in any way whether interest would accrue in the future after CSI no longer controlled the debt. The consumer jumps on this ambiguity as evidence that CSI was trying to mislead him into thinking that he had to settle with CSI, lest he later be assessed interest on the debt. But it is only when a dunning letter at least implicitly points to a possible outcome that it can become misleading. Here, the statement "no interest will be added to your account balance through the course of Client Services, Inc. collection efforts" makes no suggestion regarding the possibility that interest will or will not be assessed in the future if CSI ends its collection efforts. For that reason, the letter complies with sections 1692e and 1692g.

The case is No. 20-1089.

Attorneys: Katelyn Busby (Stern Thomasson LLP) for Joseph Degroot. Eugene Xerxes Martin, IV (Malone Frost Martin PLLC) for Client Services, Inc.

Companies: Client Services, Inc.

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