7th Cir. Rejects FDCPA Allegations Involving Letters Sent to Debtor’s Counsel

The U.S. Court of Appeals for the Seventh Circuit recently upheld the dismissal of allegations that two letters sent to the consumer’s counsel violated the federal Fair Debt Collection Practices Act (FDCPA), reiterating that its “competent attorney” standard applies regardless of whether a statement to the consumer’s counsel is false, misleading or deceptive.

A copy of the opinion in Bravo v. Midland Credit Management, Inc. is available at: Link to Opinion.

In a prior action, the debtor sued a debt collector for alleged violations of the FDCPA.  The case settled with the collector settling and releasing two of the debtor’s debts.  After settlement, the collector sent two letters to the debtor “care of” and addressed to the debtor’s attorney who represented the debtor in the first suit, demanding payment of the two debts released in the settlement.

The debtor filed a subsequent action alleging that the new letters violated the FDCPA.  The debtor’s attorney reviewed the two letters sent by the collector, but never provided them to the debtor. The debtor claimed that the letters violated: 1) § 1692c of the FDCPA prohibiting contact with a consumer once a debt collector knows the consumer is represented by counsel, and 2) continuing to demand payment after the consumer has refused to pay.  The debtor also alleged the letters made false and misleading statements that the debtor still owed debts that were previously settled.

The district court dismissed the debtor’s allegations under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The debtor appealed and the Seventh Circuit affirmed.

The debtor argued that by sending the two letters to the debtor’s attorney, the collector violated § 1692c(a)(2) by continuing communication with a represented consumer.  However, the Seventh Circuit disagreed, citing its ruling in Tinsley v. Integrity Financial Partners, Inc., 634 F.3d 416 (7th Cir. 2011), that “§ 1692c as a whole permits debt collectors to communicate freely with consumers’ lawyers.”

Because the debtor was represented by an attorney, and because the new letters were sent to the attorney, the Seventh Circuit declined to find that the debtor’s name on the envelopes was a communication with the consumer when the debt collector, knowing the consumer is represented by counsel under § 1692c(a)(2), sent the letters in “care of” to the address of the debtor’s attorney.

The debtor also argued that the two letters were an attempt to continue collection efforts after notification to cease in violation of § 1692c(c).  However, the Seventh Circuit resisted the debtor’s invitation to distinguish this matter from Tinsley due to the fact that these two debts had been settled.

The Seventh Circuit based its determination on its ruling in Randolph v. IMBS, Inc. 368 F.3d 726 (7th Cir. 2004), that “[c]ourts do not impute to debt collectors other information that may be in creditors’ files – for example, that debt has been paid or was bogus to start with.” From Randolph, the Court reasoned that “it cannot limit a debt collector’s ability to communicate with a debtor’s counsel to only those incidents where a debt is owed.”

In addition, the Seventh Circuit rejected the debtor’s argument that the letters amounted to “false, misleading, or deceptive misrepresentations” in connection with the collection of a debt in violation of 15 U.S.C. §1692e.

The Court noted that it “has consistently held that with regard to ‘false, deceptive, or misleading representations’ in violation of § 1692e of the FDCPA, the standard is: (1) whether the debt collector’s communication would deceive or mislead an unsophisticated, but reasonable, consumer if the consumer is not represented by counsel or (2) whether a competent attorney would be deceived, even if he is not a specialist in consumer debt law.”

Despite the collector’s assertions in the two new letters that the debtor still owed debts that had in fact been settled, the Court reiterated that “the ‘competent attorney’ standard applies regardless of whether a statement is false, misleading or deceptive.”  Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 768 (7th Cir. 2007)

Thus, the issue here was “whether a competent attorney, even if he is not a specialist in consumer debt law, would be deceived by two letters requesting payment for debts resolved in a settlement.”  The Seventh Circuit held that “[o]n the facts before us, we believe a competent attorney would be able to determine whether his client continued to owe a debt after it was settled in full and would therefore not be deceived by the two letters.”

The Seventh Circuit declined to address the debtor’s arguments that the two letters violated § 1692e(5) because they contained threats of action the collector was not legally able to take, noting that these arguments were not raised at the district level and were therefore waived on appeal.

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Stuart Miles is based in Maurice Wutscher's Chicago office and practices in the firm's Consumer Credit Litigation and Commercial Litigation groups. Before joining Maurice Wutscher, Stuart served as an Assistant Corporation Counsel with the City of Chicago’s Department of Law, where he earned the Chicago Landmark Award for Preservation Excellency from the City of Chicago Office of the Mayor and a Problem Solving Award from the Chicago Police Department. As a member of the City’s Drug and Gang House Enforcement division, he successfully conducted hundreds of trials and evidentiary hearings, including concerning criminal activity at residential buildings and at various nightclubs. He has also worked as a criminal defense and civil rights attorney. Stuart holds a Bachelor of the Arts degree in Political Science from the University of North Carolina – Chapel Hill. He earned his Juris Doctorate graduating cum laude from The John Marshall Law School in Chicago. While in law school, Stuart completed a judicial externship in the Mortgage Foreclosure Section of the Circuit Court of Cook County.