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7th Cir. Holds Debt Collector May Rely on Information from Creditor

Joining with the Fourth and Ninth Circuits, the U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court’s summary judgment order in favor of a debt collector and against a debtor finding that the debt collector did not violate the federal Fair Debt Collection Practices Act (FDCPA) by only verifying the information in its records instead of contacting the creditor to verify the debt.

In so ruling, the Court also held that the debt collector did not violate the federal Fair Credit Reporting Act (FCRA) because it conducted a reasonable investigation into the disputed information.

A copy of the opinion in Walton v. EOS CCA is available at:  Link to Opinion.

The creditor sent a letter to the debtor advising her that she owed $268.47 on her closed account. The letter included her account number and advised the debtor that if she did not pay the debt, then the debtor may refer the account “to an outside collection agency.”

The debtor did not pay the debt.  The debtor later received a letter from the debt collector advising her that she owed the creditor $268.47 and that she should pay the debt “unless [she] dispute[d] the debt.”  Due to an error in the records the creditor sent to the debt collector, the letter included an incorrect account number.

During a subsequent call with the debt collector, the debtor disputed the debt.  The debtor verified that the section 1692g notice letter contained her correct name and mailing address. However, the debtor falsely claimed that the last four digits of her social security number that the debt collector provided did not match her social security number.

The debtor wrote a letter to the debt collector disputing the debt claiming that she did not owe any money pertaining to the listed account number.  The debt collector investigated the debtor’s dispute by examining its records and sent the debtor a notice verifying the debt.  The notice verified her name, her address, the amount of the debt, and that the last four digits of her social security number matched the debt report the creditor had provided to the debt collector.  The notice once again contained the incorrect account number.

The debt collector reported the debtor’s debt to two credit-reporting agencies, including informing the agencies that the debtor disputed the debt.  The debtor twice wrote to the agencies to dispute the debt.  The agencies notified the debt collector that the debtor claimed “that the debt did not belong to her.”  The debt collector investigated the dispute and again determined that the debtor’s “name, address, and social security number matched the information” the creditor provided to the debt collector.  The debtor’s second dispute noted that the debt-collection letter contained the wrong number for her account.  In response, the debt collector asked the agencies to delete the debtor’s debt record.

The debtor then filed this lawsuit alleging that the debt collector “violated (1) the FDCPA by not verifying her debt with the creditor [], and (2) the FCRA by not reasonably investigating the disputed information.”  The debtor alleged that the debt collector’s violations caused her emotional distress, loss of income, and to incur attorney’s fees.

The trial court entered summary judgment in favor of the debt collector and this appeal followed.

The Seventh Circuit first examined the FDCPA claim. As you may recall, the FDCPA provides that when a consumer “notifies the debt collector in writing within the thirty-day period” that the consumer is disputing a debt notice, “the debt collector shall cease collection of the debt until the debt collector obtains verification of the debt and a copy of such verification or judgment is mailed to the consumer by the debt collector.” 15 U.S.C. § 1692g(b).

The Seventh Circuit noted that this case concerned what the debt collector must verify after receiving a dispute.

The debtor argued that § 1692(g) required the debt collector to verify “the accuracy of the underlying debt.”  She maintained that the debt collector was obliged to contact the creditor “to confirm whether the account number was hers and thus whether she really owed” the debt.  In response, the creditor argued that § 1692(g) only pertains to “the accuracy of its collection notice.”  Thus, the debt collector maintained that it only needed to confirm that its notice to the debtor matched the description of the debt and the debtor that the creditor provided to the debt collector.

The Seventh Circuit agreed with the debt collector because Congress designed the FDCPA “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). The Seventh Circuit therefore construed § 1692g(b) to require “a debt collector to verify that its letters to the consumer accurately convey the information received from the creditor.”

The Court explained that the verification lets a consumer know that the creditor “made the demand the debt collector said it did” and allows the consumer to determine whether the creditor is correct.  Further, in the Seventh Circuit’s view, it would be “burdensome and significantly beyond the Act’s purpose to interpret § 1692g(b) as requiring a debt collector to undertake an investigation into whether the creditor is actually entitled to the money it seeks.”  This is because § 1692g(b) serves as a check on the debt-collection agency, not the creditor.

The Seventh Circuit thus joined “other circuits in holding that the statute requires nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed.'” Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999); Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1173-74 (9th Cir. 2006).

In this appeal, the debt collector “plainly satisfied § 1692g(b)” because it reviewed its records and confirmed that it sent its debt-collection letter seeking the amount the creditor sought to the same debtor the creditor identified.  The notice also included the creditor’s address and contact information.  Thus, the verification provided the debtor with the necessary information to “sufficiently dispute the payment obligation.” Dunham v. Portfolio Recovery Assocs., LLC, 663 F.3d 997, 1004 (8th Cir. 2011).

The Seventh Circuit observed that this happened here as the debtor used the information provided in the § 1692g(b) notice to dispute her debt.  As a result, “she succeeded in having the debt record deleted.”

The Seventh Circuit next turned to the alleged FCRA claim.  As you may recall, when a credit-reporting agency notifies a “furnisher” that a debtor disputes a debt, the furnisher must “conduct an investigation with respect to the disputed information.” 15 U.S.C. § 1681s-2(b)(1)(A).  Whether the furnisher conducts a sufficiently reasonable investigation is ordinarily a factual inquiry, but “summary judgment is proper if the reasonableness of the defendant’s procedures is beyond question.” Westra v. Credit Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005).

Here, the Seventh Circuit found that the debt collector’s “investigation was unquestionably reasonable.” The debtor first disputed only that, “the account did not belong to her.” In response, the debt collector conducted a reasonable investigation because it verified the debtor’s personal information that it received from the creditor.  The debtor’s second dispute notified the debt collector for the first time that the account number contained in the § 1692g(b) notice did not belong to her.  In response, the debt collector instructed the agencies to delete the debt and they did.  The FCRA required nothing more of the debt collector.

The Seventh Circuit also rejected the debtor’s claim that the debt collector made false or misleading representations that violated the FDCPA and the FCRA.

Specifically, 15 U.S.C. § 1692e(8) of the FDCPA requires debt collectors who furnish information to agencies to report if a debtor disputes a debt, and 15 U.S.C. § 1681s-2(a)(1)(A) of the FCRA prevents debt collectors from furnishing information to agencies when they know or have “reasonable cause to believe that the information is inaccurate.”  These claims fail because the undisputed evidence demonstrated that the debt collector reported the debt as disputed.

Moreover, the FCRA claim separately failed because there is no private right of action for any § 1681s-2(a)(1)(A) violation. See 15 U.S.C. § 1681s-2(c); Purcell v. Bank of America, 659 F.3d 622, 623 (7th Cir. 2011).

Thus, the Seventh Circuit affirmed the trial court’s order granting summary judgment in favor of the debt collector.

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Ernest Wagner practices in Maurice Wutscher's Commercial Litigation and Consumer Litigation groups, and leads the firm’s Insurance Recovery and Advisory group. Based in Chicago, he also supports the firm’s litigation matters in its Miami office. Ernest has substantial experience in various types of commercial and insurance recovery litigation. He has conducted more than 35 jury trials, and more than 150 arbitrations for plaintiffs and defendants. He has also successfully represented clients in numerous appeals, in various jurisdictions. Ernest earned his Juris Doctor from Emory University School of Law in Atlanta, Georgia, and his Bachelor of the Arts from the University of Iowa.

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