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7th Cir. Holds Collection Letter Properly Identified ‘Original’ and ‘Current’ Creditors Under FDCPA

The U.S. Court of Appeals for the Seventh Circuit recently affirmed judgment in favor of a debt buyer and debt collector against a consumer debtor alleging that the collector’s debt collection letter violated the federal Fair Debt Collection Practices Act.

In so ruling, the Seventh Circuit rejected the debtor’s argument that the letter’s identification of both the “original creditor” and “current creditor” was likely to confuse consumers, and held that the letter accurately and clearly identified the creditor to whom the debt was owed, in compliance with subsection 1692g(a)(2) of the FDCPA.

A copy of the opinion in Dennis v. Niagara Credit Solutions, Inc. is available at:  Link to Opinion.

A consumer (“debtor”) defaulted on debt owed to a bank.  The debt was sold to a subsequent creditor (the “debt buyer”), who retained a debt collector to send a form collection letter. 

The collection letter advised that the debtor’s account had been “placed with our collection agency on 9-14-17,” and that the debt collector’s “client” had authorized it to offer a payment plan or a settlement of the debt in full.  The collection letter further identified the bank as the ‘original creditor,’ and the debt buyer as the ‘current creditor,’ along with the last four digits of the debtor’s account number and principal and interest balances due on the debt.

The debtor filed a putative class action complaint against the debt buyer and debt collector alleging that the collection letter violated § 1692g(a)(2) of the FDCPA by “fail[ing] to identify clearly and effectively the name of the creditor to whom the debt was owed.” 

The trial court entered judgment on the pleadings in the debt buyer and debt collector’s favor, holding that the collection letter adequately identified the current creditor.  The instant appeal ensued.

The Seventh Circuit referenced prior rulings that “[t]o satisfy § 1692g(a), the debt collector’s notice must state the required information ‘clearly enough that the recipient is likely to understand it.’” Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317, 321 (7th Cir. 2016) (quoting Chuway v. Nat’l Action Fin. Servs., Inc., 362 F.3d 944, 948 (7th Cir. 2004)). 

In addition, potential FDCPA violations are viewed “through the objective lens of an unsophisticated consumer who, while ‘uninformed, naïve, or trusting,’ possesses at least ‘reasonable intelligence, and is capable of making basic logical deductions and inferences.’” Smith v. Simm Assocs., Inc., 926 F.3d 377, 380 (7th Cir. 2019) (quoting Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000)).

On appeal, the debtor argued that listing two separate entities as “creditor” without explaining the difference between the two, and stating that the debt collector was authorized to make settlement offers on behalf of the debt buyer (an entity that was previously unlikely known to the customer) could confuse its recipients as to whom the debt was actually owed. 

Citing the Seventh Circuit’s ruling in Smith v. Simm Assocs., Inc., the debtor argued that in that case, dismissal was affirmed because the letters in question did “not identify any creditor other than Comenity Capital Bank, which might have led to consumer confusion,” and that here the collection letter’s identification of an original and current creditor violated Smith.

The Seventh Circuit disagreed. It held that the collection letter clearly identified the debt buyer as the current creditor, thus meeting the requirement under 1692g(a) that the written notice contain “the name of the creditor to whom the debt is owed.”  15 U.S.C. § 1692g(a)(2). 

Moreover, the debtor’s argument under Smith was soundly rejected, as the original and current creditors in Smith were the same.  Here, the collection letter’s identification of the original creditor (who the consumer is likely to recognize based on their past business relationship) and the current creditor (the debt buyer, which the consumer may not recognize and is required to be identified under the FDCPA) “provide[d] clarity for consumers” and an unsophisticated consumer would understand that his debt has been purchased by the creditor.  Smith, 926 F.3d at 381. 

Acknowledging the trial court’s suggestion that the letter could have better clarified the parties’ relationship by spelling out that the debt buyer purchased the debt from the original creditor, and that the debt buyer was the debt collector’s client, the Seventh Circuit held that section 1692g(a)(2) only requires clear identification of the current creditor — not a detailed explanation of transactions leading to the debt collector’s notice.

Accordingly, the trial court’s judgment in favor of the debt buyer and debt collector was affirmed.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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