Press "Enter" to skip to content

7th Cir. Reverses FDCPA Dismissal Based on ‘Claim Splitting’ But Provides Roadmap for Defendants

The U.S. Court of Appeals for the Seventh Circuit recently reversed the dismissal of a consumer’s second lawsuit against a debt collector for failure to notify a credit reporting agency that the debt was disputed.

In so ruling, the Court held that because the debts were owed to different creditors, they were two distinct transactions giving rise to separate claims because “[e]ach failure to notify could have caused an additional harm to credit score or peace of mind.” 

A copy of the opinion in Horia v. Nationwide Credit & Collection, Inc. is available at:  Link to Opinion.

A debt collection company sent a dunning letter to the debtor seeking to collect a medical debt. The debtor sued for injury to his credit rating and mental distress, alleging that the debt collector violated section 1692e(8) of the federal Fair Debt Collection Practices Act (FDCPA) by notifying a credit reporting agency of the debt, but not that it was disputed.

The same debtor had just settled a similar lawsuit against the same debt collector for sending him a letter attempting to collect a debt owed to a different creditor, but failing to notify the credit reporting agency the debt was disputed.

The debt collector moved to dismiss the second lawsuit, arguing that the plaintiff was “gaming the system by seeking multiple recoveries for a single kind of wrong.” The trial court granted the motion and dismissed the second case, ruling that the debtor’s second case “split his claims impermissibly.”  This appeal followed.

On appeal, the Seventh Circuit explained that “[t]he doctrine of bar forecloses repeated suits on the same claim, even if a plaintiff advances a new legal theory or a different kind of injury.” In addition, “[f]ederal law—which applies here because the first judgment was entered by a federal court, …—defines a ‘claim’ by looking for a single transaction.”

The Court reasoned that there was no need to seek a more precise definition of “claim” because the plaintiff “has alleged two transactions on any understanding.” The debts were owed to different creditors, and although “[t]hey involve the same statutory rule and the same debt collector[,] … the wrongs differ—[the debt collector] could have given proper notice for one debt but not the other—and the injury differs. Each failure to notify could have caused an additional harm to credit score or peace of mind.”

By way of analogy, the Seventh Circuit explained that just as the Supreme Court of the United States held in National Railroad Passenger Corp. v. Morgan, an employment discrimination case involving the statute of limitations, that “each discrete discriminatory act produces one claim[,]” “[d]iscrete and independently wrongful acts produce different claims, even if the same wrongdoer commits both offenses and the second wrong is similar to the first. Likewise with discrete violations of § 1692e(8). Each time a debt collector fails to give a credit agency the required notice for a debt is a stand-alone wrong. Disputes that have an independent existence may be litigated separately. Joinder in federal practice is permissive, … not mandatory[,]” except for compulsory counterclaims, which did not apply to the case at bar.

The Court rejected the debt collector’s argument that “allowing sequential litigation is inequitable because 15 U.S.C. § 1692k(a)(2)(A) sets a maximum of $1,000 in statutory damages per case[,]” reasoning that while it’s true that “[m]ultiplying the number of cases multiplies the maximum award[,]” “[j]udges aren’t authorized to turn per-case caps into per-defendant caps; that choice is legislative.”

Accordingly, the Seventh Circuit reversed the dismissal, and remanded the case to the trial court for further proceedings consistent with its ruling.

In so ruling, the Court explained that debt collectors are not defenseless.

First, a release can be drafted to cover “all disputes between the same parties, not just the dispute already in court.”

Second, the Seventh Circuit noted that debt collectors can argue that § 1692k(a)(2)(A) gives the court discretion to award up to $1,000 in statutory damages, and that “a debtor who has already collected $1,000 in statutory damages should not receive more from the same defendant for the same sort of wrong. … Debt collectors are also free to contend, and judges to find, that the second suit entails the same ‘actual damage’ (§ 1692k(a)(1)) as the first, so that an additional award on that front is inappropriate. If a bill collector’s first failure to notify a credit bureau damages a debtor’s credit score and causes emotional distress, a second suit based on a second failure to notify the same credit bureau allows the debtor to collect only the marginal loss caused by the second wrong.”

Finally, “a defendant who persuades a court that a sequential suit was brought to harass not only avoids an award of attorneys’ fees but also becomes eligible to collect its own attorneys’ fees from the debtor” pursuant to 15 U.S.C. § 1692(a)(3). “The statute thus provides debt collectors with tools to discourage abusive litigation.”

Print Friendly, PDF & Email

Hector E. Lora manages the firm’s Florida office and has substantial experience in all phases of complex commercial litigation, including bench and jury trials as well as appellate practice. Hector represents lenders, servicers, debt collectors and debt buyers in complex mortgage foreclosure actions, quiet title actions, federal TILA, RESPA, TCPA, and FDCPA actions and Florida FCCPA actions brought by borrowers or debtors. He also represents creditors in bankruptcy litigation, purchasers of accounts receivable or factoring companies that provide revenue-based financing to small and mid-sized businesses in collection actions, and landlords in commercial and residential evictions. Hector’s broad litigation experience includes over a decade of defending civil enforcement actions filed by the Federal Trade Commission as well as real estate contract disputes and partition actions, contested mortgage foreclosure and condominium lien foreclosure actions and the foreclosure of UCC Article 9 security interests. Hector also has advised a variety of types of businesses regarding their compliance with applicable federal and state consumer protection laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act (TCPA), the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida. For more information, see

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.