25 F.3d 536 (7th Cir. 1994), 93-2861, Jenkins v. Heintz

Docket Nº:93-2861.
Citation:25 F.3d 536
Party Name:Darlene JENKINS, Plaintiff-Appellant, v. George W. HEINTZ and Bowman, Heintz, Boscia & McPhee, Defendants-Appellees.
Case Date:May 27, 1994
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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25 F.3d 536 (7th Cir. 1994)

Darlene JENKINS, Plaintiff-Appellant,


George W. HEINTZ and Bowman, Heintz, Boscia & McPhee,


No. 93-2861.

United States Court of Appeals, Seventh Circuit

May 27, 1994

Argued Jan. 4, 1994.

Daniel A. Edelman (argued), Cathleen M. Combs, Tara G. Redmond, J. Eric Vander Arend, Michelle Weinberg, Edelman & Combs, Chicago, IL, Joanne Faulkner, New Haven, CT, for Darlene Jenkins.

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George W. Spellmire, Bruce L. Carmen (argued), D. Kendall Griffith, David M. Schultz, Hinshaw & Culbertson, Chicago, IL, for George W. Heintz and Bowman, Heintz, Boscia & McPhee.

Alan A. Alop, Legal Assistance Foundation of Chicago, Chicago, IL, Denise A. Lisio, Robert J. Hobbs, National Consumer Law Center, Boston, MA, for Johnnie Mae Johnson amicus curiae.

Before FAIRCHILD, MANION, and KANNE, Circuit Judges.

MANION, Circuit Judge.

Darlene Jenkins sued George W. Heintz and his law firm, Bowman, Heintz, Boscia & McPhee, for violating the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1601 et seq. Heintz and the law firm filed a motion to dismiss, arguing that attorneys who file suit to collect debts are not covered by the Act. The district court agreed and dismissed the lawsuit. Jenkins appeals. We reverse and remand.

I. Facts

Darlene Jenkins borrowed money from Gainer Bank to purchase a car. The installment contract between the bank and Jenkins required that she keep insurance on the car until she made her last payment. If she did not keep insurance, the installment contract allowed the bank to purchase insurance for the car, and then to charge Jenkins for the cost of the insurance. Specifically, the installment contract provided:

if the Buyer does not pay the taxes on the collateral [or] keep it insured against loss or damage, ... the Creditor can if it wishes to do so and Buyer will have to reimburse the Creditor upon demand, or Creditor at its sole option, may add said expenses to the Buyer's unpaid balance, which shall be payable by the Buyer at the annual percentage rate then in effect.

Jenkins defaulted on her loan. She also stopped buying insurance for the car. The bank then purchased insurance, and hired an attorney, George W. Heintz, and his law firm, Bowman, Heintz, Boscia & McPhee, to recover the remaining installment payments and the cost of the insurance. The attorneys sued Jenkins on behalf of the bank, demanding the installment payments and a $4173.00 insurance charge, and then attempted to settle the matter out of court.

Jenkins took issue with the $4173.00 insurance demand. She had reason to believe that the bank did not buy simple damage and loss insurance for the car, but instead purchased a financial protection policy to insure against the possibility that she might default on the loan. She figured that she had no obligation to reimburse the bank for that type of insurance; she was only required to reimburse the bank if it purchased damage and loss insurance for the car.

Jenkins filed suit against Heintz and his law firm, alleging that their attempts to pass the unauthorized insurance costs on to her violated the Fair Debt Collection Practices Act. Her legal theory was two-fold. First, she claimed that because the insurance charge was not authorized by the installment contract, that the attorneys violated Sec. 1692f of the Act, by adding an unauthorized amount onto the debt. Second, she claimed that the attorneys' attempt to sneak the insurance charge onto her bill amounted to a "false representation or deceptive means to collect any debt" in violation of Sec. 1692e of the Act.

Heintz and his law firm moved to dismiss. They asserted that Congress simply could not have intended to regulate normal legal proceedings under the auspices of the Act. The district court agreed, and dismissed the case. Jenkins appeals. We must determine whether the broad purview of the Act covers the type of attorney conduct described in Jenkins' complaint.

II. Analysis

We review the district court's dismissal for failure to state a claim de novo. Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1019 (7th Cir.1992). In conducting our review, we accept all material allegations made in the complaint as true, and we draw all reasonable inferences from the allegations in the plaintiff's favor. Scott v. O'Grady, 975 F.2d 366, 368 (7th Cir.1992).

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We will affirm the court's dismissal if "it appears beyond doubt that [the plaintiff] can prove no set of facts in support of this claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

Congress enacted the Fair Debt Collection Practices Act in 1977, "to eliminate abusive debt collection practices by debt collectors, to ensure that those debt collectors who refrain from using 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. Sec. 1692(e). The Act targeted common abusive debt collection practices, like late-night phone calls, Sec. 1692c(a)(1), embarrassing communications through third parties, Sec. 1692c(b), harassment, Sec. 1692d, false and misleading representations by the debt collector, Sec. 1692e, and assorted other practices, Secs. 1602f-j. Obviously, Congress did not intend to eliminate all debt collection practices, only those which it considered unfair. In its original form at least, the Act stopped short of regulating certain methods of debt collection. For instance, legal proceedings did not fall under the purview of the Act. Congress accomplished this by explicitly exempting from the definition of "debt collector," "any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client." Sec. 1692a(6)(F).

The attorney exemption meant that attorneys could go about the legitimate business of debt collection without the fear of being sued. But it also made attorneys an unregulated class of debt collectors. Some apparently abused this loophole and engaged in abusive debt collection practices with impunity. As the Sixth Circuit recently noted, "[a]ttorneys were advertising to creditors that they could do with impunity what...

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