Steffek v. Client Servs., Inc., 19-1491

• Decision Date: 21 January 2020
• Docket Number: No. 19-1491,19-1491
• Parties: Sarah M. STEFFEK, et al., Plaintiffs-Appellants, v. CLIENT SERVICES, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

948 F.3d 761

Sarah M. STEFFEK, et al., Plaintiffs-Appellants,

v.CLIENT SERVICES, INC., et al., Defendants-Appellees.

No. 19-1491

United States Court of Appeals, Seventh Circuit.

Argued December 11, 2019

Decided January 21, 2020

Francis R. Greene, Attorney, Menasha, WI, Philip D. Stern, Andrew T. Thomasson, Attorneys, Springfield, NJ, Stern Thomasson LLP, for Plaintiffs-Appellants.

Robbie Malone, Attorney, Eugene Xerxes Martin, IV, Malone Frost Martin PLLC, Dallas, TX, for Defendant-Appellee Client Services, Incorporated.

Before Flaum, Hamilton, and Barrett, Circuit Judges.

Hamilton, Circuit Judge.

The Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., requires the collector of a consumer debt to send the consumer-debtor a written notice containing, among other information, "the name of the creditor to whom the debt is owed." § 1692g(a)(2). Plaintiffs Sarah Steffek and Jill Vandenwyngaard received form notices from defendant Client Services, Inc. subject to this requirement. On each, a header stated only "RE: CHASE BANK USA, N.A." with an account number, and the letters continued: "The above account has been placed with our organization for collections." The letters did not say whether Chase Bank still owned the accounts in question or instead had sold the debts to another entity. Steffek and Vandenwyngaard sued Client Services for violating § 1692g(a)(2), arguing that these letters failed to identify clearly the current holder of the debt.

The district court certified a plaintiff class of Wisconsin debtors who received substantially identical notices from Client Services. The court then found that undisputed facts showed that Chase Bank was actually the current creditor and granted summary judgment to Client Services. Steffek v. Client Servs., Inc. , No. 1:18-cv-00160-WCG, 2019 WL 1126079, at *5 (E.D. Wis. Mar. 12, 2019). The actual identity of the current creditor, however, does not control the result. Regardless of who then owned the debts, the question under the statute is whether the letters identified the then-current creditor clearly enough that an unsophisticated consumer could identify it without guesswork. See Janetos v. Fulton Friedman & Gullace, LLP , 825 F.3d 317, 321 (7th Cir. 2016). Undisputed facts show that the notices here failed that test. We therefore reverse and remand for entry of summary judgment in the plaintiffs’ favor as to liability.

I. Factual and Procedural Background

The facts needed to decide this case are few and undisputed. Steffek and Vandenwyngaard received form dunning letters, also called debt validation notices, from Client Services. The parties agree that Client Services is a "debt collector," that the named plaintiffs are "consumers," and that the letters were "communications" in connection with attempts to collect "debts," as each of those terms is defined in the Act. See 15 U.S.C. § 1692a(2) – (3), (5) – (6).

The letter Steffek received was identical to the others except for differing account numbers and balances. It began with a header that read:

RE: CHASE BANK USA, N.A.

ACCOUNT NUMBER: XXXXXXXXXXXX3802

BALANCE DUE: $8,936.43

REFERENCE NUMBER: [redacted]3872

The body of the letter then read:

The above account has been placed with our organization for collections.

Unless you notify our office within thirty (30) days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days from receiving this notice that you dispute the validity of this debt or any portion thereof, this office will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification. If you request of this office in writing within thirty (30) days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.

We look forward to working with you in resolving this matter.

The letter further specified that payment should be made to Client Services. The only addresses contained in the letter were the P.O. box and street addresses of Client Services in Missouri. Finally, a postscript stated: "THIS COMMUNICATION IS FROM A DEBT COLLECTOR. THIS IS AN ATTEMPT TO COLLECT A DEBT. ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE." A slightly redacted copy of the letter Steffek received is attached as an appendix to this opinion.

The parties agreed on a stipulation to all facts necessary for cross-motions for summary judgment. Client Services reneged on its stipulation, however, by submitting some additional evidence, as we discuss in the concluding portion of this opinion. After addressing that procedural complication, the district court granted summary judgment to Client Services. Steffek , 2019 WL 1126079, at *5. Finding that the letters "contained" the name of Chase Bank and no other creditor, the court decided that the letters satisfied § 1692g(a)(2) as a matter of law. Id. at *4. The plaintiffs have appealed.¹

II. Failure to Identify the Current Creditor

The Fair Debt Collection Practices Act protects consumers through a series of disclosure requirements, beginning with the initial notice subject to 15 U.S.C. § 1692g. The required information includes the amount of the debt; the name of the creditor; a statement that unless the debtor disputes the validity of the debt within 30 days, it will be assumed to be valid; a statement that if the debtor disputes the debt in writing, the collector will mail the consumer verification of the debt or a copy of the judgment; and a statement that, upon written request within 30 days, the debt collector will provide the name and address of the original creditor if different from the current creditor. § 1692g(a).

We and other circuits have long interpreted § 1692g to require that the mandatory disclosures be made so that they would be clearly understood by unsophisticated debtors. "The statute does not say in so many words that the disclosures required by it must be made in a nonconfusing manner. But the courts, our own included, have held, plausibly enough, that it is implicit that the debt collector may not defeat the statute’s purpose by making the required disclosures in a form or within a context in which they are unlikely to be understood by the unsophisticated debtors who are the particular objects of the statute’s solicitude." Bartlett v. Heibl , 128 F.3d 497, 500 (7th Cir. 1997), citing Avila v. Rubin , 84 F.3d 222, 226 (7th Cir. 1996) (to be valid, a debt validation notice "must be effective, and it cannot be cleverly couched in such a way as to eviscerate its message"); Terran v. Kaplan , 109 F.3d 1428, 1432 (9th Cir. 1997) (debt validation notice may not include superfluous language that "overshadows" the required disclosures); Russell v. Equifax A.R.S. , 74 F.3d 30, 35 (2d Cir. 1996) ("It is not enough for a debt collection agency simply to include the proper debt validation notice in a mailing to a consumer—Congress intended that such notice be clearly conveyed."); Graziano v. Harrison , 950 F.2d 107, 111 (3d Cir. 1991) ( § 1692g was violated by contradictory message: "statutory notice must not only explicate a debtor’s rights; it must do so effectively"); Miller v. Payco–General American Credits, Inc. , 943 F.2d 482, 484 (4th Cir. 1991) ("a debt collector does not comply with § 1692g merely by inclusion of the required debt validation notice; the notice Congress required must be conveyed effectively to the debtor" (quotation omitted)).

This implied requirement of clarity extends to identification of the current creditor under § 1692g(a)(2). The mere presence of the correct name in the notice somewhere does not suffice. See Smith v. Simm Assocs., Inc ., 926 F.3d 377, 381 (7th Cir. 2019) (explaining that § 1692g(a)(2) "requires a debt collector to present information about the creditor and the debt in the manner the unsophisticated consumer can understand"); Janetos v. Fulton Friedman & Gullace, LLP , 825 F.3d 317, 321 (7th Cir. 2016) ("When § 1692g(a) requires that a communication include certain information, compliance demands more than simply including that information in some unintelligible form."). Across all the Act’s protections, we evaluate a communication "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 , 926 F.3d at 380 (claim under § 1692g(a)(2) ), quoting Pettit v. Retrieval Masters Creditor Bureau, Inc. , 211 F.3d 1057, 1060 (7th Cir. 2000) (claim under § 1692e ).

Turning to the notice at issue in this case, the problem for Client Services is that the form letter simply did not identify Chase Bank as the creditor to whom the debts were then owed. The heading said "RE: CHASE BANK," followed by an account number, which communicated only that the letter somehow related to the listed Chase Bank account. The body of the letter then explained that this "account has been placed with our organization for collections," referring to Client Services. Farther down, the letter said that the recipient could write to Client Services to find out if the original creditor was different from the current creditor. This latter sentence raised the possibility that the debt could have been resold, but the letter did not clarify who actually owned the debt. The letter did not communicate clearly on whose behalf Client Services was trying to collect the debt. The letter did say, however, that the recipient should pay Client Services rather than anyone else, which a recipient could reasonably understand as implying that Client Services itself was then the creditor.

As it turns out, the evidence available on summary judgment indicated that Chase Bank still owned the accounts for the two lead plaintiffs, Steffek and Vandenwyngaard....