Borcherding-Dittloff v. Corporate Receivables, 98-C-0429-C.

• Decision Date: 22 April 1999
• Docket Number: No. 98-C-0429-C.,98-C-0429-C.
• Citation: 59 F.Supp.2d 822
• Parties: Mary Beth BORCHERDING-DITTLOFF, Plaintiff, v. CORPORATE RECEIVABLES, INC., Defendant.
• Court: U.S. District Court — Western District of Wisconsin

59 F.Supp.2d 822

Mary Beth BORCHERDING-DITTLOFF, Plaintiff, v. CORPORATE RECEIVABLES, INC., Defendant.

No. 98-C-0429-C.

United States District Court, W.D. Wisconsin.

April 22, 1999.

Carla O. Andres, Andres Law Office, LLC, Portage WI, for Borcherding-Dittloff, Mary Beth, plaintiff.

J. David Krekeler, Krekeler & Scheffer, S.C., Madison WI, for Corporate Receivables, Inc., defendant.

OPINION AND ORDER

CRABB, District Judge.

This is a civil action for monetary and declaratory relief brought pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o. Plaintiff Mary Beth Borcherding-Dittloff contends that defendant Corporate Receivables, Inc., sent her a collection letter dated January 12, 1998, that violated the act in three ways. The matter is before the court on cross motions for partial summary judgment on the issue of liability. (Jurisdiction exists pursuant to § 15 U.S.C. § 1692k(d) and 28 U.S.C. § 1331.)

Plaintiff's motion will be granted and defendant's will be denied. Plaintiff is correct that defendant's January 12 letter violated § 1692g because the letter had the effect of "overshadowing" mandatory disclosures included in a letter defendant sent plaintiff several days earlier. Because plaintiff's motion for partial summary judgment on liability may be granted on this one ground, it is unnecessary to address her two other complaints about defendant's January 12 letter.

Plaintiff has submitted proposed findings of fact to which defendant has responded. These submissions reveal the following facts to be undisputed.

UNDISPUTED FACTS

The principal business of defendant Corporate Receivables, Inc., is the collection of debts on behalf of others. On December 31, 1997, defendant sent plaintiff Mary Beth Borcherding-Dittloff a letter that, among other things, advised plaintiff that her account with Beneficial National Bank, USA, had been given to defendant for collection; that she had thirty days after receiving the notice in which to dispute the validity of the debt, after which time defendant would assume the debt to be valid; and that upon request defendant would provide her with information about the creditor.

On January 12, 1998, defendant sent plaintiff another letter, which provides in full,

YOU OWE: BENEFICIAL NATIONAL BANK 412.85

ACCOUNTANT: 588120

COMPLIANCE NOTICE

PROTECT YOUR CREDIT AS IT COULD BE YOUR MOST VALUABLE ASSET.

TO DATE YOU HAVE IGNORED OUR NOTICE OF COLLECTION AGENCY ASSIGNMENT. SHOULD WE INTERPRET THIS TO MEAN THAT YOU DO NOT INTEND TO PAY VOLUNTARILY? YOUR SILENCE MAY COMPEL U.S. TO SEEK FURTHER REMEDIES.

FOR EACH CHECK THAT IS RETURNED DUE TO NON-SUFFICIENT FUNDS, THERE WILL BE A $15.00 SERVICE CHARGE.

THIS IS AN ATTEMPT TO COLLECT A DEBT. ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.

OPINION

Under 15 U.S.C. § 1692g, debt collectors are obligated to insure that consumer debtors are given certain information in writing, such as the name of the creditor. In Fair Debt Collection Practices Act jurisprudence, the required disclosures are known as the "validation notice." Of significance to this case, debt collectors must notify consumers that unless they dispute the validity of the debt within thirty days, "the debt will be assumed to be valid;" and that consumers have a right to demand written verification of the debt as well as the name and the address of the original creditor. If a consumer makes such a request, a debt collector is obligated to suspend its collection efforts until it provides the information. See Bartlett v. Heibl, 128 F.3d 497, 498-99 (7th Cir.1997) (citing § 1692g(a)(1)-(5)).

The courts are in agreement that even if a debt collector furnishes a proper validation notice, it can still violate § 1692g if it makes additional statements (which can be in the same communication) that undercut, contradict or "overshadow" the notice. See Johnson v. Revenue Management Corp., 169 F.3d 1057, 1059 (7th Cir.1999); Chauncey v. JDR Recovery Corp., 118 F.3d 516, 518 (7th Cir.1997) (citing cases from the Second, Third, Fourth and Ninth Circuits). Holding debt collectors liable for such statements prevents confusion among consumers. See Bartlett, 128 F.3d at 500-01 ("A contradiction is just one means of inducing confusion"; "overshadowing is just another"); see also Avila v. Rubin, 84 F.3d 222, 226 (7th Cir.1996) (debt collector's letter violated act because consumer would be left "scratching his head").

Whether a communication violates § 1692g is determined from the perspective of the unsophisticated consumer. See Avila, 84 F.3d at 226. Unsophisticated consumers may be uninformed, naive, trusting and of below average sophistication, although they do not stand on the "the very last rung on the sophistication ladder." See Gammon v. GC Services Limited Partnership, 27 F.3d 1254, 1257 (7th Cir.1994). There is an element of objective reasonableness within the standard. See id.

Primarily, plaintiff contends that she is entitled to summary judgment on liability because defendant's second letter of January 12 caused confusion with respect to the validation notice in its December 31 letter. She argues that the second letter would cause an unsophisticated consumer to believe that she must respond more quickly to defendant's debt collection efforts; the unsophisticated consumer who received both letters would believe that for some reason waiting to respond to first letter "has inured to the benefit of the collection agency." See Pl.'s Br., dkt. # 10, at 6. (There is no dispute that plaintiff can establish the other two elements of liability: defendant concedes that the underlying debt is a consumer debt and that it is a debt collector subject to the act.)

In support, plaintiff relies on Tychewicz v. Dobberstein, No. 96-C-195-S, unpublished slip. op. (W.D.Wis. Aug. 28, 1996) (Shabaz, J.), in which the district court awarded summary judgment to the plaintiff on the ground that a validation notice had been overshadowed by another letter sent twenty-six days later. The second letter provided,

You did not respond to our initial notice concerning this bill. Therefore, you have three days to contact our office to arrange suitable payment. If we do not hear from you within that time, further collection action will follow immediately.

Id., slip op. at 2. The court found that the second letter conveyed a message that the consumer would be the subject of collection proceedings because she had not yet disputed the debt, when in fact the consumer had four more days to bring such a challenge. The court rejected the defendant's contention that a consumer would not be so misled because the second letter did not state that the time to contest the debt had expired: in the defendant's view, only an express statement that the thirty days was over could cause uncertainty. The court reasoned that unsophisticated consumers are the persons who would likely become confused by the negative implications one might draw from the second letter. See id. at 6-7.

On its face, Tychewicz is persuasive. The timing and wording of defendant's second letter convey the same impression: especially prompt action is required on the part of the consumer (faster than the remainder of the thirty days). Tychewicz is no less persuasive after examining defendant's attempt to distinguish it. According to defendant, the second letter in Tychewicz was flawed solely because it "directly contradicted" the validation notice; the validation notice set a thirty-day time limit whereas the second letter set a three-day time limit. See Def.'s Br., dkt. # 13, at 4. Defendant forgets that the court was equally concerned about the "implications" of the defendant's second letter because "the unsophisticated consumer could be deceived by other than expressly contradicting language." See Tychewicz, slip op. at 7; see also Bartlett, 128 F.3d at 500 (debt collector might cause consumer confusion by failing to explain "apparent though not actual contradiction").

Also, defendant is wrong that Marshall-Mosby v. Corporate Receivables, Inc., No. 98 C 4430, 1999 WL 59845 (N.D.Ill., Jan.27, 1999), has any bearing on this case. Although Marshall-Mosby is similar to the extent that it involved a overshadowing claim involving defendant's standard-form collection letter, the specific charge was that some language in the initial letter (the December 31 letter in this case) overshadowed the validation notice contained in the same letter. Hence, Marshall-Mosby is of no help to defendant because it did not involve a second letter.

In sum, I agree with plaintiff that defendant's second letter violated § 1692g. Defendant does not (and cannot) dispute that the timing and language of the second letters in this case and in Tychewicz both convey an impression that the consumer had better act quickly. Obviously, defendant meant the second letter to spur plaintiff into action. But surely, the unsophisticated consumer is one that does not keep a running track of dates. Such a consumer would become confused by the second letter because it lacks a statement explaining how the second letter affected the grace period. Compare Jenkins v. Union Corp., 999 F.Supp. 1120, 1133 (N.D.Ill.1998) (second letter sent fourteen days after notice did not overshadow; second letter warned "IMPERATIVE — Grace period about to expire;"); Severson v. Transworld Systems, Inc., No. 93-C-682-S, 1994 WL 779763 at *2 (W.D.Wis. Apr.12, 1994)(Shabaz, J.) (same warning in second letter; same result). Plaintiff's motion for partial summary judgment will be granted.

Two more issues deserve attention. In addition to her main argument, which is a winner, plaintiff presents two additional arguments in support of her motion for summary judgment: that defendant's second letter threatens to take action not intended to be taken in violation of § 1692e(5), and that the second letter contains misleading statements in violation of ...