Boucher v. Fin. Sys. of Green Bay, Inc.

• Decision Date: 17 January 2018
• Docket Number: No. 17-2308,17-2308
• Citation: 880 F.3d 362
• Parties: Ryan BOUCHER, et al., Plaintiffs–Appellants, v. FINANCE SYSTEM OF GREEN BAY, INC., et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

880 F.3d 362

Ryan BOUCHER, et al., Plaintiffs–Appellants,

v.FINANCE SYSTEM OF GREEN BAY, INC., et al., Defendants–Appellees.

No. 17-2308

United States Court of Appeals, Seventh Circuit.

Argued December 1, 2017

Decided January 17, 2018

Francis R. Greene, Cathleen M. Combs, Daniel A. Edelman, James O. Latturner, Attorneys, EDELMAN COMBS LATTURNER & GOODWIN, LLC, Chicago, IL, Andrew T. Thomasson, Philip D. Stern, Attorneys, STERN THOMASSON LLP, Springfield, NJ, for Plaintiffs–Appellants.

Brett B. Larsen, Attorney, HINSHAW & CULBERTSON LLP, Milwaukee, WI, Kimberly A. Jansen, Attorney, HINSHAW & CULBERTSON LLP, Chicago, IL, for Defendant–Appellee.

Before Bauer, Flaum, and Rovner, Circuit Judges.

Flaum, Circuit Judge.

Plaintiffs sued defendant, a debt collection agency, for violations of the Fair Debt Collection Practices Act ("FDCPA"). Specifically, plaintiffs allege that defendant's dunning letters were false and misleading because they threatened to impose "late charges and other charges" that could not lawfully be imposed. The district court dismissed plaintiffs' claims because the challenged statement mirrors the safe harbor language that this Court instructed debt collectors to use in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, LLC , 214 F.3d 872 (7th Cir. 2000). The district court further held that defendant's failure to remove the reference to "late charges and other charges" was not materially misleading. For the reasons below, we reverse.

I. Background

Plaintiffs are Wisconsin residents who incurred and defaulted on debts for medical services. Plaintiffs' creditors assigned these debts to defendant, Finance System of Green Bay, Inc. ("FSGB"), a collection agency. In turn, FSGB sent plaintiffs a letter informing them of their principal balance, their interest balance, and their total account balance. The letter also included the following statement:

As of the date of this letter, you owe $[a stated amount]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check. For further information, write to the above address or call [phone number].

On January 30, 2017, plaintiffs filed a class action complaint against FSGB in the Eastern District of Wisconsin for violations of the FDCPA, 15 U.S.C. §§ 1692 – 1692p. Plaintiffs allege that FSGB's letter is false because under Wisconsin law, FSGB cannot lawfully or contractually impose "late charges and other charges." Plaintiffs further allege that the letter causes unsophisticated consumers to incorrectly believe that they will avoid such charges, and thus benefit financially, if they immediately send payment. For these reasons, plaintiffs claim that the letter is false, misleading, and deceptive in violation of § 1692e. Plaintiffs also claim that the letter fails to properly state the amount of debt, as required by § 1692g(a)(1).

In its motion to dismiss, FSGB argued that it complied with the FDCPA as a matter of law because the allegedly false statement tracks the safe harbor language provided by this Court in Miller . FSGB further asserted that, although it may not lawfully impose "late charges and other charges," the reference to such charges was not materially misleading because it is entitled to charge interest.

The district court granted defendants' motion to dismiss. In doing so, it acknowledged that some of the Miller safe harbor language—namely, the phrase "late charges and other charges"—does not "strictly" apply in this case. Boucher v. Fin. Sys. of Green Bay, Inc., No. 17-cv-132, 2017 WL 2345678, at *4 (E.D. Wis. May 30, 2017). However, it reasoned that "the central purpose of Miller 's safe harbor formula is to provide debt collectors with a way to notify debtors that the amounts they owe may ultimately vary." Id. Accordingly, it concluded that debt collectors like FSGB may rely on the Miller safe harbor language as long as the debt is variable in some way—regardless of "whether the increase occurred because of interest, late charges, other charges, some combination thereof, or all of the above." Id. Because FSGB's letter conveyed "the crucial fact" that plaintiffs' debts were variable, the court concluded that FSGB was entitled to safe harbor protection under Miller . This appeal followed.

II. Discussion

We review de novo a district court's decision to grant a motion to dismiss under Rule 12(b)(6). Bible v. United Student Aid Funds, Inc. , 799 F.3d 633, 639 (7th Cir. 2015). In doing so, we accept as true all factual allegations in the complaint and draw all permissible inferences in plaintiffs' favor. Id. To survive a motion to dismiss, a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ).

A. FSGB's Dunning Letter is Materially False, Misleading, and Deceptive in Violation of § 1692e

The FDCPA broadly prohibits the use of any "false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. Along with this general prohibition, the statute lists specific examples of prohibited conduct. See id. ; see also Nielsen v. Dickerson , 307 F.3d 623, 634 (7th Cir. 2002) (describing this list as "nonexclusive"). The following examples are relevant here: "[t]he false representation of ... the character, amount, or legal status of any debt"; "[t]he threat to take any action that cannot legally be taken or that is not intended to be taken"; and "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt ...." 15 U.S.C. § 1692e(2)(A), (5), (10).

Even if a statement in a dunning letter is "false in some technical sense," it does not violate § 1692e unless it would confuse or mislead an unsophisticated consumer. See Wahl v. Midland Credit Mgmt., Inc. , 556 F.3d 643, 645–46 (7th Cir. 2009) ; Turner v. J.V.D.B. & Assocs., Inc. , 330 F.3d 991, 995 (7th Cir. 2003). "The unsophisticated consumer is ‘uninformed, naive, [and] trusting,’ but possesses ‘rudimentary knowledge about the financial world, is wise enough to read collection notices with added care, possesses "reasonable intelligence," and is capable of making basic logical deductions and inferences.’ " Williams v. OSI Educ. Servs., Inc. , 505 F.3d 675, 678 (7th Cir. 2007) (alteration in original) (quoting Pettit v. Retrieval Masters Creditor Bureau, Inc. , 211 F.3d 1057, 1060 (7th Cir. 2000) ). An unsophisticated consumer "may tend to read collection letters literally, [but] he does not interpret them in a bizarre or idiosyncratic fashion." Pettit , 211 F.3d at 1060. That is, "[t]he ‘unsophisticated consumer’ isn't a dimwit." Wahl , 556 F.3d at 645.

Moreover, "[a] statement cannot mislead unless it is material." Hahn v. Triumph P'hips, LLC , 557 F.3d 755, 758 (7th Cir. 2009). After all, "[t]he purpose of the Fair Debt Collection Practices Act is to protect consumers, and they don't need protection against false statements that are immaterial in the sense that they would not influence a consumer's decision." Muha v. Encore Receivable Mgmt., Inc. , 558 F.3d 623, 628 (7th Cir. 2009). In this context, a statement is material if it would "influence a consumer's decision ... to pay a debt in response to a dunning letter." Id.

Thus, to state a claim under § 1692e, plaintiffs must plausibly allege that FSGB's dunning letter would materially mislead or confuse an unsophisticated consumer. Because this inquiry involves a "fact-bound determination of how an unsophisticated consumer would perceive the statement," dismissal is only appropriate in "cases involving statements that plainly, on their face, are not misleading or deceptive." Marquez v. Weinstein, Pinson & Riley, P.S. , 836 F.3d 808, 812, 814–15 (7th Cir. 2016) (quoting Ruth v. Triumph P'ships , 577 F.3d 790, 800 (7th Cir. 2009) ); see also Zemeckis v. Glob. Credit & Collection Corp. , 679 F.3d 632, 636 (7th Cir. 2012) ("As a general matter, we view the confusing nature of a dunning letter as a question of fact that, if well-pleaded, avoids dismissal on a Rule 12(b)(6) motion.") (internal citation omitted). "We have cautioned that a district court must tread carefully before holding that a letter is not confusing as a matter of law when ruling on a Rule 12(b)(6) motion because ‘district judges are not good proxies for the "unsophisticated consumer" whose interest the statute protects.’ " McMillan v. Collection Prof'ls., Inc. , 455 F.3d 754, 759 (7th Cir. 2006) (quoting Walker v. Nat'l Recovery, Inc. , 200 F.3d 500, 501–03 (7th Cir. 1999) ).

In Lox v. CDA, Ltd. , 689 F.3d 818, 825 (7th Cir. 2012), we held that a dunning letter is false and misleading if it "impl[ies] that certain outcomes might befall a delinquent debtor when, legally, those outcomes cannot come to pass." The dunning letter in Lox stated the following: "Our client may take legal steps against you and if the courts award judgement, the court could allow court costs and attorney fees." Id. at 820–21. The plaintiff moved for summary judgment, claiming that this language was false and misleading as a matter of law because "[the creditor] could not, under any circumstances, have recovered attorney fees from [him]." Id. at 820. This was so because, under the so-called "American Rule," courts do not award attorney fees unless there is an...