Degroot v. Client Servs., Inc.

• Decision Date: 08 October 2020
• Docket Number: No. 20-1089,20-1089
• Parties: Joseph DEGROOT, individually on behalf of all others similarly situated, Plaintiff-Appellant, v. CLIENT SERVICES, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

977 F.3d 656

Joseph DEGROOT, individually on behalf of all others similarly situated, Plaintiff-Appellant,

v.CLIENT SERVICES, INCORPORATED, Defendant-Appellee.

No. 20-1089

United States Court of Appeals, Seventh Circuit.

Argued September 15, 2020

Decided October 8, 2020

Francis R Greene, Philip D Stern, Andrew T Thomasson, Stern Thomasson LLP, Menasha, WI, for Plaintiff.

Robbie L Malone, Eugene X Martin, IV, Malone Frost Martin PLLC, Dallas, TX, for Defendant.

Before Flaum, Rovner, and Wood, Circuit Judges.

Flaum, Circuit Judge.

Plaintiff-appellant Joseph Degroot brought this putative class action suit in the Eastern District of Wisconsin against defendant-appellee Client Services, Inc. ("CSI"), alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692. The district court granted the collection agency's motion to dismiss, holding that CSI's communications were not false, misleading, or deceptive to the unsophisticated consumer. We agree and affirm.

I. Background

Degroot, a Wisconsin resident, defaulted on a debt owed to Capital One Bank (USA), N.A. Subsequently, Capital One placed that debt for collections with AllianceOne Receivables Management, Inc. As part of its collection efforts, AllianceOne sent Degroot a letter on August 6, 2018, stating:

The amount of your debt is $425.86. Please keep in mind, interest and fees are no longer being added to your account. This means every dollar you pay goes towards paying off your balance.

Based on AllianceOne's representations in the letter, Degroot understood that Capital One had "charged-off" his account, meaning that his debt would no longer accrue interest, late charges, or other fees for any reason.

Capital One subsequently reassigned, placed, or transferred the account to CSI for collections. CSI then mailed Degroot a letter dated March 11, 2019. The top left-hand corner of the letter contained CSI's logo and address, and a summary of information that read:

CURRENT CREDITOR: CAPITAL ONE BANK (USA), N.A.

ACCOUNT NUMBER: XXXXXXXXXXXX9018 BALANCE DUE: $425.86

Below this summary was a heading in bold, capital letters: "NEW INFORMATION ON YOUR ACCOUNT." The letter went on to note that Capital One had "placed the above account with our organization for collections" and gave an itemized summary of Degroot's current balance:

Balance Due At Charge-Off: $425.86

Interest: $0.00

Other Charges: $0.00

Payments Made: $0.00

Current Balance: $425.86

After providing an offer to resolve the debt and various disclosures required by certain states, the letter concluded on a third page with an "ACCOUNT RESOLUTION OFFER." The terms of the offer included a notice that "no interest will be added to your account balance through the course of Client Services, Inc. collection efforts concerning your account."

Following his receipt of this letter, Degroot filed suit, seeking to represent himself and all other persons to whom CSI mailed a similar letter in Wisconsin. He alleged that CSI's letter misleadingly implied that Capital One would begin to add interest and possibly fees to previously charged-off debts if consumers failed to resolve their debts with CSI. Specifically, he alleged that he was "confused by the discrepancy between the AllianceOne letter's statement that ‘interest and fees are no longer being added to your account’ and the 3/11/19 Letter's implication that Capital One would begin to add interest and possibly fees to the Debt once [CSI] stopped its collection efforts on an unspecified date." In light of these allegedly false or misleading statements, Degroot asserted that CSI violated 15 U.S.C. § 1692e by using false, deceptive, and misleading representations or means to collect a debt and 15 U.S.C. § 1692g by failing to disclose the amount of the debt in a clear and unambiguous fashion.

After its initial motion to dismiss was mooted by Degroot's filing of an amended complaint, CSI filed a new motion to dismiss the amended complaint. The district court granted that motion, concluding that CSI's letter was not false, misleading, or deceptive. Specifically, the court found that the March 11, 2019 letter had accurately and correctly disclosed the amount of the debt, and that CSI's letter did not imply fees or interest would be added to the debt in the future. Furthermore, the court noted that even if CSI's letter did imply that fees and interest would begin to accrue at a later date if the debt remained outstanding, the statement was not false or misleading given that Wisconsin law provided for the assessment of fees and interest on "static" debts in certain circumstances.

Noting differing approaches to this issue at the district level, the court invited "clarification in this important area of law." This appeal followed.

II. Discussion

Because the district court dismissed Degroot's suit under Rule 12(b)(6), we review the allegations in Degroot's complaint de novo to determine whether he has stated a claim upon which relief can be granted. Perry v. Coles County , 906 F.3d 583, 586 (7th Cir. 2018), cert. denied , ––– U.S. ––––, 139 S. Ct. 1225, 203 L.Ed.2d 209 (2019)."[W]e accept as true all factual allegations in the complaint and draw all permissible inferences in plaintiff[’s] favor." Boucher v. Fin. Sys. of Green Bay, Inc. , 880 F.3d 362, 365 (7th Cir. 2018). Notwithstanding that deference, "[t]o survive a motion to dismiss, a plaintiff must allege ‘enough facts to state a claim to relief that is plausible on its face.’ " Id. at 365–66 (citation omitted). With that standard in mind, we turn to the specific allegations in this case.

A. Itemized Breakdown and Zero Balances

Among other things, the FDCPA requires debt collectors to send consumers a written notice disclosing "the amount of ... debt" they owe. 15 U.S.C. § 1692g(a)(1). This disclosure must be clear. See Janetos v. Fulton Friedman & Gullace, LLP , 825 F.3d 317, 319 (7th Cir. 2016) ("If a letter fails to disclose the required information clearly, it violates the Act, without further proof of confusion."). Here, there is no dispute that the letter disclosed the amount that Degroot owed as of March 11, 2019, the date of CSI's letter. That said, "a collection letter can be ‘literally true’ and still be misleading ... if it ‘leav[es] the door open’ for a ‘false impression.’ " Dunbar v. Kohn Law Firm, S.C. , 896 F.3d 762, 765 (7th Cir. 2018) (alteration in original) (citations omitted). The pertinent question in this case is thus whether CSI, by providing a breakdown of Degroot's debt that showed a zero balance for "interest" and "other charges," violated 15 U.S.C. §§ 1692e and 1692g(a)(1) by implying that interest and other charges would accrue if the debt remained unpaid. See, e.g. , Boucher , 880 F.3d at 371 (explaining that where a plaintiff claims that a false or misleading statement goes to the amount of debt, a determination of whether there has been a violation of § 1692e " ‘goes hand-in-hand with whether the amount of the debt has been accurately disclosed’ under § 1692g(a)(1)").

A debt collector violates § 1692e by making statements or representations that "would materially mislead or confuse an unsophisticated consumer." Koehn v. Delta Outsource Grp., Inc. , 939 F.3d 863, 864 (7th Cir. 2019) (quoting Boucher , 880 F.3d at 366 ). While the paradigmatic example of such prohibited behavior is the inclusion of patently false information, we have also 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.’ " Boucher , 880 F.3d at 367 (alteration in original) (quoting Lox v. CDA, Ltd. , 689 F.3d 818, 825 (7th Cir. 2012) ).

With that background, we turn to the itemized breakdown of debt at issue in this case. To determine whether CSI's letter was false or misleading, we must answer two questions. The first is whether an unsophisticated consumer would even infer from the letter that interest and other charges would accrue on his outstanding balance if he did not settle the debt. If, and only if, we conclude that an unsophisticated consumer would make such an inference, then we move to analyze whether the inference is false or misleading.

To answer the question of whether a statement can be interpreted as Degroot claims, we ask whether an unsophisticated consumer could reach that interpretation. See Steffek v. Client Servs., Inc. , 948 F.3d 761, 765 (7th Cir. 2020). As we have stated time and again, while the unsophisticated consumer is "uninformed, naïve, or trusting," we assume the consumer "nonetheless possesses reasonable intelligence, basic knowledge about the financial world, and is wise enough to read collection notices with added care." Koehn , 939 F.3d at 864 (internal quotation marks and citations omitted). For that reason, our unsophisticated consumer test is objective and "disregards ‘bizarre’ or ‘idiosyncratic’ interpretations of collection letters." Dunbar , 896 F.3d at 764–65 (citations omitted).

CSI, joined by the Consumer Financial Protection Bureau ("CFPB" or "the Bureau") and ACA International, the Association of Credit and Collection Professionals ("ACA"), as amici curiae, urge us to conclude that Degroot's alleged under-standing of its dunning letter is just such a "bizarre" or "idiosyncratic" interpretation. As the CFPB points out, the itemization of a debt is a record of what has already happened. It "discloses the interest or other charges that have been assessed between a date in the past (in this case, the date that the debt was charged-off) and the date of the notice." For that reason, the Bureau argues, such a breakdown cannot be construed as forward looking and therefore misleading. We agree.

The facts in this case bear a striking resemblance to those in Koehn , in which we concluded a similar claim could not proceed. See 939 F.3d at 865. The plaintiff in Koehn alleged that the dunning letter in question was misleading because it used the phrase "current...