Pettit v. Retrieval Masters Creditors Bureau

Decision Date09 May 2000
Docket NumberNo. 99-1797,99-1797
Citation211 F.3d 1057
Parties(7th Cir. 2000) Lori Pettit, Plaintiff-Appellant, v. Retrieval Masters Creditors Bureau, Inc., and Russell Fuchs, Defendants-Appellees
CourtU.S. Court of Appeals — Seventh Circuit

Before Easterbrook, Manion, and Rovner, Circuit Judges.

Manion, Circuit Judge.

Lori Pettit claims that the Retrieval Masters Creditors Bureau (Retrieval) and its president--Russell Fuchs-- violated the Fair Debt Collection Practices Act (FDCPA) by using its name in a collection letter. Specifically, she contends that the name "Retrieval Masters Creditors Bureau Incorporated" is deceptive because it leads unsophisticated debtors to believe that Retrieval is a credit bureau rather than a collection agency. The district court granted summary judgment for Fuchs because he is not a "debt collector." It also granted summary judgment for Retrieval based on its view that the letter was not deceptive as a matter of law. We affirm because under the FDCPA Fuchs is not a debt collector and because Pettit failed to create a genuine issue of material fact as to whether an unsophisticated debtor would find Retrieval's name misleading. We also reject her argument that her own subjective belief that all debt collectors are credit bureaus results in liability for Retrieval Masters.

A. Liability of the Debt Collector's Shareholders or Officers Under the FDCPA

The FDCPA is designed to protect against abusive debt collection practices which would likely disrupt a debtor's life. Mace v. Van Ru Credit Corp., 109 F.3d 338, 343 (7th Cir. 1997). Its provisions generally apply only to debt collectors. See 15 U.S.C. sec. 1692(e); Transamerica Fin. Servs., Inc. v. Sykes, 171 F.3d 553, 554 n.1 (7th Cir. 1999); Whitaker v. Ameritech Corp., 129 F.3d 952, 958 (7th Cir. 1997). A "debt collector" is defined as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. sec. 1692a(6).

Pettit argues that Russell Fuchs--as the largest shareholder and president of Retrieval Masters-- is a debt collector under the terms of the FDCPA, and thus is personally liable for any violations of the Act perpetrated by Retrieval, or at least for those violations in which he was intimately involved. The district court rejected this argument and held that Fuchs is not liable under the FDCPA because he exercised little or no day- to-day control over Retrieval Masters. Pettit v. Retrieval Masters Creditors Bureau, Inc., 42 F. Supp.2d 797, 805 (N.D. Ill. 1999). But under our holding in White v. Goodman, the extent of control exercised by an officer or shareholder is irrelevant to determining his liability under the FDCPA. 200 F.3d 1016, 1019 (7th Cir. 2000). Because such individuals do not become "debt collectors" simply by working for or owning stock in debt collection companies, we held that the Act does not contemplate personal liability for shareholders or employees of debt collection companies who act on behalf of those companies, except perhaps in limited instances where the corporate veil is pierced. Id.; Aubert v. American Gen. Fin., Inc., 137 F.3d 976, 979-80 (7th Cir. 1998). Rather, the FDCPA has utilized the principle of vicarious liability. See Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 108 (6th Cir. 1996); Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1516 (9th Cir. 1994). Just as in the Title VII context, the debt collection company answers for its employees' violations of the statute. With vicarious or respondeat superior liability, the debt collection company "and its managers have the proper incentives to adequately discipline wayward employees, as well as to instruct and train employees to avoid actions that might impose liability." U.S. EEOC v. AIC Sec. Investigations, Ltd., 55 F.3d 1276, 1282 (7th Cir. 1995). Individuals who do not otherwise meet the statutory definition of "debt collector" cannot be held liable under the Act. Transamerica, 171 F.3d at 554 n.1. As we mentioned in White, FDCPA suits against the owners of a debt collection company who are not otherwise debt collectors are frivolous and might well warrant sanctions. 200 F.3d at 1019. The holding of White is equally applicable to this case, so regardless of whether Fuchs exercised extensive control over Retrieval Masters, the district court correctly granted summary judgment for Fuchs. Of course, Pettit may still seek redress from Retrieval Masters for any violations of the Act committed by Fuchs, since it is undisputed that Retrieval is a debt collector.

B. The FDCPA and the Unsophisticated Debtor

The FDCPA specifically prohibits a "false representation or implication that a debt collector operates or is employed by a consumer reporting agency . . . ." 15 U.S.C. sec. 1692e(16). A consumer reporting agency is "any person which, for monetary fees . . . regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties . . . ." 15 U.S.C. sec. 1681a(f). The purpose of this provision is to prevent debt collectors from coercing payments from debtors by falsely leading them to believe that the failure to pay the debt will adversely affect the debtor's credit rating and ability to obtain credit. Cf. McKenzie v. E.A. Uffman & Assocs., Inc., 119 F.3d 358, 361 (5th Cir. 1997).

Practices purporting to violate the Act must be viewed from the objective standard of an "unsophisticated debtor." Bartlett v. Heibl, 128 F.3d 497, 500 (7th Cir. 1997); Jang v. A.M. Miller & Assoc., 122 F.3d 480, 483 (7th Cir. 1997). In attempting to describe this hypothetical debtor we have recognized that he is not as learned in commercial matters as are federal judges, see Walker v. National Recovery, Inc., 200 F.3d 500, 501 (7th Cir. 1999), but neither is he completely ignorant. Thus, on the one hand, we have described an unsophisticated debtor as "uninformed, naive, or trusting." Gammon v. GC Servs., Ltd. Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994). At the same time, we have rejected the "least sophisticated debtor" standard used by some other circuits because we don't believe that the unsophisticated debtor standard should be tied to "the very last rung on the sophistication ladder." Id. Instead, we and other courts have held that our uneducated debtor 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. See Chaudhry v. Gallerizzo, 174 F.3d 394, 408-09 (4th Cir. 1999); United States v. National Fin. Servs., Inc., 98 F.3d 131, 136 (4th Cir. 1996); Gammon, 27 F.3d at 1257; Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993). Furthermore, while our unwary debtor may tend to read collection letters literally, he does not interpret them in a bizarre or idiosyncratic fashion. White, 200 F.3d at 1020; Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232, 1236 (5th Cir. 1997). According to our unsophisticated debtor standard, a statement will not be confusing or misleading unless a significant fraction of the population would be similarly misled. Gammon, 27 F.3d at 1260 (Easterbrook, J., concurring). With this standard in mind, we turn to the letter at hand.

C. No Genuine Issue of Material Fact

The first thing a person notices when reading the letter is the name "RETRIEVAL MASTERS CREDITORS BUREAU, INC." which is prominently displayed, in capital letters, at the top of the correspondence. See Appendix. Almost as prominent are the words, also in capital letters, "RCMB COLLECTION AGENCY". In smaller type, the letter also informs Pettit that Retrieval Masters is a member of the "American Collectors Association, Incorporated." The body of the letter plainly states that "your account is now being handled by debt collectors . . .", and it warns Pettit that a failure to pay the debt might result in her name being placed on the "National Delinquent Debtor File, which could affect your ability to obtain certain types of credit . . . ." The letter is signed by a person identified as a "Collection Manager." Finally, the letter instructs Pettit to examine the reverse side which informs her in plain English that "[t]his is an attempt to collect a debt."

The district court held that this letter would not dupe an unsophisticated debtor into believing that Retrieval Masters was a credit bureau. Pettit, 42 F. Supp.2d at 810. The court based its holding on the fact that the letter does not suffer from the usual defects which result in FDCPA liability. For instance, it does not contain an explicit statement that Retrieval is a credit bureau.1 There are no inconsistent or contradictory assertions concerning Retrieval's status with respect to being a credit bureau or a collection agency, and the letter does not bury or overshadow its identification of Retrieval as a collection agency with a suggestion that it is a credit bureau. Rather, Retrieval's reminder that the creditor might place Pettit's name on the National Delinquent Debtor File suggests to the reader that Retrieval is not a credit bureau, since it is not the one in charge of the Delinquent Debtor File. As the district court stated: "Obviously, RMCB is warning that Pettit's name will be turned over to a credit reporting agency if she does not pay promptly. If RMCB was falsely suggesting that RMCB itself was a credit bureau,...

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