Alice Ruth v. Triumph Partnerships ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-3458
A LICE A. R UTH and M ARYLOU H AHN,
Plaintiffs-Appellants,
v.
T RIUMPH P ARTNERSHIPS, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Western Division.
No. 3:06-cv-50042—Frederick J. Kapala, Judge.
A RGUED M AY 5, 2009—D ECIDED A UGUST 17, 2009
Before R IPPLE AND S YKES, Circuit Judges, and L AWRENCE,
District Judge.Œ
R IPPLE, Circuit Judge. Alice A. Ruth and Marylou Hahn
brought this class action in the United States District Court
Œ
The Honorable William T. Lawrence, United States District
Judge for the Southern District of Indiana, is sitting by designa-
tion.
2 No. 08-3458
for the Northern District of Illinois against Triumph
Partnerships, LLC, and Triumph Asset Services, alleging
violations of the Fair Debt Collection Practices Act, 15
U.S.C. § 1692 et seq. The district court certified the class
on January 8, 2008. The parties filed cross-motions for
summary judgment. The court initially denied the
motions, but later reconsidered its earlier decision and
granted summary judgment to the defendants.
Ms. Ruth and Ms. Hahn now appeal; they contend that
the district court erred in granting summary judgment
to the defendants and in failing to grant summary judg-
ment to them. For the reasons set forth in this opinion,
we now reverse the district court’s judgment and
remand with instructions to enter judgment in favor of
the plaintiffs.
I
BACKGROUND
A.
Defendant Triumph Partnerships is a company that
purchases defaulted debts and attempts to recover them.
Defendant Allied International Credit Corporation, doing
business as Triumph Asset Services (“TAS”), is a debt
collection agency. Both of these entities are indepen-
dently operated subsidiaries of the same parent com-
pany, Allied Global Holdings.
The plaintiff class, represented by Alice A. Ruth and
Marylou Hahn (collectively “Ms. Ruth” or “plaintiffs”),
No. 08-3458 3
consists of individuals who owed debts purchased by
Triumph Partnerships. Triumph Partnerships hired TAS
to collect these debts.
In January 2006, TAS sent a letter to each plaintiff. The
first sentence of the letter, which was titled “Notification
of Assignment,” stated: “TRIUMPH PARTNERSHIPS
LLP recently purchased your [credit card] account and
Triumph Asset Services (‘TAS’), a debt collection com-
pany, is the servicer of this obligation.” R.1, Ex. A. The
letter then listed the amount owed and stated: “As the
new owner of this account, we have authorized TAS to
work with you to find a positive resolution to this out-
standing debt. Once TAS receives your payment of
[amount], we will notify the credit bureaus that the debt
is ‘Paid’ and immediately stop all recovery activity on
this account.” Id. The letter also stated: “Please under-
stand that this is a communication from a debt collector.
This is an attempt to collect a debt. Any information
obtained will be used for that purpose.” Id.
In the same envelope as the collection letter was a
second document, titled “Privacy Notice of Financial
Information From Triumph Partnerships LLC (’TPLLC’)
and its affiliates” (the “notice”). Id. The notice, which
stated that it was “sent on behalf of TPLLC and its
affiliate: Triumph Asset Services,” also stated the follow-
ing:
What Information Do we collect and share?
To the extent permitted by law, we may collect
and/or share all the information we obtain in
servicing your account. We collect information
4 No. 08-3458
about you to service your account with the highest
quality.
....
We may share information about you (whether you
are a customer or former customer) to the following
third parties:
! Non-financial companies, such as direct market-
ers or retailers financial service companies (like
banks, mortgage lenders, and organizations
with which we have a joint marketing agree-
ments [sic])
! Non-financial companies, such as direct market-
ers or retailers as outlined below in the OPT-
OUT NOTICE section, you may tell us not to
share information about you with outside com-
panies. However, that choice will not affect
sharing: with credit reporting agencies, with
third party collection agencies, with attorneys,
with companies that process financial products,
in connection with the sale of debt portfolios,
and to respond to legal subpoenas and other
legal process.
....
OPT-OUT NOTICE
You have the option of directing us NOT to disclose
your information with outside companies (other than
those disclosures permitted by law). If you prefer
that we do not disclose nonpublic personal informa-
No. 08-3458 5
tion about you to nonaffiliated third parties, please
fill out the Opt-Out Response Form on the reverse
side . . . .
Id. The language of the notice was chosen by Richard Arko,
Triumph Partnerships’ vice president, who selected the
letter from samples provided by a letter vendor. After
selecting this language, Arko sent it to TAS’ compliance
office for review. TAS returned the notice, altered
in form but unchanged in substance, about three weeks
later.
B.
Beginning in January 2006, TAS sent an envelope con-
taining a collection letter and a copy of the notice to each
of the plaintiffs. In March 2006, Ms. Ruth filed this
action in the United States District Court for the
Northern District of Illinois. She alleged that by sending
the notice, the defendants had violated the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e.
The parties filed cross-motions for summary judg-
ment. Ms. Ruth contended that the notice violated the
FDCPA because it made a false statement in connection
with the collection of a debt and threatened illegal action.
She claimed that the notice falsely stated that the defen-
dants, by law, could disclose certain nonpublic informa-
tion about the debtor without the debtor’s permission,
and would do so unless the debtor expressly “opted out.”
Ms. Ruth submitted that these statements were false
and constituted a threat to take illegal action because
6 No. 08-3458
the FDCPA prohibits debt collectors from sharing
nonpublic information about a debtor without the
debtor’s explicit consent.
The defendants argued that they were entitled to sum-
mary judgment because the notice was not sent in con-
nection with the collection of a debt. They claimed that
the notice was sent “not for the purpose of collecting the
debt but in order to satisfy Triumph Partnerships’ ob-
ligations under the [Gramm-Leach-Bliley Act].” 1 The
defendants also argued that even if the notice was a com-
munication in connection with collection of a debt, it did
not run afoul of section 1692e because it did not make
any false or misleading statement. Moreover, even if
the notice was a false or misleading communication in
connection with collection of a debt, the defendants
argued that they were shielded from liability by the
FDCPA’s “bona fide error defense,” which provides that
debt collectors are not liable for FDCPA violations that
were “not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error.” 15 U.S.C.
§ 1692k(c). Triumph Partnerships further argued that it
was not a “debt collector” as defined in the FDCPA and
that the statute’s restrictions therefore did not apply to it.
On January 22, 2008, the district court denied both
parties’ motions for summary judgment. The court began
1
The Gramm-Leach-Bliley Act, Pub. L. 106-102, 113 Stat. 1338
(1999), is a federal statute that, among other things, requires
financial institutions to send a privacy notice whenever a
new consumer relationship is established.
No. 08-3458 7
by holding that Triumph Partnerships was a debt
collector under the FDCPA. The court then rejected the
defendants’ other arguments because it concluded that
there were disputed issues of material fact as to whether,
when viewed from the perspective of an “unsophisticated
consumer,” the notice: (1) was a communication in con-
nection with the collection of a debt and (2) threatened to
take illegal action.2 The court held that a reasonable jury
2
The district court in its decision, and the parties in their
arguments before us, treat Ms. Ruth’s two claims—that
the notice is a “threat to take . . . action that cannot legally be
taken or that is not intended to be taken” in violation of
15 U.S.C. § 1692e(5), and that it is also “a false representation or
deceptive means to collect or attempt to collect [a] debt” in
violation of 15 U.S.C. § 1692e(10)—somewhat interchangeably.
This is appropriate in this case, because the two claims stand
or fall together: if the notice does falsely or deceptively claim a
right to share the plaintiffs’ information without their consent,
then it is also a threat to take illegal action; if the notice is not
false or misleading, then it is not such a threat.
In any event, the FDCPA does not require Ms. Ruth to prove
that the notice violated any particular subpart of section 1692e.
The statute requires only that she prove that it was a “false,
deceptive, or misleading misrepresentation or means in con-
nection with the collection of any debt.” 15 U.S.C. § 1692e.
Sections 1592e(5) and (10) are simply items in a non-exclusive
list of examples of ways in which the statute can be violated.
See id.; Nielsen v. Dickerson, 307 F.3d 623, 634 (7th Cir. 2002)
(“The FDCPA broadly prohibits a debt collector from using
‘any false, deceptive, or misleading representation or means
(continued...)
8 No. 08-3458
could conclude that the notice was a communication in
connection with collection of a debt because it was the
only other document in the envelope with the collection
letter, both documents contained the same Triumph logo,
and both documents were worded as though they had
been written by Triumph Partnerships. The court also
rejected the defendants’ argument that the bona fide error
defense entitled them to summary judgment. The court
concluded that the evidence, when reviewed in the light
most favorable to Ms. Ruth, was not sufficient to allow it
to conclude that the defendants were entitled to the
defense as a matter of law.
The district court also denied Ms. Ruth’s motion for
summary judgment. The court held that, although there
was enough evidence to support a jury’s finding that the
notice violated the FDCPA, the evidence was not suf-
ficient to allow the court to find a violation as a matter
of law.
Shortly before the trial was scheduled to begin, the
district court reconsidered its decision on summary
2
(...continued)
in connection with the collection of any debt.’ The statute
proceeds to identify sixteen, nonexclusive instances of conduct
that would constitute a violation of this prohibition.”); Mattson
v. U.S. W. Commc’ns, Inc., 967 F.2d 259, 260 (8th Cir. 1992)
(“Section 1692e then sets out a non-exclusive list of sixteen
specific violations of the FDCPA.”); Pipiles v. Credit Bureau of
Lockport, Inc., 886 F.2d 22, 24 (2d Cir. 1989) (“The sixteen
subsections of section 1692e detail nonexclusive specifications
of this general prohibition.”).
No. 08-3458 9
judgment. It asked the parties to submit briefs addressing
whether the case law of this circuit required Ms. Ruth to
present extrinsic evidence to prove that the unsophisti-
cated debtor: (1) would view the notice as a communica-
tion in connection with collection of a debt and (2) would
interpret the notice as a threat to take illegal action.
After considering the parties’ briefs, the court concluded
that Ms. Ruth could not prevail on her claim without
presenting extrinsic evidence on these two points. Be-
cause she had not introduced any such extrinsic
evidence, the court granted summary judgment to the
defendants. Ms. Ruth now appeals that decision.
II
DISCUSSION
We review a district court’s grant or denial of summary
judgment de novo. Belcher v. Norton, 497 F.3d 742, 747 (7th
Cir. 2007).
Ms. Ruth raises five points of error on appeal, but these
really boil down to two arguments. First, she argues that
the court erred in granting summary judgment to the
defendants rather than to her because it concluded that
she was required to produce extrinsic evidence that the
notice was sent in connection with the collection of a debt
and that the notice threatened illegal action. Second, she
argues that the district court should have entered sum-
mary judgment in her favor on the defendants’
bona fide error defense. We shall consider these points in
due course. Before we turn to Ms. Ruth’s arguments,
10 No. 08-3458
however, we must address an argument by Triumph
Partnerships that it is not subject to FDCPA liability at all.
A.
Triumph Partnerships submits that, even if the mailing
did run afoul of the FDCPA, Ms. Ruth nevertheless has
no cause of action against it because the FDCPA does not
apply to it. The FDCPA regulates only the conduct of “debt
collectors,” and Triumph Partnerships submits that it
is not a debt collector as that term is defined by the
FDCPA. Section 1692a(6) defines a “debt collector” as
follows:
The term “debt collector” means 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. § 1692a(6). Section 1692a(4) defines
a “creditor” as “any person who offers or extends
credit creating a debt or to whom a debt is owed, but
such term does not include any person to the extent
that he receives an assignment or transfer of a debt
in default solely for the purpose of facilitating collec-
tion of such debt for another.” 15 U.S.C. § 1692a(4).
Triumph Partnerships submits that “it is a creditor and
not a debt collector because it purchases delinquent debt
thereby becoming one ‘to whom a debt is owed’ under
§ 1692a(4).” Appellees’ Br. 27. It contends that it does not
No. 08-3458 11
fit the statutory definition of a debt collector because it
does not collect debts; rather, it purchases debts and
then hires others to collect them. The district court con-
sidered this argument and rejected it. Triumph Partner-
ships contends that the district court erred in doing so.
Ms. Ruth responds by suggesting that Triumph Partner-
ships cannot make this argument because it did not file
a cross-appeal. We cannot accept this view. “We may
affirm summary judgment on any basis supported in
the record.” Klebanowski v. Sheahan, 540 F.3d 633, 639
(7th Cir. 2008) (citing Holmes v. Vill. of Hoffman Estates, 511
F.3d 673, 681 (7th Cir. 2007)); see also Morley Const. Co. v.
Md. Cas. Co., 300 U.S. 185, 191 (1937) (“Without a cross-
appeal, an appellee may ‘urge in support of a decree
any matter appearing in the record, although his argu-
ment may involve an attack upon the reasoning of the
lower court or an insistence upon matter overlooked or
ignored by it.’ ” (quoting United States v. Am. Ry. Express
Co., 265 U.S. 425, 435 (1924))).
On the merits, Ms. Ruth contends that the district
court was correct to hold that Triumph Partnerships is a
debt collector under the FDCPA. Relying on our decisions
in McKinney v. Cadleway Properties, 548 F.3d 496, 501 (7th
Cir. 2008), and Schlosser v. Fairbanks Capital Corp., 323
F.3d 534, 539 (7th Cir. 2003), she submits that “[t]he
purchaser of a debt in default who undertakes directly
or indirectly to collect the debt is a debt collector.”
Reply Br. 20.
Triumph Partnerships’ argument is foreclosed by our
precedents. The FDCPA distinguishes between debt
12 No. 08-3458
collectors, who are subject to the statute’s requirements,
and creditors, who are not. “For purposes of applying the
Act to a particular debt, these two categories . . . are
mutually exclusive.” Schlosser, 323 F.3d at 536. Where, as
here, the party seeking to collect a debt did not originate
it but instead acquired it from another party, we have
held that the party’s status under the FDCPA turns on
whether the debt was in default at the time it was ac-
quired. See McKinney, 548 F.3d at 501; Schlosser, 323
F.3d at 538-39. We based this interpretation on the lan-
guage of the statute, which excludes from its definition
of “creditor” those who acquire and seek to collect a
“debt in default,” 15 U.S.C. § 1692a(4), and excludes
from its definition of “debt collector” those who seek to
collect a debt “which was not in default at the time it
was obtained,” id. § 1692a(6)(F).
We also found support for this distinction in the
rationale behind Congress’ decision to treat the originator
of a debt obligation differently from a party whose
only interest is in the collection of a debt that already
has fallen into default. We explained this rationale in
Schlosser:
Creditors, “who generally are restrained by the desire
to protect their good will when collecting past due
accounts,” S. Rep. 95-382, at 2 (1977), reprinted in 1977
U.S.C.C.A.N. 1695, 1696, are not covered by the Act.
Instead, the Act is aimed at debt collectors, who may
have “no future contact with the consumer and often
are unconcerned with the consumer’s opinion of
them.”
No. 08-3458 13
Schlosser, 323 F.3d at 536. The purchaser of an already-
defaulted debt—like the debt collector, and unlike the
originator and servicer of a non-defaulted debt—has no
ongoing relationship with the debtor and, therefore, no
incentive to engender good will by treating the debtor
with honesty and respect. Accordingly, we have held that a
party that seeks to collect on a debt that was in default
when acquired is a debt collector under the FDCPA, “even
though it owns the debt and is collecting for itself.”
McKinney, 548 F.3d at 501 (citing Schlosser, 323 F.3d at 538-
39).
Triumph Partnerships does not dispute that the debts
at issue in this case already were in default when it ac-
quired them. Thus, Schlosser and McKinney compel the
conclusion that Triumph Partnerships is a debt collector
under the FDCPA and is, therefore, subject to its provi-
sions.
Triumph Partnerships maintains that it should not be
considered a debt collector in this case because it “took
no . . . action” to collect the debts at issue in this case.
Appellees’ Br. 28. It points out that it “did not draft,
authorize, or send the collection letter at issue in this
lawsuit.” Id. Responsibility for drafting the letter, how-
ever, is irrelevant. Ms. Ruth does not take issue with
the collection letter itself; rather, she alleges that the
notice, which was sent in the same envelope as the
letter, falsely or deceptively claimed that the defendants
had the right to disclose the plaintiffs’ personal informa-
tion without their permission. Triumph Partnerships
admits that it drafted the notice and directed TAS to
14 No. 08-3458
include it in the mailing with the collection letter. If, as
Ms. Ruth alleges, the notice was sent “in connection with”
an attempt to collect a debt—a question we shall
address below—then Triumph Partnerships’ control over
its drafting and mailing plainly constituted affirmative
conduct with regard to collecting a debt.
B.
We turn next to Ms. Ruth’s arguments on appeal.
Ms. Ruth contends that the district court should have
denied the defendants’ motion for summary judgment
and instead granted summary judgment to her. She
argues that, as a matter of law, the mailing at issue in
this case violated section 1692e. Section 1692e provides
that “[a] debt collector may not use any false, deceptive,
or misleading representation or means in connection
with the collection of any debt.” 15 U.S.C. § 1692e. The
FDCPA specifically prohibits debt collectors from
making a “threat to take any action that cannot legally be
taken or that is not intended to be taken.” Id. § 1692e(5).
The statute also proscribes “[t]he use of any false rep-
resentation or deceptive means to collect or attempt to
collect any debt or to obtain any information concerning
a consumer.” Id. § 1692e(10).
The district court granted summary judgment for the
defendants in part because it read this court’s decisions
to require a plaintiff who attacks a collection notice
under the FDCPA to present extrinsic survey evidence
proving that unsophisticated consumers would be de-
ceived or misled. The district court concluded that
No. 08-3458 15
Ms. Ruth had to present extrinsic evidence that the unso-
phisticated consumer would view the notice as a com-
munication in connection with the collection of a debt and
that the notice threatened illegal action. Because Ms. Ruth
had presented no such evidence, the district court con-
cluded that the defendants were entitled to summary
judgment.
Ms. Ruth submits that the district court’s decision was
in error. She contends that it is inappropriate to require
extrinsic evidence to prove that a notice was sent “in
connection with” an attempt to collect a debt. She also
argues that, although extrinsic evidence sometimes is
required to prove that a communication was deceptive
or misleading, the FDCPA does not require such
evidence when the communication contains an unam-
biguous misstatement of the law.
1. The “In Connection With” Element
The district court granted summary judgment to the
defendants in part because it read our case law to require
the plaintiffs to establish, via extrinsic evidence, that the
unsophisticated debtor would view the notice as having
been sent in connection with an attempt to collect a debt.
Ms. Ruth submits that this conclusion was erroneous;
she contends that whether a communication was sent
in connection with collection of a debt should be mea-
sured by an objective standard rather than a subjective
one. Otherwise, she contends, debt collectors will be free
to send false or misleading collection letters as long as
the letters are so misleading that the unsophisticated
16 No. 08-3458
consumer fails to recognize them as attempts to col-
lect a debt. Ms. Ruth submits that this would be a nonsen-
sical result.
Whether the “in connection with” element is subject to
the unsophisticated-consumer standard is one of first
impression for our court; indeed, we are not aware of,
nor have the parties advised us of, any decision by a
federal court of appeals addressing the question. In light
of the statute’s purposes, and the consequences that
would follow from the district court’s approach, we
must conclude that the proper standard is an objective
one. To hold, as the district court did, that a communica-
tion is made in connection with collection of a debt—and,
therefore, is subject to the FDCPA’s protections—only
if the unsophisticated consumer recognizes it as such,
would stand the statute on its head. Unscrupulous debt
collectors could shield themselves from liability simply
by disguising their collection letters as something else.
The more deceptive the letters were, the more likely
they would escape FDCPA liability. Needless to say,
Congress’ intent in enacting the FDCPA was not to en-
courage debt collectors to deceive consumers; in fact, it
was just the opposite. Thus, we conclude that whether
a communication was sent “in connection with” an
attempt to collect a debt is a question of objective fact, to
be proven like any other fact. It need not be established
by extrinsic evidence of what the unsophisticated con-
sumer might think.
Turning to the facts of this case, we believe that any
reasonable trier of fact would conclude that the notice
No. 08-3458 17
was sent in connection with an attempt to collect a debt.
The notice was sent in the same envelope as the collection
letter, which the defendants admit was sent for debt-
collection purposes. Both the notice and the letter refer
to both defendants: Triumph Partnerships, the owner
of the defaulted debt, and TAS, the company hired to try
to collect it. The only relationship the defendants had
with the plaintiffs arose out of Triumph Partnerships’
ownership of the plaintiffs’ defaulted debt.3 In sum, the
defendants would not have sent this combination of
materials to the plaintiffs if they had not been at-
tempting to collect a debt.
Accordingly, the district court erred in granting sum-
mary judgment to the defendants because of Ms. Ruth’s
failure to produce extrinsic evidence to satisfy the “in
3
There is some evidence in the record indicating that the
defendants phrased the notice the way they did because
Triumph Partnerships had contemplated offering the plain-
tiffs an opportunity to discharge the defaulted debt by trans-
ferring it to a new credit account. If the debtor agreed to such
an arrangement, the new account would not be subject to the
FDCPA, and the defendants could share certain nonpublic
information acquired while servicing that account without
the debtor’s prior consent.
Any plans along these lines that the defendants might have
had are irrelevant to this case, however, because neither the
collection letter nor the notice ever mentions such an arrange-
ment or indicates that the information-sharing described in
the notice would be limited to information collected pursuant
to such an arrangement.
18 No. 08-3458
connection with” element of her FDCPA claim. As a
matter of law, the letter and notice were sent in con-
nection with an attempt to collect a debt.
2. The “False, Deceptive, or Misleading” Element
As discussed above, 15 U.S.C. § 1692e provides that “[a]
debt collector may not use any false, deceptive, or mis-
leading representation or means in connection with the
collection of any debt.” The statute specifies sixteen
types of conduct that run afoul of this prohibition. In
her complaint, Ms. Ruth relied upon two subsections:
section 1692e(5), which proscribes “[t]he threat to take
any action that cannot legally be taken or that is not
intended to be taken,” and section 1692e(10), which
prohibits “[t]he use of any false representation or
deceptive means to collect or attempt to collect any debt
or to obtain information concerning a consumer.”
The notice states that “[t]o the extent permitted by
law, we may collect and/or share all the information we
obtain in servicing your account.” R.1, Ex. A. It goes on
to describe the types of information the defendants
might collect and the parties with which it might share
that information. Ms. Ruth submits that the notice
violates the FDCPA because it implies that the defen-
dants have a legal right to collect and share nonpublic
information about the debtor without the debtor’s prior
consent. In effect, Ms. Ruth claims that the defendants
stated in the notice they had the legal authority to
disclose nonpublic personal information and then stated
that they might, in fact, share such information with
No. 08-3458 19
other parties. She contends that such information-
sharing is illegal under the FDCPA; thus, she argues, the
notice is false, in violation of section 1692e(10), and consti-
tutes a threat to take illegal action, in violation of section
1692e(5). In her view, because the notice is objectively and
materially false, the district court erred in requiring
extrinsic evidence to prove that it was misleading to the
unsophisticated consumer.
We recently considered, and rejected, Ms. Ruth’s argu-
ment that a false statement automatically violates the
FDCPA. In Wahl v. Midland Credit Management, Inc., 556
F.3d 643 (7th Cir. 2009), we explained that an FDCPA
plaintiff bears the burden of proving that even a false
statement would mislead or deceive the unsophisticated
consumer:
If a statement would not mislead the unsophisticated
consumer, it does not violate the FDCPA—even if it
is false in some technical sense. For purposes of
§ 1692e, then, a statement isn’t “false” unless it
would confuse the unsophisticated consumer. See
Turner [v. J.V.D.B. & Assoc.], 330 F.3d [991, 995 (7th
Cir. 2003)] (“[O]ur test for determining whether a debt
collector violated § 1692e is objective, turning not on
the question of what the debt collector knew but on
whether the debt collector’s communication would
deceive or mislead an unsophisticated, but reason-
able, consumer.”). So, while the FDCPA is a strict
liability statute—a collector “need not be deliberate,
reckless, or even negligent to trigger liability,” Ross v.
RJM Acquisitions Funding LLC, 480 F.3d 493, 495 (7th
20 No. 08-3458
Cir. 2007), the state of mind of the reasonable debtor
is always relevant. The upshot? Wahl can’t win
simply by showing that Midland’s use of the term
“principal balance” is false in a technical sense; she
has to show that it would mislead the unsophisticated
consumer.
Id. at 645-46. Accord Muha v. Encore Receivable Mgmt., Inc.,
558 F.3d 623, 627 (7th Cir. 2009); Hahn v. Triumph P’ships
LLC, 557 F.3d 755, 757 (7th Cir. 2009).
Thus, contrary to Ms. Ruth’s arguments, she could not
prevail in the district court simply by proving that state-
ments in the notice were false. Whether they were false
or not, she had to prove that an unsophisticated con-
sumer would be deceived or misled by them.
The next question we must consider is whether Ms. Ruth
was required to produce extrinsic evidence in order to
meet this burden. A review of our prior decisions in
FDCPA cases reveals that suits alleging deceptive or
misleading statements fall into three distinct categories.
In the first category are cases involving statements that
plainly, on their face, are not misleading or deceptive. In
these cases, we do not look to extrinsic evidence to deter-
mine whether consumers were confused. Instead, we
grant dismissal or summary judgment in favor of the
defendant based on our own determination that the
statement complied with the law. See, e.g., Hahn, 557
F.3d at 757 (affirming summary judgment for the defen-
dants where the alleged falsehood was immaterial and
therefore could not be misleading); Wahl, 556 F.3d at 646
(“[W]e see no way this language would confuse the
reasonable consumer, unsophisticated though she may
No. 08-3458 21
be.”); Barnes v. Advanced Call Ctr. Techs., LLC, 493 F.3d 838,
841 (7th Cir. 2007) (affirming a grant of summary judg-
ment for the defendants because “we [could] not see
how an unsophisticated consumer” could interpret the
communication in the misleading manner suggested by
the plaintiffs).
The second category of cases involves statements that
are not plainly misleading or deceptive but might
possibly mislead or deceive the unsophisticated con-
sumer. In these cases, we have held that plaintiffs may
prevail only by producing extrinsic evidence, such as
consumer surveys, to prove that unsophisticated con-
sumers do in fact find the challenged statements mislead-
ing or deceptive. See, e.g., Hahn, 557 F.3d at 757 (“Hahn
does not contend that the ‘interest due’ line item is mis-
leading. To get anywhere with such an argument she
would need to introduce survey evidence, or some equiva-
lent, demonstrating how the language actually affects
borrowers.”); Evory v. RJM Acquisitions Funding L.L.C., 505
F.3d 769, 776 (7th Cir. 2007) (“[W]e have no way of deter-
mining whether a sufficiently large segment of the unso-
phisticated are likely to be deceived to enable us to con-
clude that the statute has been violated. For that, evidence
is required, the most useful sort being the . . . consumer
survey . . . .”); Williams v. OSI Educ. Servs., Inc., 505 F.3d
675, 678 (7th Cir. 2007).4 The district court in this case
4
In Williams, we wrote:
Our past cases indicate that summary judgment may be
avoided by showing that the letter, on its face, will confuse
(continued...)
22 No. 08-3458
thought that the notice fell into this category. In the
absence of any extrinsic evidence, the court granted
summary judgment for the defendants.
Not every meritorious FDCPA claim requires such
extrinsic evidence, however; some collection notices are
clearly misleading on their face. Cases involving
plainly deceptive communications fall into a third cate-
gory, one where we will grant summary judgment for
the plaintiffs without requiring them to prove what is
already clear. As we explained in McKinney, “in some
situations . . . a debt collector’s letter may be so clearly
confusing on its face that a court may award summary
judgment to the plaintiff on that basis.” 548 F.3d at 503
(citing Durkin v. Equifax Check Servs., 406 F.3d 410, 415 (7th
Cir. 2005)); see also Chuway v. Nat’l Action Fin. Servs., Inc.,
362 F.3d 944, 948 (7th Cir. 2004) (excusing the plaintiff’s
burden to produce extrinsic evidence, based on the
court’s own determination that the letter at issue was
confusing).
We believe that this case falls into this third category.
Upon receiving and reading the collection letter and
4
(...continued)
a substantial number of recipients. We also have said that,
absent a showing that the face of the letter will precipitate
such a level of confusion, the plaintiff must come forward
with evidence beyond the letter and beyond [her] own
self-serving assertions that the letter is confusing in order
to create a genuine issue of material fact for trial.
505 F.3d at 678 (alteration in original).
No. 08-3458 23
the notice, the only reasonable conclusion that an unso-
phisticated consumer 5 —or, indeed, any consumer—could
reach is that the defendants were claiming a legal right
to disclose the nonpublic information about the debtor
that they had obtained as a consequence of attempting
to collect the debt, and were threatening to do so unless
the debtor affirmatively “opted out.” After all, the defen-
dants had no other relationship with the plaintiffs and
therefore had no foreseeable prospect of obtaining
nonpublic information in any other way. The defendants
do not deny that sharing the nonpublic information they
had about the plaintiffs, without their express prior
consent, would have violated the FDCPA. 6 Thus, on its
face, the only reasonable interpretation of the notice was
as a threat to take illegal action.
5
“The unsophisticated debtor is ‘uninformed, naive, [and]
trusting’ but is also assumed ‘to possess rudimentary knowl-
edge about the financial world and is capable of making basic
logical deductions and inferences.’ ” McKinney v. Cadleway
Props., Inc., 548 F.3d 496, 503 (7th Cir. 2008) (alteration in
original) (quoting Durkin v. Equifax Check Servs., Inc., 406 F.3d
410, 414 (7th Cir. 2005)).
6
The defendants submit that the Gramm-Leach-Bliley Act
permits the sharing of certain kinds of nonpublic information
unless a customer affirmatively opts out. See Appellees’ Br. 17-
19. This is irrelevant, however, because, with a few exceptions
not applicable here, the FDCPA bars debt collectors from
communicating with third parties about a debtor in the
absence of “the prior consent of the consumer given directly
to the debt collector . . . .” 15 U.S.C. § 1692c(b).
24 No. 08-3458
The defendants argue that the notice does not falsely
claim a right to share the plaintiffs’ nonpublic informa-
tion because it states that the defendants will do so only
“to the extent permitted by law.” Appellees’ Br. 20. To
threaten to take some action “to the extent permitted by
law,” however, is to imply that, under some set of cir-
cumstances and to some extent, the law actually permits
that action to be taken. Here, the defendants have sug-
gested no set of circumstances under which the FDCPA
would have permitted disclosure of the plaintiffs’
nonpublic information without their consent. If anything,
the notice’s implication to the contrary makes the state-
ment more misleading, not less. See Gionis v. Javitch, Block &
Rathbone, LLP, 238 Fed. App’x 24, 27-29 (6th Cir. 2007)
(unpublished disposition) (holding that the defendant’s
representation that it could collect attorney’s fees “to the
extent permitted by applicable law” violated the FDCPA
because the applicable state law did not permit collection
of such fees).
Thus, we conclude that the only reasonable conclusion
an unsophisticated consumer could reach, upon
receiving the collection letter and the notice, was that the
defendants intended to share without permission the
nonpublic information they had received by virtue of
acquiring and collecting on the debts. As a matter of law,
therefore, the notice constitutes “a threat to take . . . action
that cannot legally be taken,” 15 U.S.C. § 1692e(5), and a
“false representation or deceptive means to collect or
attempt to collect a[] debt,” id. § 1692e(10).
No. 08-3458 25
C.
Finally, Ms. Ruth submits that the district court erred
in failing to grant summary judgment in her favor on the
defendants’ assertion of the bona fide error defense.
15 U.S.C. § 1692k(c) provides that a “debt collector may
not be held liable in any action brought under this
subchapter if the debt collector shows by a preponderance
of evidence that the violation was not intentional and
resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to
avoid any such error.” The district court held that the
defendants had produced enough evidence to create
a genuine issue of triable fact as to whether the
procedures they had in place were sufficient to entitle
them to the protection of this statutory defense.
Ms. Ruth submits that the district court erred in declin-
ing to hold that, as a matter of law, the defendants’
actions did not qualify as bona fide error under the
FDCPA. In support of her argument, Ms. Ruth relies on
our decision in Seeger v. AFNI, Inc., 548 F.3d 1107 (7th Cir.
2008). In that case, this court held that the defendant,
which had attempted to collect fees that were not autho-
rized by Wisconsin state law, was not entitled to the
FDCPA’s bona fide mistake defense because it did not
have in place reasonable procedures designed to
prevent errors. The court acknowledged that the defen-
dant’s employees regularly reviewed legal summaries
prepared by trade groups (though only on the FDCPA, not
on state law) and read excerpts of relevant state statutes.
The court concluded, however, that this was not suf-
26 No. 08-3458
ficient. The court specifically noted that the defendant
“never consulted an attorney in Wisconsin on state law
issues, nor did it ask a Wisconsin governmental agency
whether it was entitled to charge a collection fee as the
owner of the debt.” Id. at 1114. We rejected the
defendant’s contention “that its ignorance of the law
should be excused because it attempted to keep itself
informed about the law through the various trade associa-
tion communications”; we concluded that “this [was] not
enough . . . to support the bona fide error defense.” Id.
Ms. Ruth submits that, like the defendants in Seeger, the
defendants in this case failed to establish procedures
that were sufficient to establish a defense of bona fide
error. She notes that the defendants apparently never
asked an attorney to review the notice; instead, they
relied on a 2001 pamphlet published by a trade group
called the Debt Buyers’ Association.
The defendants, on the other hand, contend that their
procedures were reasonably sufficient to prevent errors.
They point to evidence in the record that Rick Arko, the
Vice President who chose the original notice language,
had extensive training in FDCPA and Gramm-Leach-
Bliley compliance, and that the notice was reviewed by
Kevin Bradford of TAS’ Compliance Department. They
also defend their reliance on a pamphlet from the Debt
Buyers’ Association that was written by a lawyer.
We note at the outset that the defendants’ error was an
error of law: They misconstrued whether the notice
satisfied the statute’s requirements. It is an open question
whether the FDCPA’s bona fide error provision applies
No. 08-3458 27
to legal errors, or just to procedural or clerical errors
such as stating incorrectly the amount owed or inadver-
tently mailing a required communication to the wrong
address. The courts of appeals are divided on this
question,7 and the Supreme Court recently granted certio-
rari on the issue. See Jerman v. Carlisle, McNellie, Rini,
Kramer & Ulrich LPA, 538 F.3d 469, 476 (6th Cir. 2008)
(holding that the defense applies to legal errors), cert.
granted, 557 U.S. ___ (June 29, 2009).
We have not taken a side in this intercircuit split. Al-
though we occasionally have assumed, in cases where it
made no difference to the outcome, that the defense
applies to legal errors, we have not yet resolved the
question definitively.8 The same is true in this case. We
7
Compare Baker v. G. C. Servs. Corp., 677 F.2d 775, 779 (9th Cir.
1982) (holding that the defense does not apply to legal errors),
and Hulshizer v. Global Credit Servs., Inc., 728 F.2d 1037, 1038 (8th
Cir. 1984) (same), and Pipiles v. Credit Bureau of Lockport, Inc., 886
F.2d 22, 27 (2d Cir. 1989) (same), with Jerman v. Carlisle, McNellie,
Rini, Kramer & Ulrich LPA, 538 F.3d 469, 476 (6th Cir. 2008)
(holding that the defense applies to legal errors), cert. granted,
557 U.S. ___, (June 29, 2009), and Johnson v. Riddle, 305 F.3d
1107, 1121-23 (10th Cir. 2002) (same).
8
See, e.g., Seeger v. AFNI, Inc., 548 F.3d 1107, 1114 (7th Cir. 2008)
(“We have no need to take sides on the circuit split in this
case, because, even assuming that AFNI’s mistake was a
mistake of law, it cannot prevail for other reasons.”); Nielsen
v. Dickerson, 307 F.3d 623, 641 (7th Cir. 2002) (“This question,
which the parties have not addressed, is not one that we need
(continued...)
28 No. 08-3458
have no need to decide whether the bona fide error
defense applies to the defendants’ error, or to wait for
the Supreme Court’s judgment on the matter, because a
thorough review of the record convinces us that the
steps the defendants took were not sufficient to qualify
for the defense.
A defendant is entitled to invoke the FDCPA’s bona fide
error defense only if it can show that the violation: (1) was
unintentional, (2) resulted from a bona fide error, and
(3) occurred despite the debt collector’s maintenance of
procedures reasonably adapted to avoid such error. Kort
v. Diversified Collection Servs., Inc., 394 F.3d 530, 537 (7th
Cir. 2005) (citing Jenkins v. Heintz, 124 F.3d 824, 834 (7th
Cir. 1997)). Ms. Ruth does not contend that the defen-
dants have failed to establish the first two elements; she
submits, however, that they did not have reasonable
procedures in place to prevent the kind of error they
committed in this case.
Because so few courts have sanctioned the use of the
bona fide error defense to excuse errors of law, there is
little authority to guide us in determining whether a
party’s use of any particular set of procedures was rea-
sonable. In Seeger, we held that the defendant’s pro-
cedures were insufficient because they did not include
consulting an attorney, or the appropriate governmental
agency, about whether the communications sent to
8
(...continued)
to decide here. We shall again assume that Household may
avail itself of the defense . . . .”).
No. 08-3458 29
debtors accurately stated the law. Seeger, 548 F.3d at 1114
(“[The defendant] never consulted an attorney in Wis-
consin on state law issues, nor did it ask a Wisconsin
governmental agency whether it was entitled to charge
a collection fee as the owner of the debt.”). In Jerman, the
Sixth Circuit held that the defendant, a law firm, had
earned the protection of the defense by employing
“specific procedures to comply with FDCPA and its ever-
changing body of law”:
Defendant law firm has designated its senior
principal, Richard McNellie, as the individual respon-
sible for compliance with the FDCPA; McNellie regu-
larly attends conferences and seminars that focus on
FDCPA issues; the firm subscribes to “Fair Debt
Collection,” a part of “The Consumer Credit and Legal
Practice Series,” together with the supplements
thereto; McNellie routinely distributes copies of cases
relevant to the firm’s practices and procedures to all
attorneys at the firm; all new employees, attorneys and
nonattorneys, are advised of the firm’s obligations
under the FDCPA and provided with the firm’s
FDCPA Procedures Manual, and encouraged to seek
McNellie’s advice with questions regarding the
FDCPA; McNellie conducts a mandatory meeting at
least twice a year for all available employees wherein
FDCPA issues and developments are discussed.
Jerman, 538 F.3d at 477 (citation and quotation marks
omitted). In Johnson v. Riddle, 443 F.3d 723, 730-31 (10th
Cir. 2006), the Tenth Circuit held that the defendant, an
attorney, could establish a bona fide error defense by
30 No. 08-3458
proving that he had (1) researched relevant statutes
and case law to determine whether state law gave debt
collectors the right claimed in the collection letters,9 and
(2) filed a “test case” to verify that collectors indeed
had such a right under state law. In considering what
kinds of procedures would be sufficient to establish a
bona fide error of law, the court noted:
Procedures which may be reasonably adapted to
avoiding a clerical error—e.g., sending employees and
staff to training seminars or subjecting employees
and staff to compliance testing—cannot shield an
attorney from liability for legal errors because such
clerical procedures are mostly about the mechanics
for collecting debts. Furthermore, only Riddle, as the
attorney in charge, rather than his staff or employees, may
make a core legal decision as to whether a particular practice
is permitted by law. Thus, in order for his mistake to
have been bona fide, Riddle himself must have em-
ployed procedures to avoid committing an error, and
those procedures must have been reasonably adapted
to avoiding the core legal error that occurred.
Id. at 730 (emphasis added).
After reading these cases, we conclude that, if the bona
fide error defense is available at all for errors of law, it is
available only to debt collectors who can establish that
they reasonably relied on either: (1) the legal opinion of
9
The legal issue in Johnson was whether state law permitted
the recipient of a bad check to demand a $250 “shoplifting
penalty” from the person who wrote the check.
No. 08-3458 31
an attorney who has conducted the appropriate legal
research, or (2) the opinion of another person or organiza-
tion with expertise in the relevant area of law—for exam-
ple, the appropriate government agency.1 0
Measured against this standard, the defendants’ proce-
dures fall short. Although the defendants have produced
evidence that their employees attended training sessions
on FDCPA compliance, and that they had procedures
in place to prevent violations of other provisions of
the FDCPA, they point to no evidence in the record
indicating that they ever sought legal or regulatory advice
as to whether the collection letter and notice were in
compliance with the FDCPA. The defendants claim that
they reasonably relied on a 2001 pamphlet titled “Ques-
tions and Answers about New Federal Privacy Regulations
As They Apply to Debt Buyers and Other ‘Financial
Institutions.’ ” R.57, Ex. G at 1. The pamphlet, which was
written by an attorney and published by the Debt Buy-
ers’ Association, suggests that “a possible way to comply
[with Gramm-Leach-Bliley] would be to have the third
party collector send out your entity’s privacy notice on
your ‘financial institution’s’ letterhead; for economy, that
notice could be included with that agency’s or law firm’s
FDCPA validation letter.” Id. at 12. The defendants claim
10
We do not hold that a debt collector necessarily must consult
with an attorney or government agency to get individualized
approval of every communication it wishes to send out. Under
the circumstances of a particular case, reliance on general
advice from a qualified attorney or government agency might
well be sufficient to support a claim of bona fide error.
32 No. 08-3458
that their reliance on this advice was reasonably adapted
to prevent legal mistakes.
We disagree. The pamphlet falls far short of a legal
opinion on which it was reasonable for the defendants
to rely for the proposition that their letter and the notice
were in compliance with the FDCPA. First of all, the
pamphlet does not purport to give advice about the
FDCPA; it is focused on compliance with federal reg-
ulations implementing the privacy provisions in the
Gramm-Leach-Bliley Act. Second, the pamphlet specifi-
cally disclaims that it is providing legal advice, and
directs the reader to consult an attorney before taking any
action. The pamphlet’s front page explicitly states:
This pamphlet does not provide legal advice. It is
not a complete guide to the new law and regulations.
Rather, it is a general overview of a brand new compli-
cated law and implementing regulations. The
more your entity wants to market data, the more
onerous the compliance. . . . The reader should consult
with legal counsel regarding the applicability of the
statutes and regulations to his or her debt buying
entity or “financial institution” as defined therein.
There are many variations to how the law and FTC
regulations will apply depending on how your entity
is structured, its marketing and servicing arrange-
ments with third parties, whether or not it is part of
an affiliated group, and whether your entity wants to
sell information to third parties.
Id. at 1. Third, and perhaps most critically, the pamphlet
does not provide any advice about how a disclosure
No. 08-3458 33
notice should be worded to comply with the FDCPA. In
light of all this, the pamphlet is simply too insubstantial
to justify the defendants’ reliance on it in concluding
that the notice complied with the FDCPA. Ms. Ruth
was entitled to summary judgment on the defendants’
attempt to raise the bona fide error defense.
Conclusion
There is no evidence in this record to indicate that the
defendants intentionally sought to mislead or to deceive
the recipients of the collection letter and notice. The
FDCPA, however, is a strict liability statute, and debt
collectors whose conduct falls short of its requirements
are liable irrespective of their intentions. Ross v. RJM
Acquisitions Funding LLC, 480 F.3d 493, 495 (7th Cir. 2007)
(“[T]he representation need not be deliberate, reckless, or
even negligent to trigger liability—it need only be
false . . . .”). Accordingly, for the reasons set forth above,
we must reverse the judgment of the district court and
remand the case with instructions to enter judgment
in favor of the plaintiffs. The defendants shall bear the
costs of this appeal.
R EVERSED and R EMANDED W ITH INSTRUCTIONS
8-17-09