Ryan Boucher v. Finance System of Green Bay, I , 880 F.3d 362 ( 2018 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-2308
RYAN BOUCHER, et al.,
Plaintiffs-Appellants,
v.
FINANCE SYSTEM OF GREEN BAY, INC., et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 1:17-cv-132 — William C. Griesbach, Judge.
____________________
ARGUED DECEMBER 1, 2017 — DECIDED JANUARY 17, 2018
____________________
Before BAUER, FLAUM, and ROVNER, Circuit Judges.
FLAUM, Circuit Judge. Plaintiffs sued defendant, a debt col-
lection agency, for violations of the Fair Debt Collection Prac-
tices Act (“FDCPA”). Specifically, plaintiffs allege that de-
fendant’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 dis-
missed plaintiffs’ claims because the challenged statement
mirrors the safe harbor language that this Court instructed
2 No. 17-2308
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 ma-
terially misleading. For the reasons below, we reverse.
I. Background
Plaintiffs are Wisconsin residents who incurred and de-
faulted on debts for medical services. Plaintiffs’ creditors as-
signed 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 inter-
est balance, and their total account balance. The letter also in-
cluded 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 com-
plaint 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
No. 17-2308 3
claim that the letter is false, misleading, and deceptive in vio-
lation 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 ref-
erence 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 har-
bor 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 cen-
tral 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—regard-
less 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.
4 No. 17-2308
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 sur-
vive 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 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that al-
lows the court to draw the reasonable inference that the de-
fendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (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. (quot-
ing Twombly, 550 U.S. at 556).
A. FSGB’s Dunning Letter is Materially False, Mislead-
ing, and Deceptive in Violation of § 1692e
The FDCPA broadly prohibits the use of any “false, decep-
tive, 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 “nonexclu-
sive”). 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 at-
tempt to collect any debt ….” 15 U.S.C. § 1692e(2)(A), (5), (10).
No. 17-2308 5
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 infer-
ences.’” 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 col-
lection 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 mate-
rial.” 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 pro-
tection 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 “in-
fluence a consumer’s decision … to pay a debt in response to
a dunning letter.” Id.
Thus, to state a claim under § 1692e, plaintiffs must plau-
sibly allege that FSGB’s dunning letter would materially mis-
6 No. 17-2308
lead or confuse an unsophisticated consumer. Because this in-
quiry involves a “fact-bound determination of how an unso-
phisticated consumer would perceive the statement,” dismis-
sal 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 judg-
ment, 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
No. 17-2308 7
Rule,” courts do not award attorney fees unless there is an ex-
plicit contractual or statutory exception. See id. at 823. Because
the debt collector failed to identify any applicable exception,
it effectively “admit[ted] (through waiver) that the award of
attorney fees was not a possible outcome.” Id. at 824. Thus, we
concluded that the statement about attorney fees was false. Id.
In addition, the statement was misleading to an unsophisti-
cated consumer, who “is not aware of the American Rule on
attorney fees,” and “is therefore likely to believe a debt collec-
tor when it says that attorney fees are a potential consequence
of nonpayment.” Id. at 824–25.
Here, as in Lox, the challenged statement is misleading to
an unsophisticated consumer. The dunning letter states that,
“[b]ecause 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.” While creditors of medical debts may charge in-
terest, FSGB admits that it cannot impose “late charges and
other charges” under Wisconsin law. Therefore, the dunning
letter falsely implies a possible outcome—the imposition of
“late charges and other charges”—that cannot legally come to
pass. See id. at 825. This statement is misleading to an unso-
phisticated consumer because “[t]his is not the type of legal
knowledge we can presume the general public has at its dis-
posal.” Id. at 826. 1
1 Although the dunning letter uses the word “may,” the presence of
hypothetical language does not make the statement less confusing. See
Lox, 689 F.3d at 825 (“[C]onditional language, particularly in the absence
of any language clarifying or explaining the conditions, does not insulate
a debt collector from liability.” (quoting Gonzales v. Arrow Fin. Servs., LLC,
660 F.3d 1055, 1063 (9th Cir. 2011))). The challenged statement in Lox also
used “multiple hypothetical words” like “may” and “could.” Id. at 823–
24. However, we explained that “[t]he clear meaning of this statement is
8 No. 17-2308
The next question is whether the challenged statement is
material—i.e., whether the potential imposition of “late
charges and other charges” would influence an unsophisti-
cated consumer’s decision to pay the debt. The district court
reasoned that, as long as the debt collector communicates that
the debt is variable, the ultimate basis for an increase is imma-
terial. Similarly, FSGB argues that “[a]ny consumer who owes
a variable debt must decide whether to pay sooner than later
to avoid that variance, regardless of whether any increase in
the amount of the debt is due to the addition of interest, late
charges, other charges, or some combination thereof.”
We disagree. Of course, debtors always have some incen-
tive to pay variable debts as quickly as possible, regardless of
the source of variability. However, this incentive is even
greater if the debt collector threatens to impose “late charges
and other charges” in addition to interest. 2 Here, the letter
does not say how much the “late charges” are or what “other
charges” might apply, so consumers are left to guess about the
that if [the debt collector] decided to bring legal action against [the debtor]
and was victorious, the award of attorney fees to [the debt collector] was
one possible outcome.” Id. Because the debt collector conceded that this
was not possible, the statement was misleading. Id. Similarly, the chal-
lenged statement here falsely suggests that the imposition of late charges
and other charges is a possible consequence of nonpayment.
2 It is worth noting that plaintiffs owed little to no interest on their
medical debts in this case. For example, plaintiffs Christopher and Michele
Dettloff had an interest balance of $0.00; plaintiff Adam Duch had an in-
terest balance of $0.00; and plaintiffs Ryan and Heather Boucher had an
interest balance of just $0.09. Because the amount of interest was negligi-
ble, the purported “late charges and other charges” would likely have
played an even more important role in the consumer’s decision whether
to pay the debt.
No. 17-2308 9
economic consequences of failing to pay immediately. But re-
gardless of the amount of such charges, an unsophisticated
consumer understands that these additional charges could
further increase the amount of debt owed, thus potentially
making it “more costly” for the consumer to hold off on pay-
ment. Id. at 827. Even if these additional charges are minimal,
such that they might not “alter [the consumer’s] course of ac-
tion,” they are still material because they would be “a factor
in his decision-making process.” Id. 3
This is especially true for consumers who are subject to
debt collection activity. We have acknowledged that “[w]hen
default occurs, it is nearly always due to an unforeseen event
such as unemployment, overextension, serious illness, or
marital difficulties or divorce.” McMillan, 455 F.3d at 762
(quoting S. Rep. No. 95–382, at 2 (1977), as reprinted in 1977
U.S.C.C.A.N. 1695, 1697). Because these consumers must of-
ten make difficult decisions about how to use scarce financial
resources, it is plausible that the fear of “late charges and
other charges” might influence these consumers’ choices.
Therefore, the challenged statement is material.
In sum, plaintiffs have plausibly alleged that the dunning
letter was materially false and misleading to an unsophisti-
cated consumer in violation of § 1692e.
3 Moreover, even unsophisticated consumers understand that interest
payments represent a contractual arrangement to pay more for the benefit
of delaying full payment. In contrast, the purpose of “late charges” is to
punish the consumer for violating the contract. The punitive nature of
“late charges” might further incentivize an unsophisticated consumer to
pay off the debt.
10 No. 17-2308
B. The Miller Safe Harbor Does Not Apply
FSGB argues that it is nevertheless immune from liability
because it used the safe harbor language provided by this
Court in Miller.
In Miller, we addressed whether defendants had violated
a separate provision of the FDCPA: § 1692g(a)(1). See 214 F.3d
at 875–76. That provision requires debt collectors to send the
consumer a written notice containing “the amount of the
debt.” 15 U.S.C. § 1692g(a)(1). The dunning letter in Miller
stated the unpaid principal balance, but added that “this
amount does not include accrued but unpaid interest, unpaid
late charges, escrow advances or other charges.” 214 F.3d at
875. The letter also stated that the amount owed “changes
daily.” Id. We held that this letter violated § 1692g(a)(1) be-
cause the unpaid principal balance “is only a part of the debt”
and the statute requires debt collectors “to state the total
amount due—interest and other charges as well as princi-
pal—on the date the dunning letter [is] sent.” Id. at 875–76.
We further held that the defendants were not excused
from complying with § 1692g(a)(1) simply because the
amount owed changed daily. However, “in an effort to mini-
mize litigation,” we fashioned the following safe harbor lan-
guage for debt collectors to use if the amount owed is variable:
As of the date of this letter, you owe $___ [the exact
amount due]. 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, in which
event we will inform you before depositing the check
No. 17-2308 11
for collection. For further information, write the under-
signed or call 1-800-[phone number].
Id. at 876 (alterations in original). Debt collectors are not re-
quired to use this language. Id. However, “[a] debt collector
who uses this form will not violate the ‘amount of debt’ pro-
vision, provided, of course, that the information he furnishes
is accurate and he does not obscure it by adding confusing
other information (or misinformation).” Id. Assuming this
“essential qualification” is met, a debt collector who uses this
language “will as a matter of law have discharged his duty to
state clearly the amount due.” Id.
Because the Miller decision only addressed § 1692g(a)(1),
we have not previously addressed whether the safe harbor
language also immunizes debt collectors from liability under
§ 1692e. However, most district courts in this Circuit have
concluded that it does. See, e.g., Washington v. Portfolio Recovery
Assocs., LLC, 211 F. Supp. 3d 1041, 1051–52 (N.D. Ill. 2016);
Wilder v. J.C. Christensen & Assocs., Inc., No. 16-cv-1979, 2016
WL 7104283, at *4 (N.D. Ill. Dec. 6, 2016); Tilmon v. LVNV Fund-
ing, LLC, No. 12-cv-734-WDS, 2014 WL 335234, at *3 (S.D. Ill.
Jan. 30, 2014); but see O’Chaney v. Shapiro & Kreisman, LLC, No.
02-cv-3866, 2004 WL 635060, at *4 (N.D. Ill. Mar. 29, 2004).
We agree with the majority of district courts that have ad-
dressed the issue for two reasons. First, the two statutory pro-
visions at issue sometimes overlap: § 1692g(a)(1) requires
debt collectors to state “the amount of the debt,” and
§ 1692e(2) prohibits debt collectors from making a “false rep-
resentation of … the character, amount, or legal status of any
debt.” 15 U.S.C. §§ 1692g(a)(1), e(2). Thus, it makes sense to
consider Miller’s safe harbor protection where, as here, plain-
12 No. 17-2308
tiffs allege that the debt collector violated § 1692e by misrep-
resenting the amount of the debt “in a manner identical to a
Section 1692g claim.” Wilder, 2016 WL 7104283 at *4. Second,
“Miller would not offer much of a safe harbor if this language
(or its equivalent) subjected debt collectors to liability under
a different FDCPA provision as ‘misleading’ or ‘deceptive’ on
its face.” Id.; see also Washington, 211 F. Supp. 3d at 1051–52
(“[I]t would be inappropriate to hold that Defendants vio-
lated [§ 1692e] where they used the precise language that the
Seventh Circuit has instructed creditors to use in cases where
[the debt is variable].”).
However, even if a debt collector may generally rely on the
safe harbor language to avoid liability under § 1692e, Miller’s
accuracy requirement still applies. As we explained in Miller,
a debt collector is only entitled to safe harbor protection if “the
information he furnishes is accurate and he does not obscure
it by adding confusing other information (or misinfor-
mation).” 214 F.3d at 876. And, although the Miller language
is not misleading or deceptive on its face, it may nevertheless
be inaccurate under certain circumstances. See, e.g., Ruge v.
Delta Outsource Grp., Inc., No. 15-cv-10865, 2017 WL 959017, at
*3 (N.D. Ill. Mar. 13, 2017) (holding that, although “[the de-
fendant’s] letter is nearly identical to the safe harbor language
in Miller,” the defendant was not immune from liability be-
cause “[t]he safe harbor language that says the amount of the
debt might change because of interest was not true in this par-
ticular case”) (footnote omitted). Here, FSGB’s use of the safe
harbor language was inaccurate because FSGB could not law-
fully impose “late charges and other charges.” Therefore,
FSGB is not entitled to safe harbor protection under Miller.
No. 17-2308 13
In support of its position to the contrary, FSGB relies heav-
ily on a single statement—indeed, a single word—in Chuway
v. Natl’s Action Fin. Servs., Inc., 362 F.3d 944 (7th Cir. 2004). Un-
like the variable debt at issue in Miller, the debt at issue in
Chuway was fixed. Id. at 947. Accordingly, we concluded that
Miller was “not on point.” Id. Although the debt in Chuway
was fixed, the dunning letter encouraged the debtor to call to
obtain their “most current balance information.” Id. We con-
cluded that this statement was confusing because it suggested
to the consumer that the defendant was trying to collect addi-
tional debt. Id. at 947–48. After reaching this conclusion, we
advised debt collectors who are collecting fixed debts to
simply state the amount due and “stop[] there, without talk
of the ‘current balance.’” Id. at 949. We continued: “If, instead,
the debt collector is trying to collect the listed balance plus the
interest running on it or other charges, he should use the safe-
harbor language of Miller.” Id. FSGB argues that this sentence,
and in particular the word “or,” advises debt collectors to use
the safe harbor language “any time there is reason for the
amount owed to increase in the future, whether due to inter-
est, late charges, other charges, or some combination thereof.”
Admittedly, debt collectors may have followed our guid-
ance in Chuway in a good-faith attempt to comply with the
FDCPA. However, this statement was dicta because we con-
cluded that Miller did not apply to the fixed debt in Chuway.
Moreover, our statement in Chuway must be read in conjunc-
tion with Miller, which explained that a defendant is not enti-
tled to safe harbor protection if it provides inaccurate infor-
mation. In any event, our judicial interpretations cannot over-
ride the statute itself, which clearly prohibits debt collectors
from making false and misleading misrepresentations. See
Oliva v. Blatt, Hasenmiller, Leibsker & Moore LLC, 864 F.3d 492,
14 No. 17-2308
500 (7th Cir. 2017) (acknowledging debt collectors’ good faith
reliance on our precedent, but explaining that “the controlling
law is and always has been the statute itself” and “the statute
remains the law even if judges err”). Thus, FSGB’s reliance on
Chuway is not persuasive.
At bottom, FSGB argues that debt collectors should be able
to copy and paste the Miller safe harbor language to avoid li-
ability under § 1692e, regardless of whether that language is
accurate under the circumstances. This argument fails for two
reasons. First, “[a]lthough the safe harbor was offered in an
attempt both to bring predictability to this area and to con-
serve judicial resources, it is compliance with the statute, not
our suggested language, that counts.” Williams, 505 F.3d at
680. As explained above, FSGB’s letter fails that decisive test
because it is false and misleading to an unsophisticated con-
sumer. Second, debt collectors are required to tailor boiler-
plate language to avoid ambiguity. See Lox, 689 F.3d at 825
(holding that the dunning letter would violate § 1692e even if
it was “a form letter”). If they fail to do so, they run the risk
of liability. See id. (“When language in a debt collection letter
can reasonably be interpreted to imply that the debt collector
will take action it has no intention or ability to undertake, the
debt collector that fails to clarify that ambiguity does so at its
peril.” (quoting Gonzalez v. Arrow Fin. Servs., LLC, 660 F.3d
1055, 1063 (9th Cir. 2011))).
In sum, debt collectors cannot immunize themselves from
FDCPA liability by blindly copying and pasting the Miller safe
harbor language without regard for whether that language is
accurate under the circumstances. Therefore, the district court
erred by dismissing plaintiffs’ claims on this ground.
No. 17-2308 15
C. Plaintiffs Did Not Forfeit Their § 1692g(a)(1) Claim
The final issue is whether plaintiffs have forfeited their
claim under § 1692g(a)(1). FSGB argues that plaintiffs aban-
doned this claim on appeal because their issue statement does
not reference it and they dedicate just one paragraph of their
opening brief to it.
FSGB is wrong. As explained above, the claims under
§ 1692e and § 1692g(a)(1) overlap because plaintiffs allege
that FSGB violated both provisions by misrepresenting the
amount of the debt. Thus, as plaintiffs point out, their discus-
sion of whether the statement was misleading under § 1692e
“goes hand-in-hand with whether the amount of the debt has
been accurately disclosed” under § 1692g(a)(1). Moreover, the
safe harbor analysis is the same because, as FSGB argues in its
briefing, Miller applies equally to claims brought under both
provisions. Therefore, plaintiffs have not forfeited their
claims under § 1692g(a)(1). For the reasons outlined above,
plaintiffs have stated a claim under both § 1692g(a)(1) and
§ 1692e.
III. Conclusion
For the foregoing reasons, we REVERSE the judgment of the
district court.