Summary
In Edmonds, the plaintiff entered into a Consumer Loan Agreement with Check-n-Go, but after one of plaintiff's checks to Check-n-Go was returned for insufficient funds, the check was assigned to NCB for collection.
Summary of this case from Chung v. National Check Bureau, Inc. (S.D.Ind. 2005)Opinion
IP01-1289-C-B/S
July 31, 2003
ENTRY GRANTING DEFENDANT'S CONVERTED MOTION FOR SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on Defendant's Motion to Dismiss (hereinafter referred to as Defendant's "Motion for Summary Judgment") and Plaintiffs Motion for Summary Judgment, filed in response. Plaintiff Robert Edmunds alleges that Defendant National Check Bureau, Inc. ("NCB") violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA") by including certain terms in a collection letter sent to Edmonds and by attempting to collect an illegal debt. NCB counters that neither the language of the collection letter nor the attempt to collect the underlying debt violates the FDCPA, and, therefore, that Mr. Edmonds cannot maintain a cause of action against NCB. For the reasons set out in detail below, we GRANT NCB's Motion and we GRANT IN PART and DENY IN PART Mr. Edmonds' Motion.
NCB filed a Motion to Dismiss, to which Mr. Edmonds responded by filing his Motion for Summary Judgment. Because the issues addressed by the two filings substantially overlap, and because the parties in their briefing on the motions have placed before the Court or responded to matters outside the scope of the pleadings, we will convert NCB's Motion to Dismiss to a Motion for Summary Judgment, and consider the two as independent motions for summary judgment. See Fed.R.Civ.P. 12(c); Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998). However, Mr. Edmonds has moved for summary judgment on certain issues that NCB has not included in its own motion. Therefore, we address the contents of each motion separately, combining our analysis where appropriate.
Factual Background
The following facts are undisputed: At some time prior to March 23, 2001, Mr. Edmonds, a "consumer" for purposes of the FDCPA, entered into a Consumer Loan Agreement with Check-n-Go of Indiana, Inc. Pl.'s Statement of Material Facts ¶ 1. As part of his transaction with Check-n-Go, Mr. Edmonds was required to provide to Check-n-Go a postdated check to secure payment on the Consumer Loan Agreement. Id. ¶ 2. Mr. Edmonds' check was subsequently returned for insufficient funds. Def.'s Statement of Material Facts ¶ 15. Check-n-Go thereafter assigned the check from Mr. Edmonds to NCB, a "debt collector" under the FDCPA, for collection. Id. ¶ 14.
On March 23, 2001, NCB sent Mr. Edmonds a form collection letter, seeking payment of $318.50, the amount of the check ($283.00 plus dishonored check and late fees). Pl.'s Statement of Material Facts ¶ 5; Aff. of Jon Bader ¶ 5. NCB sent the letter to Mr. Edmonds in an attempt to collect on a debt owed to Check-n-Go. Id. ¶ 7. The collection letter was the first communication Mr. Edmonds received from NCB regarding his alleged debt to Check-n-Go. Id. ¶ 10. The letter contained the following relevant passages:
Unless you notify this office (NCB) in writing within thirty (30) days after receiving this notice that you dispute the validity of the debt or any portion thereof, this office (NCB) will assume this debt is valid. If you notify this office (NCB) in writing within thirty (30) days from receiving this notice, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such verification or judgment. If you request from this office (NCB) in writing within thirty (30) days after receiving this notice, this office (NCB) will provide you the name and address of the original creditor, if different from the current creditor.
This communication is from a debt collector. This is an attempt to collect a debt. All information obtained will be used for that purpose under the Fair Debt Collection Practices Act.
* * *
We have the full right and title of this debt. If necessary, we will exercise our right under the laws in your state in pursuing payment through the court system. If suit is filed and if judgment is rendered against you, we will collect payment utilizing all methods legally available to us. This may include, but would not be limited to wage garnishment and/or liens against personal property.
At the time this letter was sent, NCB had full right and title to amounts owed under the Consumer Loan Agreement and Mr. Edmonds' check originally issued to Check-n-Go. Id. ¶ 8. Also at that time, neither Check-n-Go nor NCB had obtained a judgment against Mr. Edmonds regarding the debt owed. Id. ¶ 12.
Standard of Review
Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party on the particular issue. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986); Eiland v. Trinity Hosp., 150 F.3d 747, 750 (7th Cir. 1998).On a motion for summary judgment, the burden rests on the moving party to demonstrate "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). After the moving party demonstrates the absence of a genuine issue for trial, the responsibility shifts to the non-movant to "go beyond the pleadings" and point to evidence of a genuine factual dispute precluding summary judgment. Id. at 322-23. "If the non-movant does not come forward with evidence that would reasonably permit the finder of fact to find in his favor on a material question, then the court must enter summary judgment against him." Waldridge v. American Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994),citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); Celotex, 477 U.S. at 322-24; Anderson, 477 U.S. at 249-52.
Summary judgment is not a substitute for a trial on the merits, nor is it a vehicle for resolving factual disputes. Waldridge, 24 F.3d at 290. Therefore, in considering a motion for summary judgment, we draw all reasonable inferences in favor of the non-movant. Venters v. City of Delphi, 123 F.3d 956, 962 (7th Cir. 1997). If genuine doubts remain, and a reasonable fact-finder could find for the party opposing the motion, summary judgment is inappropriate. See Shields Enters., Inc. v. First Chicago Corp., 975 F.2d 1290, 1294 (7th Cir. 1992);Wolf v. City of Fitchburg, 870 F.2d 1327, 1330 (7th Cir. 1989). But if it is clear that a plaintiff will be unable to satisfy the legal requirements necessary to establish his case, summary judgment is not only appropriate, but mandated. See Celotex, 477 U.S. at 322;Waldridge, 24 F.3d at 920.
Legal Analysis
1. Writing requirement
NCB's collection letter includes the requirement that the recipient notify NCB in writing within 30 days that he intends to dispute part or all of the debt described therein. Mr. Edmonds contends that this requirement violates 15 U.S.C. § 1692g, which, when read together with 15 U.S.C. § 1692e, does not impose any such writing requirement on a consumer seeking to dispute an alleged debt.
We begin by noting that, although the Seventh Circuit has never addressed whether a debt collector's imposition of a writing requirement to dispute a debt violates the FDCPA, other courts have disagreed on this issue.See, e.g., Brady v. Credit Recovery Co., 160 F.3d 64 (1st Cir. 1998); Graziano v. Harrison, 950 F.2d 107 (3rd Cir. 1991). Indeed, two decisions from the Southern District of Indiana have reached opposite conclusions on this question. See Spearman v. Tom Wood Pontiac-GMC, 2002 WL 31854892 (S.D. Ind. 2002): c.f. Castillo v. Carter, 2001 WL 238121 (S.D. Ind. 2001). In order to resolve this question, therefore, we must utilize our traditional methods of statutory interpretation to analyze the meaning of § 1692g.
To properly construe a statute, a court must begin with the statute's plain meaning and assume "that the ordinary meaning of that language accurately expresses the legislative purpose." Park'N Fly. Inc. v. Dollar Park and Fly. Inc., 469 U.S. 189, 194 (1985). If the wording is unambiguous, the court must enforce the congressional intent expressed in the statute. U.S. v. Clark, 454 U.S. 555, 560 (1982);Bethlehem Steel Corp. v. Bush, 918 F.2d 1323, 1326 (7th Cir. 1990). We follow the plain meaning unless "`literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.'" U.S. v. Ron Pair Enterer., Inc., 489 U.S. 235, 242 (1989), quoting Griffin v. Oceanic Contractors. Inc., 458 U.S. 564, 571 (1982). Moreover, "`where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.'"Gozlon-Peretz v. U.S., 498 U.S. 395, 404-05 (1991), quoting Russello v. U.S., 464 U.S. 16, 23 (1983); see also General Motors Corp. v. U.S., 496 U.S. 530, 541 (1990).
The statutory provision in question, § 1692g, states in relevant part:
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing — . . . a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.15 U.S.C. § 1692g(a)(3). The plain language of subsection (a)(3) does not require that the consumer dispute the debt in writing. By contrast, the subsections immediately following this provision impose obligations on the debt collector only in cases where the debtor makes certain written requests or notifications.See 15 U.S.C. § 1692g(a)(4),(5). We must therefore assume, as have other courts, that Congress intended this distinction and, accordingly, that no writing requirement should be read into subsection (a)(3). See, e.g., Spearman v. Tom Wood Pontiac-GMC, 2002 WL 31854892 (S.D. Ind. 2002); Castro v. ARS Nat. Servs., Inc., 2000 WL 264310 (S.D.N.Y. 2000); Ong v. American Collections Enterp., Inc., 1999 WL 51816 (E.D.N.Y. 1999);Harvey v. United Adjusters, 509 F. Supp. 1218, 1221 (D. Ore. 1981).
This reading of § 1692 is consistent with the purpose of the statute as a whole. Congress enacted the FDCPA in 1977 "to eliminate abusive debt collection practices by debt collectors." 15 U.S.C. § 1692(e). The statute, as construed by the Seventh Circuit, is intended to protect the "unsophisticated consumer," who, although reasonable, "is still unsophisticated — uninformed, naive, trusting." Blum v. Fisher and Fisher, 961 F. Supp. 1218, 1223 (N.D. Ill. 1997), citing Vaughn v. CSC Credit Services. Inc., 1995 WL 51402, at *2 (N.D. Ill 1995); see also Gammon v. GC Services Ltd. Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994). Such a consumer, not perceiving the value of creating a "paper trail" of their communications, may opt to notify the debt collector by phone or in person of his intention to dispute a debt. A consumer who opts to use one of these notice methods should not be penalized by the terms of § 1692g, lest the single provision contradict the overall purpose of the statute. Therefore, we find that § 1692g does not impose on the consumer any obligation to dispute an alleged debt in writing. Accordingly, NCB's Motion for Summary Judgment on this ground is DENIED, and Mr. Edmonds' corresponding Motion for Summary Judgment on this ground isGRANTED.
2. "Reference to "the" judgment, instead of "a" judgment
Mr. Edmonds contends that by stating in the collection letter that, upon written notice from the debtor requesting verification of the debt, "[NCB] will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such verification or judgment," NCB falsely suggests that a judgment already exists against the recipient of the letter. We disagree. In determining whether a collection letter comports with the requirements of the FDCPA, courts should not read selected passages out of context, but should consider the letter in its entirety. See, e.g., Keen v. Omnibus Intern. Inc., 1998 WL 485682 (N.D. Ill. 1998), citing Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997). Moreover, the letter should be interpreted according to the understanding of an "unsophisticated consumer." This standard, as applied by the Seventh Circuit to FDCPA cases such as this one and as mentioned earlier in this entry, includes an objective element of reasonableness, which "shields complying debt collectors from liability for unrealistic or peculiar interpretations of collection letters." Gammon, 27 F.3d at 1257. The "unsophisticated debtor" "is wise enough to read collection notices with added care, [is possessed of] `reasonable intelligence,' and is capable of making basic logical deductions and inferences."Pettit v. Retrieval Masters Creditor Bureau. Inc., 211 F.3d 1057, 1060 (7th Cir. 2000).
We simply find no support for Mr. Edmonds' contention that a reference to "the" judgment in some way suggests — even to an unsophisticated consumer — that a judgment already exists. Although a definite article, the word is used not to refer to any particular judgment but to a hypothetical judgment applicable to a particular debtor. The strained interpretation Mr. Edmonds advocates does not comport with the reasonableness requirement of the Seventh Circuit's unsophisticated consumer standard. Accordingly, NCB's Motion for Summary Judgment isGRANTED on this claim, and Mr. Edmonds' Motion for Summary Judgment is DENIED.
3. Attempting to collect an illegal debt
Mr. Edmonds contends that NCB attempted to collect a debt to which Check-n-Go had applied an interest rate in excess of that permitted by Indiana Code §§ 24-4.5-3-508 and 35-45-7-2. see Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572 (Ind. 2001), such that the attempt violated the FDCPA. NCB responds that any such violation of Indiana law was not knowing or intentional.
The relevant section of the FDCPA states:
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.15 U.S.C. § 1692f. The parties spend considerable time disputing the scienter requirements for Indiana Code § 24-4.5-3-508, which sets maximum finance charge rates for supervised loans, for Indiana's criminal "loansharking"statute, Ind. Code § 35-45-7-2, and for relevant provisions of the FDCPA. However, even if we assume, as Mr. Edmonds contends, that neither the state laws prescribing the interest rates for supervised loans nor the FDCPA contains a scienter requirement, Seventh Circuit precedent prohibits us from concluding that NCB's collection letter violated § 1692f. In Transamerica Financial Services. Inc. v. Sykes, 171 F.3d 553 (7th Cir. 1999), the plaintiff allegedly failed to make payments on a mortgage secured by her home. Transamerica initiated a foreclosure action against the plaintiff, who brought a counterclaim against Transamerica and its attorney, in part, under the FDCPA. The plaintiff maintained that the mortgage was a forgery and, therefore, that she owed no money to Transamerica. In deciding whether Transamerica's attempts to collect the purported debt violated 1692f, the court stated
[T]his section [§ 1692f] does not apply to Sykes' circumstances because [the attorney] never attempted to collect any debt not authorized by the agreement itself. Rather, he sought to collect a debt authorized by the agreement, the validity of the agreement notwithstanding. While attempting to enforce a fraudulent agreement may violate other laws, 15 U.S.C. § 1692f does not reach this action.
The circumstances in Transamerica closely parallel the situation we face here. Mr. Edmonds essentially contends that NCB was not lawfully entitled to collect the amount mentioned in the collection letter because the excessive interest rate imposed by the Consumer Loan Agreement voided the entire agreement and/or rendered the agreement illegal. The validity of the underlying agreement is not our focus, however, in analyzing NCB's collection efforts under § 1692f. We consider only whether on its face the agreement authorized the debt. Although neither of the parties has filed with the Court a copy of the Consumer Loan Agreement, Mr. Edmonds bases his arguments on the supposition, and nowhere disputes, that the Consumer Loan Agreement authorized the debt amount mentioned in the letter. Accordingly, we find that NCB's attempt to collect this amount did not violate 15 U.S.C. § 1692f(1), and Mr. Edmonds' Motion for Summary Judgment on this ground is DENIED.
NCB has not moved for summary judgment as to this claim and has not made the necessary evidentiary showing or legal arguments to justify a grant of summary judgment in its favor. Therefore, we pass only on Mr. Edmonds' Motion for Summary Judgment as to this claim.
4. Misstatements in collection letter
In addition to challenging NCB's bare efforts to collect the alleged debt in this case, Mr. Edmonds also contends that NCB's collection letter contained factual misrepresentations, in violation of 15 U.S.C. § 1692e(2)(A) and (B). Those sections prohibit "any false, deceptive, or misleading representation or means in connection with the collection of any debt," including the "character, amount, or legal status of any debt; or . . . any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt." It is now well established in this circuit that a misrepresentation need not be knowing or intentional to constitute an unlawful attempt to collect a debt under the FDCPA. Gearing v. Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000).
The FDCPA contains a "bona fide error" defense, whereby a debt collector "may not be held liable in any action under this title if the debt collector shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error." 15 U.S.C. § 1692k(c). Because "bona fide error" is an affirmative defense under the statute, a defendant bears the burden of proving (1) that the violation was unintentional and (2) that it maintained reasonable procedures to avoid such error. Borcherding-Dittloff v. Transworld Systems. Inc., 58 F. Supp.2d 1006, 1012 (W.D. Wis. 1999).
Here, Mr. Edmonds has offered evidence to show, and NCB has not offered evidence to refute, that the Consumer Loan Agreement between Check-n-Go and Mr. Edmonds included an interest rate in excess of that permitted by Indiana law. NCB's collection letter represented this debt as valid and owing, despite its contravention of Indiana Code § 24-4.5-3-508. On the surface, therefore, NCB's representation appears to qualify as a false or misleading statement as to the legal status of the debt.
Nowhere in its own motion or in its responsive briefing does NCB invoke or offer evidence to avail itself of the "bona fide error" defense. We cannot impute the desire to use this defense where no such desire has been demonstrated, and we cannot refuse summary judgment where no evidence has been offered to support this affirmative defense. Therefore, because NCB has not offered legally sufficient evidence from which a reasonable jury could find in its favor on this issue, Mr. Edmonds' Motion for Summary Judgment is GRANTED.
5. Threats of garnishments and liens
Mr. Edmonds contends that the collection letter contains threats to garnish wages and place liens against certain property in violation of the FDCPA. Specifically, Mr. Edmonds argues that 1) because NCB was attempting to collect an illegal debt, NCB could not lawfully pursue any of the remedies listed in the collection letter; and 2) NCB failed to disclose certain exemptions to garnishment, seizure, etc. among Mr. Edmonds' wages and personal property.
Section 1692e(5) prohibits debt collectors from making "threat[s] to take any action that cannot legally be taken or that is not intended to be taken." For a collection notice to run afoul of this subsection, it must falsely "communicate that a lawsuit is not merely a possibility, but that a decision to pursue legal action is either imminent or has already been made." Jenkins v. Union Corp., 999 F. Supp. 1120, 1136 (N.D. Ill. 1998).
Notwithstanding Mr. Edmonds' contention that NCB was attempting to collect an unlawful debt — a contention on which we refused to grant summary judgment, see section 3, infra — we find that NCB's statements in the collection letter regarding legal action do not rise to the level of "threats" as contemplated by § 1692e(5). The statements communicate not that future legal action is imminent or even likely, but that it is conditional on future decisions and future actions. Moreover, the letter states that the use of "all [collection] methods legally available" is contingent on suit being filed and judgment being rendered. The letter in no way suggests that either of these prerequisites has yet been met or likely will be met in the near future. Therefore, we find that these statements do not violate the prohibition against threats of legal action embodied in § 1692e(5).
Further, we find that NCB's failure to alert Mr. Edmonds to certain exemptions to wage garnishment and personal property liens does not constitute a misstatement under § 1692e(4). That subsection prohibits a debt collector from making a "representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action." Mr. Edmonds contends that not all his wages may be subject to garnishment and that not all his personal property may be subject to liens. This may be a correct statement of law. However, nowhere in the collection letter does NCB state that it intends to garnish all Mr. Edmonds' wages or place liens against all his personal property, or any subsets of such property as may be excluded under law. The passage makes clear that NCB intends to examine those "legally available" remedies. Mr. Edmonds has not identified, and we have not found, any obligation imposed by the FDCPA on debt collectors to apprise consumers of all the potential exemptions and exclusions under any of the aforementioned remedial schemes. Therefore, we find that these alleged omissions do not constitute misstatements under § 1692e(4). Accordingly, Mr. Edmonds' Motion for Summary Judgment on these grounds is DENIED.
Conclusion
For the reasons set out in detail above, we find that 1) 15 U.S.C. § 1692g does not authorize a debt collector to require that a consumer dispute a debt in writing; 2) NCB's reference in the collection letter to "the" judgment, as opposed to "a" judgment, does not constitute a misleading statement under the FDCPA; 3) NCB's attempt to collect the amount mentioned in the collection letter does not violate 15 U.S.C. § 1692f(1); 4) without passing on any "bona fide error" affirmative defense which may later be asserted by NCB, NCB's statement regarding the legal status of the debt owed by Mr. Edmonds appears to constitute a misstatement under § 1692e; and 5) NCB's statements regarding liens and garnishments, as well as the failure to mention certain property exemptions and exclusions that may or may not be applicable to Mr. Edmonds, do not constitute misstatements under § 1692e as a matter of law. Accordingly, NCB's Motion for Summary Judgment is GRANTED as to the alleged misstatement regarding "the" judgment, as opposed to "a" judgment, and Mr. Edmonds' Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART.
The issues addressed in these motions that remain after issuance of this entry include Mr. Edmonds claims regarding NCB's alleged attempt to collect an illegal debt and NCB's alleged misstatements and omissions regarding liens or garnishments, as well as NCB's possible use of the "bona fide error" affirmative defense.