The United States Court of Appeals for the Seventh Circuit recently upheld a trial court’s decision granting summary judgment in favor of two debt collectors for alleged violations of the federal Fair Debt Collection Practices Act and of the federal Fair Credit Reporting Act regarding their attempts to collect a debt resulting from identity theft.
A copy of the notice in Woods vs. LVNV Funding, LLC is available on: Link to Reviews.
The appeal stems from a lawsuit filed against a debt buyer and debt collection agency (“creditors”) for alleged violations of the FDCPA and FCRA. The lawsuit arose out of an airline credit card that was opened in the name of the plaintiff (“alleged debtor”) and used to make a one-time purchase for a one-way plane ticket.
The alleged debtor only became aware of the debt when the creditors attempted to collect it.
The alleged debtor disputed the debt and the creditors repeatedly found the debt to be valid and reported the outstanding debt to credit reporting agencies. The alleged debtor also contacted the airline which initially determined that the debt was valid and payable by the alleged debtor.
Shortly after filing a lawsuit, the airline concluded that the alleged debtor was not responsible for the unpaid charges, and creditors asked credit reporting agencies to stop reporting the account.
The alleged debtor alleged that the creditors violated the FDCPA by using a “false representation[s] or deceptive means to collect or attempt to collect a debt”. 15 USC § 1692e(10). The alleged debtor believed that the debt declared by the creditor was literally false, because the debt had been determined by the airline not to be his.
The trial court granted summary judgment in favor of the creditors, finding that the alleged debtor had failed to meet the threshold of the burden of proving that the airline ticket was a “consumer debt” and that a consumer uninformed would not have been deceived by the collection letters.
The alleged debtor also claimed that the creditors violated the FCRA by failing to conduct a reasonable investigation into his allegations of fraud. See 15 USC § 1681s-2(b)(1)(A).
The trial court also entered summary judgment in favor of the creditors on this count, finding that the creditors had “examined closely” his claim, immediately noted the dispute and requested more information and documents to help. to solve the case.
The alleged debtor appealed.
On appeal, the Seventh Circuit first considered the alleged debtor’s claim under the FDCPA.
FDCPA protections apply only to consumer debt, which is defined as any obligation to any sum of money “arising out of a transaction” entered into “primarily for personal, family, or household purposes.” 15 USC §1692a(5). The trial court held that since there was no way to know for certain whether the one-way flight was purchased for business or consumer purposes, the alleged creditor failed to s discharge his charge.
The Court noted, however, that there is no requirement of absolute certainty as to the object of the purchase. It would be enough if there was enough evidence for a jury to conclude that it is more likely than not that the balance was consumer debt. To see Burton Law Firm v. Kohn, SC, 934 F.3d 572, 584–85 (7th Cir. 2019). The question is factual and very contextual.
The Seventh Circuit found the context to point in favor of the alleged debtor. The Court again referred to Burtonnoting that it teaches that “the types of purchases made with the credit card may be relevant” in determining whether they were consumer purchases or business purchases. Identifier. at 584.
Here, the Seventh Circuit found that it was unlikely that a business traveler would purchase a one-way airline ticket and that a reasonable jury could conclude that the odds that the purchase was made for the purpose of consumption were better than a draw.
Creditors argued the alleged debtor was required to do more, such as subpoena the airline for information about who took the flight, but the Seventh Circuit disagreed. The Court found that the alleged debtor had discharged his charge under § 1692a(5) because the nature of a disputed debt allowed a reasonable inference that it had been incurred “for personal, family or domestic”.
The Seventh Circuit then considered the alleged debtor’s claim that the creditors had used a “misrepresentation[s] or deceptive means to collect or attempt to collect a debt”. 15 USC § 1692e(10).
The alleged debtor argued that because the airline ultimately determined the debt was not its own, the information in the creditors’ letters was literally false.
However, the Seventh Circuit pointed out that the standard under § 1692e is not a literal falsehood. In place, “[i]A statement would not mislead the uninformed consumer, nor does it violate the FDCPA – even if it is false in a technical sense. Wahl v Midland Credit Mgmt., Inc.556 F.3d 643, 645-646 (7th Cir. 2009).
Despite the alleged debtor’s arguments to the contrary, the Seventh Circuit reiterated its previous rulings that the FDCPA imposes strict liability only in the sense that “a collector need not be willful, reckless, or even negligent. to trigger liability” but that “the reasonable debtor’s state of mind is still relevant. Identifier. at 646.
The Court found that an uninformed consumer, upon receipt of these letters, would have known that the account was not his and would have known that the letters had been sent in error, as did the alleged debtor. Since the statements in the letters were not such as to “influence a consumer’s decision…to pay a debt”, Muha vs. Encore Receivable Mgmt., Inc.558 F.3d 623, 628 (7thh Cir. 2019), they were not “false” within the meaning of § 1692e(10).
The Seventh Circuit thus upheld the trial court’s entry of summary judgment in favor of creditors on the FDCPA claim.
The Court then considered the alleged debtor’s FCRA claim.
The Seventh Circuit noted that the reasonableness of a credit dispute investigation depends on the content of the Automated Credit Dispute Check (“ACDV”) that the provider receives. In Westrathe Court found that a supplier’s limited investigation, during which it “verified [the plaintiff’s] name, address and date of birth”, was undoubtedly reasonable. Westra v. Credit from Pinellas409 F.3d 825, 827 (7th Cir. 2005).
the Westra The court left open the possibility that if the CVMA indicated that the dispute involved fraud or impersonation, “further investigation” might have been required. Identifier.; see also Gorman vs. Wolpoff & Abramson, LLP584 F.3d 1147, 1157 (9th Cir. 2009).
The alleged debtor argued that because the CVMA included here the police report filed by the alleged debtor which stated that “someone had obtained a credit card [in] name and filed a complaint”, further investigation was required.
However, the Seventh Circuit noted that because the police report also contained additional information, namely that the alleged debtor received two letters from the airline “stating that they have completed an investigation and have determined that it was actually [Alleged Debtor]” who made the purchase, the creditor was entitled to rely to some extent on this statement.
In addition, the court noted that the debt collector sent another letter inviting him to provide additional information and attach a blank affidavit of impersonation for the alleged debtor to complete. The alleged debtor did not respond to this communication and did not inform the creditor of the use of an expired address and a fake email to open the credit card.
Under the circumstances, the Seventh Circuit declined to find that the creditors’ investigation was unreasonable.
Accordingly, the Seventh Circuit upheld the trial court’s judgment in its entirety.