Debt Collector Prevails by Using Safe Harbor Language on Letters in Current Balance Case

This article was written by David N. Anthony and Reiss F. Wilks, and originally published on the Troutman Sanders LLP Consumer Financial Services Law Monitor. It is republished here with permission. 

In dismissing a claim against a debt collector, brought under the Fair Debt Collection Practices Act, the U.S. District Court for the Eastern District of Wisconsin found that language used by the debt collector clearly informing the consumer that interest and fees would continue to accrue on the balance did not violate the FDCPA.

In Boucher et al. v. Finance System of Green Bay, Inc. et al., the plaintiffs defaulted on medical debts which were placed with Finance System to collect.  Finance System sent the plaintiffs letters containing the following disclaimer:

“As of the date of this letter, you owe $ [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 address above or call [listed number].”

The plaintiffs claimed that Finance System could never have lawfully imposed late fees or charges on medical debt.  They asserted a class action, alleging that the letters were materially false, deceptive, and misleading under the FDCPA.

Finance System filed a Rule 12(b)(6) motion to dismiss for failure to state a claim, arguing that the disclaimer used in its collection letters mirrored the safe harbor language found in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark LLC. 214 F. 3d 872, 876 (7th Cir. 2000).  Finance System also argued it was entitled to accrue interest on the plaintiffs’ accounts because interest was authorized by the creditor.

In granting the motion to dismiss, the Court held that Finance System accurately notified the plaintiffs of the amount due on the date of the letters and properly informed them that the amounts due may vary due to additional charges.

The Court referenced Miller and stated that the Seventh Circuit recognized that a debt collector who uses such language would not violate the “amount of the debt” provisions as long as “the information he furnishes is accurate and he does not obscure it by adding confusing other information (or misinformation).”

The plaintiffs tried to argue that Miller required debt collectors to narrowly tailor the Miller statement to each unique situation and eliminate the variable charges that no longer apply.  Failure to do so, the plaintiffs argued, would therefore result in inaccurate and misleading information in violation of the FDCPA.

The Court held that the plaintiffs’ interpretation of Finance System’s collection letter was unreasonable.  The central purpose of the Miller safe harbor formula was to provide debt collectors with a way to notify consumers that the amounts they owe may ultimately vary.  Therefore, the Court noted that, as in the Millercase, no reasonable person could conclude that the letters used by Finance Systems failed to clearly inform the plaintiffs of the amount due or that the balance may increase by the time of payment.

This case has now been appealed to the Seventh Circuit.  We will continue to monitor the outcome of this case and other current account balance cases, and will report on future developments.