In a recent decision, Johnson v. Enhanced Recovery Company, LLC, the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s grant of summary judgment in favor of a debt collector based on the plaintiff’s failure to present any evidence beyond her own “speculation” that a debt collection letter was misleading in violation of the FDCPA.

The debt collector had sent the plaintiff a series of collection letters regarding her delinquent debt with her wireless phone carrier.  The second letter contained a statement that her “delinquent account may be reported to the national credit bureaus,” three payment options for settling the debt, and a statement that paying the offered settlement amount would stop collection activity.  In her lawsuit, the plaintiff alleged the second letter was misleading in violation of FDCPA Section 1692e because (1) the statement that her delinquent account “may be reported” to the national credit bureaus implied future reporting, and by the time she received the letter, the collector had already reported the account, and (2) the statement that paying the offered settlement amount would stop collection activity amounted to a promise by the collector that if she took advantage of the first settlement option and paid by the date indicated, then the collector would not report her debt to the credit bureaus.  

The district court denied the collector’s motion to dismiss, noting that whether a communication is misleading is ordinarily a question of fact and, because the plaintiff’s interpretation was plausible, dismissal would be premature.  After class certification, however, the district court granted summary judgment for the collector based on the plaintiff’s failure to produce evidence that the language in question would be confusing or misleading to a significant portion of the population.

In affirming the district court’s grant of summary judgment for the collector, the Seventh Circuit evaluated whether the disputed language was misleading from the standpoint of an “unsophisticated debtor.”  According to the Seventh Circuit, such a debtor is someone who “is ‘uninformed, naïve,’ and ‘trusting,’ but does possess ‘rudimentary knowledge about the financial world,’ and ‘is wise enough to read collection notices with added care.’…In short, ‘[t]he [FDCPA] protects the unsophisticated debtor, but not the irrational one.’”

The Seventh Circuit then proceeded to apply this standard “by asking whether the disputed language ‘could well confuse a substantial number of recipients.’”  It viewed the case as falling into the category of Section 1692e cases “where the debt collection language is not deceptive or misleading on its face but could be construed so as to be confusing or misleading to the unsophisticated consumer.”  To prevail in such cases, a plaintiff must produce “extrinsic evidence, such as consumer surveys, tending to show that unsophisticated consumers are in fact confused or misled by the challenged language.”

The plaintiff had argued that no further evidence was needed when a communication has two possible readings, one of which is misleading (i.e., while the phrase “may be reported” could mean the collector has the ability to report the debt, it could also refer to the future possibility that her debt could be reported which, according to the plaintiff was misleading because her debt had already been reported).  To support her position, the plaintiff cited cases from other circuits using the “least sophisticated debtor” standard.  The Seventh Circuit responded by noting that because it had specifically rejected this standard to assess whether a communication is confusing under the FDCPA, a letter had to be confusing to “‘a significant fraction of the population’” to satisfy the “unsophisticated consumer” standard.

The plaintiff’s next argument was that she did not have to present extrinsic evidence of confusion because the letter’s ambiguity itself was evidence of confusion.  In response to this argument, the Seventh Circuit stated that while such a showing might be enough to avoid dismissal for failure to state a claim, the plaintiff had to do more at the summary judgment stage than simply propose a potentially misleading interpretation of the collector’s letter.  Specifically, the plaintiff had the burden to show “that language not misleading on its face yet that could plausibly be read in a misleading or deceptive manner would in fact mislead a ‘significant fraction’ of the population.”

In the Seventh Circuit’s view, the plaintiff had not met this burden because she had not produced evidence “beyond her own say so demonstrating the likelihood that an unsophisticated debtor would conclude [that the collector would not report the debt if she paid by the date indicated in the first settlement option].”  As a result, the plaintiff “had failed to create a genuine issue as to whether a significant fraction of the population would reach such a conclusion after reading the [second] letter.”  Accordingly, the Seventh Circuit ruled that summary judgment for the collector was appropriate because, under Seventh Circuit case law, a plaintiff’s “‘mere speculation’” that a collection letter is misleading is insufficient to survive a debt collector’s summary judgment motion.