The CFPB filed an amicus brief in Hopkins v. Collecto, Inc., an appeal before the U.S. Court of Appeals for the Third Circuit, in support of the debt collector’s position that it did not violate the FDCPA by sending the plaintiff a letter that included an itemization of the plaintiff’s debt that indicated “$0.00” was owed in interest and collection fees.

The FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” or “unfair or unconscionable means to collect or attempt to collect any debt.”  The plaintiff filed a putative class action complaint in which he claimed that the collection letter violated these FDCPA prohibitions.  According to the plaintiff, by itemizing interest and collection fees, the letter falsely implied to the least sophisticated consumer that such interest and fees could begin to accrue and thereby increase the amount of the debt.  (While not expressly stated, it appears the plaintiff’s account was a “static debt” on which interest and fees could not be added.)  The district court dismissed the complaint because it did not state a “plausible claim for relief.”

In its amicus brief, the Bureau asserts that an itemization of a debt “discloses what has already happened, not what will happen or may happen in the future.”  According to the Bureau, “[t]he bare statement that $0.00 in interest and collection fees [is owed] says nothing one way or the other about whether such charges may be assessed in the future.”  It argues that “it would be unreasonable for an unsophisticated consumer to interpret an itemization showing that no interest and fees had been assessed on her account as raising the prospect that she would be charged fees or interest in the future.”

The Bureau references the proposed model validation notice in its proposed debt collection rule.  It states that the model notice would require debt collectors “to include a table showing the interest, fees, payments, and credits that have been applied since the itemization date, even if none of those items had been assessed or applied to the debt.  To show that no interest, fees, payments, or credits were assessed, the proposal would allow collectors to use “0” or “N/A” for that component or to state that “no interest, fees, payments, or credits have been assessed or applied to the debt.”  According to the Bureau, its proposal is based on the premise that “consumers understand such itemizations to reflect past charges (even $0.00 in past charges) rather than to suggest future charges may accrue.” 

In support of its position, the Bureau cites to the Seventh Circuit’s recent decision in Degroot v. Client Services Inc., another FDCPA case in which the Bureau also filed an amicus brief in support of the debt collector.  In Degroot, the plaintiff filed a putative class action lawsuit alleging that a debt collector seeking to collect the amount owed on the plaintiff’s charged-off credit card account violated the FDCPA by including an itemization in a collection letter that indicated “$0.00” was owed for interest or other charges.  Similar to the argument made by the plaintiff in Hopkins, he argued that the inclusion of interest and other charges in the debt itemization was misleading because it implied that the card issuer would begin adding interest and possibly other charges to previously charged-off debts if consumers failed to resolve their debts with the debt collector.

In affirming the district court’s dismissal of the complaint, the Seventh Circuit indicated that it agreed with the Bureau’s argument in its amicus brief that because “the itemization of a debt is a record of what has already happened…such a breakdown cannot be construed as forward looking and therefore misleading.”  It found “unpersuasive” the plaintiff’s “insistence…that the inclusion of a zero balance for interest and fees naturally implies he could incur future interest or other charges if he did not settle the debt.”  The Seventh Circuit stated that the plaintiff’s “mere raising of an open question about future assessment of other charges with a speculative answer does not make the breakdown misleading.”  According to the Seventh Circuit, the district court had correctly concluded that the debt collector’s “use of an itemized breakdown accompanied by zero balances would not confuse or mislead the reasonable unsophisticated consumer.”