Case Study:
Miller v. McCalla, Raymer Padrick and Clark, LLC
United States Court of Appeals for the Seventh Circuit
Miller (plaintiff) sued McCalla (defendant) for violation of the FDCPA (Act) for failing to state “the amount of the debt” in a dunning letter that the defendant sent. The plaintiff argued that the relevant time for determining debt is when it first arises, not when collection begins. The defendants replied that they did state the amount of the debt
The lower court granted summary judgment for the defendants. The plaintiff appealed.
Justice Posner
The defendants [argue] that since the Act under which the plaintiff is suing governs debt collection, the relevant time is when the attempt at collection is made. Oddly, there are no reported appellate decisions on the issue, though it was assumed that the relevant time is when the loan is made, not when collection is attempted.
The language of the statute favors this interpretation. “Debt”is defined as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.”
So the Act is applicable and we move to the question [of] whether the defendants violated the statutory duty to state the amount of the loan. The dunning letter said that the “unpaid principal balance” of the loan was $178,844.65, but added that “this amount does not include accrued but unpaid interest, unpaid late charges, escrow advances or other charges for preservation and protection of the lender’s interest in the property, as authorized by your loan agreement. The amount to reinstate or pay off your loan changes daily. You may call our office for complete reinstatement and payoff figures.” An 800 number is given.
The statement does not comply with the Act (again we can find no case on the question). The unpaid principal balance is not the debt; it is only a part of the debt; the Act requires statement of the debt.
We hold that the following statement satisfies the debt collector’s duty to state the amount of the debt in cases like this where the amount varies from day to day.
“As of the date of this letter, you owe $_____ [the exact amount due]. 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, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800-[phone number].”
A debt collector who uses this form will not violate the “amount of the debt” provision, provided, of course, that the information he furnishes is accurate and he does not obscure it by adding confusing other information (or misinformation). Of course we do not hold that a debt collector must use this form of words to avoid violating the statute; but if he does, and (to repeat an essential qualification) does not add other words that confuse the message, he will as a matter of law have discharged his duty to state clearly the amount due. No reasonable person could conclude that the statement that we have drafted does not inform the debtor of the amount due.
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